On December 21, 2020, Congress passed the second-largest economic rescue package in American history surpassing the $787 billion stimulus package passed in response to the financial crisis in 2009. This comes just behind the $1.8 trillion virus relief package that was signed into law earlier this year. The pandemic relief in conjunction with the omnibus spending bill totals more than $2.3 trillion and the vast package includes many tax benefits and provisions, energy provisions, national security provisions, and COVID-19 crisis related assistance.
As part of the Consolidated Appropriations Act, the “Continued Assistance for Unemployed Workers Act of 2021” bill language includes the extension of the CARES Act unemployment insurance provisions, specifically the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs until March 14, 2021. This bill provides an additional $300 per week in unemployment benefits for the next eleven weeks under the Federal Pandemic Unemployment Compensation (FPUC) program, extends the number of weeks of benefits an otherwise eligible individual may receive from 39 weeks to 50 weeks, and extends the funding of the first week of compensable regular unemployment for those states with no waiting week provision. The Families First Act received full federal funding of extended unemployment compensation and allows for short-time compensation under a short-time compensation program, plus financing, which was also extended to March 14, 2020.
In regard to tax provisions, the legislation provided a five-year extension of the Work Opportunity Tax Credit program through 2025, a five-year extension of Empowerment Zones through 2025, and a one-year extension of the Indian Employment Credit. Disaster Relief for 2020 through sixty days after date of enactment includes a tax credits of 40% of $6,000 in wages and this credit applies to wages paid regardless of whether services associated with those wages were performed.
The legislation provides for $22,318,000 from the Trust Fund to be allocated to the national activities of the Employment Service, including the administration of the Work Opportunity Tax Credit, which includes assisting State Workforce Agencies in adopting or modernizing information technology for use in the processing of certification requests and the provision of technical assistance and staff training under the Wagner-Peyser Act.
The package also includes an extended and enhanced Employment Retention Tax Credit (ERTC) that increases the credit from 50% to 70%, allows a credit against $10,000 for each quarter vs only one quarter, and increases the 100-employee delineation from 100 to 500. Employers who also qualified for Paycheck Protection Program (PPP) loans may still qualify for ERTC with respect to wages that are not paid for with forgiven PPP proceeds, as well as other changes.
The Paycheck Protection Program created in the Cares Act received an additional $284 billion as part of the package and allows loans to be fully forgiven if companies keep employees on their payroll. The legislation states that business owners can write off expenses paid for with forgiven PPP loans, which gives small companies a tax break that could amount to more than $100 billion.
Although many lawmakers supported larger stimulus payments, they were able to agree on a one-time direct stimulus payment of $600 to individuals and $600 per child. The payments are not eligible for those individuals making more than $75,000 or couples making $150,000 and these payments could begin processing as soon as next week. These will be distributed in the same fashion of the previous stimulus bill payments earlier in the year.
The legislation calls for other changes to the earned income tax credit and child tax credit to make it available to those who lost wages or jobs during the pandemic and expanded the Low-Income Housing Tax Credit increase construction of housing for low-wage families. Other tax impacts include an excise tax break for beer brewers, wine makers, and distillers and additional tax credits to help business in low-income communities.
The package includes many more measures such as $69 billion for the distribution of a coronavirus vaccine and more than $22 billion for states to conduct testing, tracing, and mitigation programs. It also provides $13 billion in nutrition assistance, $7 billion for broadband access, $45 billion for transportation and transit agencies, $82 billion in education funding, $25 billion in rental assistance, etc. and is expected to be signed later today by President Trump.
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