Congressional Deal on $900 Billion Pandemic Relief Plan

On December 21, Congress passed legislation to fund the federal government for fiscal year 2021 and provide emergency COVID-19-related relief. President Trump was originally expected to sign the legislation, but then said he might veto it if the next round of economic impact payments is not raised from $600 to $2,000 per person.

• Infusion of funds for the Paycheck Protection Program
• Expansion of unemployment benefits
• Financial relief and direct payments to Americans
• Vaccine funding 
• Food assistance
• Financial relief for education and child care
• Renewal of the Employee Retention Credit
• Rental assistance

Here are some highlights of the provisions listed above:

Employee Retention Credit Extended and Expanded

The Coronavirus Aid, Relief, and Economic Security (CARES) Act established an employee retention tax credit designed to encourage businesses to keep employees on their payrolls by allowing eligible employers to claim 50% of up to $10,000 in qualified wages paid by employers financially affected by COVID-19. Qualifying wages, including health plan expenses, are those paid after March 12, 2020, and before January 1, 2021.

This legislation extends the credit to qualified wages paid before July 1, 2021. The credit is increased to 70% of qualified wages for each quarter. The degree to which an eligible employer’s gross receipts must be reduced to qualify for the credit has been adjusted from 50% to 20%. The definition of a large employer is increased from 100 to 500 employees. Finally, an employer may receive a Paycheck Protection Program (PPP) loan and qualify for the tax credit so long as the wages taken into consideration for the tax credit are not paid with loan proceeds.

Qualified Leave Tax Credits Extended

The Families First Coronavirus Response Act (FFCRA) generally requires employers with fewer than 500 employees to provide emergency paid sick leave and expanded family and medical leave to employees unable to work or telework due to certain COVID-19-related reasons (together, qualified leave). Eligible employers can get a refundable tax credit equal to the amount of the qualified leave wages, plus allocable qualified health plan expenses. The requirement to provide the qualified leave expires on December 31, 2020.

This legislation does not extend the requirement to provide qualified leave. However, the legislation does extend the tax credits. Employers that would have been required to provide qualified leave under the FFCRA if the requirement had not expired, will be eligible for tax credits for providing qualified leave through March 31, 2021.

Future Developments

If this or similar legislation is enacted, additional information on key payroll provisions will be updated and communicated.

Namely does not provide legal, accounting, or tax advice. Please consult with professional counsel for any tax, accounting or legal questions.