Finances and Taxes

The New COVID-19 Stimulus Package: What’s in the Consolidated Appropriations Act 2021?

Gusto Editors  

As we head into the new year, the COVID-19 pandemic continues to wreak havoc on small businesses. While the initial round of the coronavirus vaccine has been issued, distribution will take months—and Americans need relief now. Fortunately, Congress came to an agreement and released the Emergency Coronavirus Relief Act of 2020 at the end of December.  Within the bill is a $900 billion COVID-19 relief package that extends certain provisions of the CARES Act, creates new programs, and allocates funds to help small businesses—and Americans—survive the pandemic. 

We’ll walk you through it step-by-step here. 

Loans and grants under the new bill

While the PPP is getting all the attention, several loans and grants received funding under the new bill. Understand all of them so you know which one is right for your business.  

Paycheck Protection Program (PPP) round 2

Update on January 13, 2020: Applications for PPP loans are open.

Currently, the SBA portal is open only to CDFI lenders for both first- and second-draw loans.

The portal will open to all other lenders shortly after.

Other lenders may be accepting applications, but those applications won’t be processed until the SBA portal opens to all lenders.

Let’s start with the start of the show. $284 billion has been allotted to the Small Business Administration (SBA) for a second round of the Paycheck Protection Program (PPP), and the program has been extended through March 31, 2021. To understand all the details on how the new round could affect your business, read the PPP guide here

New funds for EIDL

$20 billion has been allocated to the Economic Injury Disaster Loan (EIDL) fund and will be targeted to businesses in low-income areas. To get all the details about the EIDL program, read this comprehensive guide

Some quick facts on EIDL: 

  • The maximum loan amount is $2 million
  • The interest rate is fixed at 3.75 percent for for-profit businesses and 2.75 percent for non-profits
  • The loan term is 30 years 
  • The loan is not forgivable

Under the new bill:

  • The covered period for the loan has been extended through December 31, 2021.
  • The $10,000 grant advance program has been re-established and will be available to eligible applicants in low-income communities who did not secure grants the first time around.
  • Borrowers in low-income areas who have already received an EIDL advance under $10,000 are eligible to receive a second advance that is the difference between the first advance and $10,000. 
  • EIDL grants are not taxable, but the loan is taxable. 
  • PPP recipients who receive EIDL grants no longer have to deduct the grant amount from the PPP forgiveness amount.
  • If a borrower received both a PPP loan and an EIDL, and they have received forgiveness on the PPP loan, but the EIDL amount was deducted from the forgiven PPP amount, then the borrower can now be forgiven for the EIDL amount, as well. 
  • PPP borrowers who are not eligible for PPP forgiveness may still be eligible for an EIDL advance.  

SBA loan funding under the new bill 

The Small Business Administration (SBA) plays a critical role in helping small businesses get access to capital by connecting borrowers with the right lenders and by guaranteeing loans to increase borrowing power (how much you will be able to borrow). 

SBA provides many loan programs (including PPP and EIDL), and under the new bill funding was also provided to the following loan programs:

  • 7(a)
  • 504
  • Microloans

To get all the details on how the bill has read this guide on COVID-19 relief for SBA loans. Here are the footnotes:

  • The SBA will cover principal, interest, and loan fees for at least six months for 7(a) loans, 504 loans, and Microloans; certain businesses will get even more coverage.
  • Borrower fees are waived for 7(a) and 504 loans. 
  • The SBA guarantees have increased on 7(a) loans.
  • Reciprocity has been created between 7(a) and 504 loans.
  • An Express 504 Loan program will be established. 
  • Repayment periods for Microloans have been extended.

CDFIs, community lenders, and funding for BIPOC businesses

Last spring, it was revealed that many small businesses owned by people of color and businesses in low-income areas were unable to take advantage of government programs. The new bill is designed to address and repair this. 

The new bill has dedicated $12 billion funding for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to serve low-income, minority, and rural communities. Here’s how the allocation breaks down:

  • $3 billion is going to the CDFI fund, for minority communities, and minority-owned lenders disproportionately impacted by the COVID-19 pandemic
    • This includes $800 million for minority lending institutions 
  • $9 billion in emergency capital injections to eligible CDFIs and MDIs to support immediate economic relief in low-income and minority communities struggling to respond to the COVID-19 pandemic  

It’s important to note that part of PPP funding was dedicated to helping CDFIs and MDIs distribute PPP loans, however, the funding listed directly above is outside of PPP. This means that even if a PPP loan isn’t right for your business (or you’ve been denied), your local CDFI or MDI may have other resources suitable to your business’ needs. 

Small business owners who have been unable to access funding should turn to CDFIs. Learn more about CDFIs and MDIs, and get a lists of CDFIs and MDIs you should contact here.  

The Community Advantage program

The new bill also provided funding for the Community Advantage Program which is intended to help small businesses in underserved or low-income areas access 7(a) loans. The program enables lenders who are mission-oriented by providing funding for loans and helping to create technical assistance programs so that these lenders can help train new small businesses. 

The Minority Business Development Agency (MBDA)

Under the new bill, $15 million was dedicated to the Minority Business Development Centers program under the Minority  Business Development Agency (MBDA) which is aimed at helping BIPOC businesses all over the country.  

Loans and grants for specific industries

The new bill recognizes that certain industries have been hit particularly hard by the pandemic, and has dedicated funds to buoy businesses within these industries. 

Grants for the entertainment industry: theaters, live venues, and performing arts

$15 billion within the new bill has been allocated for grants that will be distributed to live venues and performing arts organizations. Of the $15 billion, $2 billion has been set aside for entertainment businesses that employ fewer than 50 full-time people. (But, any amount from the $2 billion that remains after 60 days will be made available to all eligible entertainment businesses.)

Business eligible for grants include:  

  • live venue operators or promoters
  • theatrical producers
  • live performing arts organization operators
  • museum operators
  • motion picture theatre operators
  • talent representatives who demonstrate a 25 percent reduction in revenues

The way the grants will work will be dependent on the specific situation of the business, but here are guidelines:  

  • The SBA is empowered to make an initial grant of up to $10 million dollars to an eligible person or business (within the entertainment industry) and a supplemental grant that is equal to 50 percent of the initial grants. 
  • Businesses that receive priority for accessing these grants will be those that employ over 50 workers and that lost the greatest share of their revenue. These grants must be used for specified expenses like payroll costs, rent, utilities, and PPE. 
  • All grants provided by the SBA under the new bill to businesses in entertainment will not be considered gross income and so, will not be taxable. 

Funding for childcare centers and programs

$10 billion dollars has been allocated to Child Care Development Block grants to provide immediate assistance to childcare providers to help them reopen. 

Support for farmers and agricultural workers 

The bill provided $11 billion for supporting agricultural producers, growers, and processors. The funding has been allocated for a number of programs including: 

  • Support through the Local Agriculture Market Program for local farmers, farmers markets who are impacted by COVID-19.
  • Funding for The Farming Opportunities Training and Outreach Program to support groups that provide financial advice, marketing advice, and technical assistance to new, socially disadvantaged, and veteran farmers and ranchers.
  • Cash flow to small and mid-sized dairies that have grown over the last seven years.
  • Resources for existing meat and poultry processors to make facility upgrades (and other enhancements) to help them pass federal inspections and be able to sell products across state lines.

Support for transportation workers 

  • $15 billion has been allocated for grants to employees of passenger airline carriers. 
  • $1 billion for grants to employees of contractors in aviation.  
  • In order to receive funding, airlines or contractors must commit to recalling furloughed employees and providing backpay to returning employees. 
  • $2 billion is dedicated to providing economic assistance to motorcoach and bus operators, school bus companies, and other U.S. transportation service providers. 

Unemployment assistance in the new bill 

The Consolidated Appropriations Act, 2021 has extended many of the unemployment benefit programs that were launched under CARES last spring. We’ll give you a snapshot here of the pandemic unemployment benefits programs, but for more details see this post on unemployment benefits under the new coronavirus relief package

ProgramPurposeUnder CARES

now outdated

Under the new bill
Pandemic Unemployment Assistance

Extends unemployment insurance to those who may not have been eligible before COVID-19
  • expires December 31, 2020

  • 39 weeks of coverage
  • expires April 5, 2021
  • 50 weeks of coverage
Pandemic Emergency Unemployment Compensation

Extends unemployment benefits after they have been exhausted
  • expires December 31, 2020
  • 13 additional weeks of coverage
  • expires April 5, 2021
  • 29 additional weeks of coverage
Federal Pandemic Unemployment Compensation

Provides additional money (from a federal fund) on top of regular unemployment 
  • $300 added to unemployment benefit
  • lasted through end of July 2020
  • expires March 14, 2021
  • $600 added to unemployment benefits

The new COVID-19 stimulus 

The bill has directed $600 stimulus payments to individuals (this is half the amount that was provided under CARES). Families with children received $600 per child (which is $100 more than was provided under CARES). 

Those eligible for the stimulus include individuals whose adjusted gross income was less than $75,000 in 2019. 

Tax relief and tax credits in the new bill 

The new bill made several updates to a wide array of tax credits, including tax credits that were created by the Families First Coronavirus Response and CARES Acts. For everything, you need to know about COVID-19 tax credits, see this post

Here are some quick facts:

  • The Employee Retention Credit (ERC) rate has been increased from 50 percent to 70 percent.
  • Employers who choose to offer paid leave under the Emergency Paid Sick Leave Act (EPSLA) will receive tax credits; this is a big change because employers are no longer required to provide this leave.
  • Ditto for leave under the Emergency Family and Medical Leave Expansion Act (also known as Expanded FMLA); this is no longer required, but employers who choose to offer this will get tax credits.
  • The New Markets tax credit was extended through 2025.
  • The Work Opportunity tax credit was extended through 2025.

The bill also made clarifications on tax relief for COVID-19 relief resources; there’s a lot here, so to understand all the nitty-gritty details, read this post on how taking advantage of coronavirus financial relief options may affect your taxes

Here’s a high-level overview:

  • The PPP is not taxable and forgivable expenses paid for with loan proceeds are deductible.
  • The EIDL advance grant is not taxable but the loan is taxable.
  • SBA 7(a), 504, and Microloans are taxable.
  • Unemployment benefits are taxable.
  • The payroll tax deferrals have expired. 
  • The repayment period for employee-side payroll tax deferral has been extended; nothing has changed with the repayment period of the employer-side payroll tax deferral. 
  • Terminating employees may or may not affect your taxes, depending on where you live.

Again, read the full post—trust us: it’s worth it. 

Rental assistance programs 

The Treasury Department has been directed to allocate $25 billion in funds to state and local governments to provide renters with assistance. 

Importantly, the eviction moratorium has been extended through January 31, 2021. 

Those eligible to receive rental assistance include:

  • Households with an income that is 80 percent or less than the Area Median Income (AMI). In other words: if the household makes less than other households in the area, they may qualify (households whose income is under 50 percent of AMI will be prioritized).  
  • Households that house one or more members with a demonstrated risk of homelessness. 
  • Households with one or more members who qualify for unemployment benefits or have experienced financial hardship due to the pandemic (those who have been unemployed for over 90 days will be prioritized).

Any financial assistance provided to renters under this section of the bill is not taxable. 

Nutrition benefits for individuals and families 

The Supplemental Nutrition Assistance Program (SNAP) is a state-specific program aimed at eliminating hunger. Certain Americans are eligible for these benefits to feed themselves and their families. SNAP benefits can be accessed by using an EBT card, which is like a debit card. 

The new bill: 

  • Increases monthly SNAP benefit levels by 15% through June 30, 2021. 
  • Gets rid of some red tape to simplify the processes within each state and make getting SNAP benefit level increases easier. 
  • Excludes PUA from being counted toward household income when making SNAP benefit calculations.
  • Extends SNAP eligibility to college students who are eligible for federal or state work-study programs. 
  • For children under 6 who live in households that receive SNAP benefits and are experiencing school closures (or any childcare facility closures), the state may issue P-EBT benefits.  to those households.

Outside of SNAP, other nutrition programs will be funded under the bill: 

Emergency Food Assistance Program: $400 million will be invested in this program through September 30, 2021, and up to 20 percent of the funds to be used for distribution.

Emergency Costs for Child Nutrition Programs: The bill provides emergency relief to fund school (and child care) meal programs. As much funding as necessary will be provided to carry out needed payments to these programs. 

Aging and Disability Services Programs: $175 million has been allocated to emergency funding for Older Americans Act nutrition programs

Funding for higher education and students 

Almost $23 billion has been allocated to the Higher Education Emergency Relief Fund; here’s how it breaks down:

  • $20.2 billion for public and private, non-profit institutions of higher education (including those that serve students enrolled exclusively in distance education); the funds will be distributed by a formula that takes student population and full-time enrollment into account. 
  • $1.7 billion will be dedicated to Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities,  Hispanic Serving Institutions, and certain other institutions. 
  • $113 million will go to higher ed institutions with unmet needs 

There are restrictions on how funds can be used and a cap n funding for proprietary institutions.

COVID-19 testing and contact tracing 

$25.4 billion will go to supporting testing and contact tracing to monitor and suppress the spread of COVID-19, and to provide relief for healthcare expenses. This includes funding for the Provider Relief Fund where healthcare providers can apply to get reimbursed for financial losses incurred in 2020, and grants for hospital and health care providers to make up for lost revenue directly attributable to the pandemic.

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