Clarifications of tax consequences of PPP loan forgiveness
The act clarifies that taxpayers whose PPP loans or other obligations are forgiven, are allowed deductions for otherwise deductible expenses paid with the proceeds and that the tax basis and other attributes of the borrower's assets will not be reduced because of forgiveness.
Deductibility of business meal expenses
The act provides that expenses for business-related food and beverages provided by a restaurant are fully deductible if they are paid or incurred in calendar years 2021 or 2022, instead of being subject to the 50% limit that generally applies to business meals.
Extensions and modifications of earlier payroll tax relief
The act extends the CARES Act credit, allowed against the employer portion of the Social Security (OASDI) payroll tax or of the Railroad Retirement tax, for qualified wages paid to employees during the COVID-19 crisis. Under the extension, qualified wages must be paid before July 1, 2021 (instead of January 1, 2021). Additionally, beginning on January 1, 2021, the credit rate is increased from 50% to 70% of qualified wages. and qualified wages are increased from $10,000 for the year to $10,000 per quarter. Many other rules are also relaxed. And the TCDTR makes some retroactive clarifications and technical improvements to the credit as initially enacted.
The COVIDTRA extends (1) the credits provided by the Families First Coronavirus Response Act (FFCRA) against the employer portion of OASDI and Railroad Retirement taxes for qualifying sick and family paid leave and (2) the equivalent FFCRA-provided credits for the self-employed against the self-employment tax. Under the extension of the employer credits, wages considered are those paid before April 1, 2021 (instead of January 1, 2021). Under the extension of the credits for the self-employed, the days considered are those before April 1, 2021 (instead of January 1, 2021).