New COVID-19 relief legislation: PPP, tax impacts, and more

After many months of on and off negotiations, including a final push that began the day after the November general election, Congress has passed a new round of COVID-19 relief worth nearly $900 billion. The president is expected to sign the legislation, which is part of a much larger tax and spending bill worth $2.3 trillion.
Read on for what we consider highlights and our perspectives on the package as a whole, and continue to the end of this page for a thorough table summarizing the legislation’s most notable measures. Plus, find out about the major tax provisions included in the COVID-19 measures and in the broader package.
Please note that this is based on news reports and early congressional summaries of the relief package; we will continue to update this page to reflect the final version as more information becomes available.
Top 3 highlights
- Second-draw PPP loans: The relief package provides over $284 billion in new funding for Paycheck Protection Program loans extending the program to March 31, 2021, available to both current and first-time borrowers, and takes several steps to expand who is eligible (details in our table below) and what funds can be used for (including costs incurred to protect employees and customers from COVID-19). An earlier version of the legislation called for new application materials to be released within the first week of enactment, so businesses intending to apply should begin preparing now to act quickly when the time comes.
- A key tax update for current and prospective borrowers: Business expenses paid with proceeds of forgiven PPP loans are now deemed deductible, a hoped-for reversal of previous IRS guidance. This change could have a significant impact as businesses conduct year-end or other tax planning and determine tax obligations for next year. (Keep in mind that states may decouple from this federal treatment.)
- Unemployment assistance: The federal unemployment programs created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act were due to expire Dec. 31, 2020. The new package extends all pandemic unemployment insurance through March 14, 2021, with an additional weekly benefit of $300 per week.
- Additional aid to individuals and communities, including minority and low-income communities: The legislation includes a number of provisions to provide assistance directly to people and communities that continue to suffer the effects of the pandemic. Notably:
- Individuals below a certain income threshold will receive one-time direct cash payments of $600, including both adults and children
- $12 billion is provided in targeted economic investments to help low-income and minority communities, including funding for eligible CDFIs (Community Development Financial Institutions) and MDIs (Minority Deposit Institutions).
- $25 billion is provided to state, local, and tribal entities for rental assistance, and the eviction moratorium has been extended to Jan. 31, 2021.
- Funding is included to support better broadband access, including some funds designated specifically for low-income families, rural areas, and telehealth.
- A host of food and nutrition assistance measures are included, from a temporary increase in SNAP benefits to increased funding for food banks, school and child care meal programs, and more.
Tax updates
The COVID-19 relief legislation and the broader year-end package also contain a number of tax-related provisions, including extending the New Markets Tax Credit (NMTC) and the Work Opportunity Tax Credit and making a hoped-for adjustment to fix the 4% rate for the Low-Income Housing Tax Credit (LIHTC). See the below table for highlights, and watch our website and Tax social media for more detailed insights to come in the new year. (Also see: our alert on extenders for renewable energy industry.)Our perspectives
As these relief measures are implemented, we will be interested to see how both the outgoing and incoming administrations and legislatures apply lessons learned from the CARES Act, the first round of PPP loans, and other aid initiatives implemented over the past nine-plus months. With the second-draw Paycheck Protection Program loans, for example, will funds be disbursed more quickly with the infrastructure already in place, or will we see increased governance slow dispersal as more careful due diligence ensures that funds are going to businesses that need them most? Will businesses without existing banking relationships again struggle to secure PPP funds, or have those issues been resolved? While providing clear, welcome relief, this new package, like most significant new legislation, leaves open a number of questions regarding how the programs will be implemented, or how they may change in implementation, if at all. We will see how these new measures play out.
We were also encouraged to see running through this legislation a theme of strengthening those communities hit especially hard, including minority and low-income communities. The direct payments and the new measures offering assistance with food, housing, child care, education, and other needs should offer some relief over what will likely still be a number of very difficult months to come.
We expect additional COVID-19 relief to be passed in the early months of 2021, potentially followed by more significant legislation related to taxation and infrastructure. Still, this package arguably offers sufficient “stopgap” assistance in the interim.
Summary of select new COVID-19 relief measures and key tax updates
Matter |
New or updated provisions |
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Paycheck Protection Program (PPP)/Small business support |
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Unemployment |
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Other assistance to individuals, families, and communities |
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Vaccines, testing, and other healthcare provisions |
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Education and child care |
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Agricultural assistance and fisheries |
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Transportation |
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Postal service |
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Extensions of certain tax provisions |
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Other tax provisions |
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Other |
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Subject matter expertise
Patrick Duffany
CPA, JD, Managing Partner - Tax
Stephanie O’Rourk
CPA, Partner
Jeremy Swan
Managing Principal - Financial Sponsors & Financial Services Industry
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Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.