After months of delay, Congress finally approved a $900 billion economic stimulus package shortly before midnight on December 21, 2020, which President Trump signed into law on December 27, 2020. The COVID-19 relief package was tied into a separate $1.4 trillion resolution to fund the government through September 30, 2021, and is known as the Consolidated Appropriations Act of 2021. Below are the most significant provisions for you and your practice:

Paycheck Protection Program (PPP) Expanded

1. The new law allocates another $284 billion to the Small Business Association (SBA) for additional forgivable PPP small business loans. In order to ensure these funds go to the hardest hit small businesses, eligibility is limited to employers with 300 or fewer employees that have sustained a revenue loss of at least 25% in any quarter during 2020, compared to 2019.

Practices may receive a PPP2 loan of up to 2.5 times their average monthly payroll costs in the year prior to the loan, or in the 2019 calendar year. However, the maximum loan amount was cut from $10,000,000 in the first round to $2,000,000 in the second. Additional set-asides have been included to support PPP borrowers with 10 or fewer employees, first time PPP borrowers recently eligible, and for loans made by community lenders.

Eligible expenses have been expanded to include not only payroll (including group health, life, disability, vision, and dental insurance benefits), covered rent, utilities, and mortgage interest as under PPP1, but also covered worker protection (including PPE and facility modification expenditures to comply with COVID-19 federal health and safety guidelines), supply expenses essential to maintaining your current operations, and covered operating costs such as software and cloud computing services and accounting expenses.

PPP Loan Forgiveness

2. In order to be eligible for full loan forgiveness, under PPP2, your practice must spend at least 60% of the funds on payroll costs over the covered period selected of either 8 or 24 weeks. Furthermore, the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less, up from $50,000 previously.

Full Tax Deductibility for Business Expenses Paid with PPP Loans

3. The new law provides full (100%) deductibility for business expenses paid for with Paycheck Protection Program (PPP) loans, as discussed in more detail in our article "Accelerate Your Tax Savings From PPP Deductibility."

Economic Injury Disaster Loan (EIDL) Grants

4. The new law adds $20 billion for additional EIDL grants that do not have to be repaid. The EIDL grant amount is limited to $1,000 per employee, up to a maximum of $10,000. Also, EIDL grants received no longer reduce the total amount of PPP loans eligible for forgiveness. The new law confirms that EIDL grants are tax-free to the practice, and expenses paid with these funds are tax-deductible.

Additional Provider Relief Funds (PRF)

5. The PRF received another $3 billion for additional grants. Furthermore, it provides guidelines clarifying lost revenue calculations and allows PRF grants to be used for staffing expenses. Also, the new law provides a directive to HHS to consider appropriate distribution of funds to healthcare providers who were underrepresented in previous allocations or who are at risk of imminent closure.

We’ve encouraged doctors to apply for PRF funding, and the HHS recently announced it had distributed more than $24 billion to over 70,000 providers during its Phase 3 of funding. These distributions were in amounts greater than the previous funding level (2% of annual revenue) and were designed to satisfy close to 90% of each applicant’s reported lost revenue and increased expenses attributable to the coronavirus pandemic.

Emergency Sick and Family Leave Act Tax Credit

6. The new law extends the tax credits available for amounts paid under the Emergency Sick and Family Leave Act that were set to expire on December 31, 2020 until March 31, 2021. It also permits self-employed doctors (Schedule C) to claim the credit based on their average daily self-employment income.

Employee Retention Tax Credit Expanded

7. The new law extends the Employee Retention Tax Credit (ERTC) through June 30, 2021 and increases the credit percentage from 50% to 70% of eligible wages. It also increases the maximum employee salary limit from $10,000 total to $10,000 per quarter. Under the new law, the credit is available if receipts are less than 80% of those for the same calendar quarter during 2019. This tax credit is now available to practices that receive a PPP loan, although the same wages cannot be used in computing both the credit and PPP loan forgiveness.

Other Tax Savings Measures

8. Provides full (100%) deductibility for business meals served by restaurants during 2021 and 2022, up from 50% previously.

9. Repeals the tuition and fees deduction, but increases the income limit for the Lifetime Learning Educational Tax Credit to those with Modified Adjusted Gross Income (MAGI) of up to $80,000 (single) and $160,000 (married). This can provide additional tax savings for doctors following our recommended strategies for funding graduate and professional school costs.

10. The new law extends the ability of practices to contribute up to $5,250 annually toward an employee’s student loans, on a basis which is tax-deductible to the practice and tax-free to the employee, through December 31, 2025.

Other Provisions

11. Provides one-time stimulus payments of $600 to individuals making up to $75,000 a year, and $1,200 to married couples making up to $150,000 a year, in addition to a $600 payment for each dependent child.

12. Provides additional federal supplemental unemployment benefits of $300 a week through March 14, 2021. The new law also extends the Pandemic Emergency Unemployment Compensation program.

13. Provides $25 billion in emergency rental aid, as well as an extension of the moratorium on national evictions through January 31, 2021.

14. Extends the moratorium on student loan debt repayments from January 31, 2021 to April 1, 2021.

15. Allows taxpayers to roll over unused flexible spending account (FSA) funds from 2020 to 2021 and from 2021 to 2022, to provide increased flexibility.

16. Extends the time period over which the federal government will pay principal, interest, and fees on qualifying SBA loans.

We will continue to provide updates as the rules and regulations are issued for these COVID-19-related loans, grants, and tax saving benefits.