Jessica L. Jeane, J.D., Director of Public Policy & Strategic Communications
December 21, 2020
Legislative text has been released for the next bipartisan economic relief package, which includes changes and enhancements to the Paycheck Protection Program (PPP). The 5593-page Consolidated Appropriations Act, 2021 includes several tax-related provisions.
*Please note, for members' convenience the page numbers referenced below are the PDF page numbers for the legislative package in its entirety, not the numbers printed on the individual bills' pages.
Generally, members can locate relevant PPP information under the COVID-Related Tax Relief Act of 2020 within the appropriations bill as follows:
- PPP deductibility begins on page 2004;
- PPP Simplified Forgiveness Application section begins on page 2055; and
- PPP Second Draw Loans section begins on page 2064.
The inclusion of PPP deductibility language meant to clarify congressional intent under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, (P.L. 116-136), is seen as a "win" for congressional tax writers and stakeholders alike. Top bipartisan lawmakers as well as those in the tax and accounting community have consistently voiced their disapproval of Treasury and the IRS's position prohibiting the deduction of expenses paid for with forgiven or forgivable PPP loans. This legislation would essentially nullify the administration's previous guidance on the issue.
Notably, Section 276. Clarification of Tax Treatment of Forgiveness of Covered Loans includes the following regarding PPP deductibility:
TAX TREATMENT.—For purposes of the Internal Revenue Code of 1986— (1) no amount shall be included in the gross income of the eligible recipient by reason of forgiveness of indebtedness described in subsection (b), (2) no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and (3) in the case of an eligible recipient that is a partnership or S corporation— (A) any amount excluded from income by reason of paragraph (1) shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986.
Quick View of Other Tax Provisions
Additionally, Section 210. Temporary Allowance of Full Deduction for Business Meals, beginning on page 4946, provides 100 percent deductibility, compared to 50 percent, in 2021 and 2022.
Further, Section 6428A. Additional 2020 Recovery Rebates for Individuals, begins on page 1966. This section provides that eligible individuals shall be allowed as a credit against tax imposed for the first taxable year beginning in 2020 an amount equal to $600 ($1,200 in the case of eligible individuals filing a joint return), plus $600 per qualifying child. The income thresholds remain the same as the first round of economic impact payments.
A useful Tax Foundation summary of the bill's other tax provisions can be located here.
And considering this economic relief measure is catching a ride with the FY 2021 appropriations bill, it is worthwhile to note that the package includes $11.92 billion in base IRS funding, an increase of $409 million above FY 2020 with increases across the board to IRS Taxpayer Services, Enforcement, Operations Support, and Business System Modernization. The area of IRS funding receiving the highest increase is enforcement, raised to $5.2 billion - an increase of $203 million. IRS Commissioner Chuck Rettig has often referred to himself as an "enforcement guy."
The bipartisan measure is expected to clear both the House and Senate, though changes could still occur. NSA will continue its analysis of the legislation once enacted and will update members accordingly once the enrolled bill is released.
The Joint Committee on Taxation has released its score of the measure, JCX-24-20, which can be located here.
Members can visit the NSA website PPP page for additional resources here.
The core mission of the National Society of Accountants is to help tax and accounting professionals become more successful.
NSA presents this information in the interest of its members for information purposes only and is not intended to provide, nor should it be relied upon, as legal, tax, or accounting advice.