February 25, 2021 - Douglas Myser

Tax provisions in year end tax relief bill. The omnibus spending and coronavirus relief bill passed by Congress includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, and much more. The Consolidated Appropriations Ace, 2021, H.R. 133, passed both houses of Congress on Dec. 21 and former President Trump signed the bill into law on  Dec. 27. Among the general tax provisions, the bill temporarily (through 2022) allows 100% deductibility of certain business meal expenses, extends the $300 charitable contribution deduction for nonitemizers, and enacts various disaster tax relief provisions. Tax provisions in year end tax relief bill.

The bill provides a refundable tax credit in the amount of $600 per eligible family member by adding a new Sec. 6428A to the Code. The credit is $600 per taxpayer ($1200) for married taxpayers filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income ($112500 for heads of household and $150,000 for married taxpayers filing jointly) at a rate of $5 per $100 of additional income. Treasury is authorized to issued advance payments of this credit in the same way it made stimulus payments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The bill clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program loan. This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven and that the tax basis and other attributes of the borrower's assets will not be reduced as a result of the loan forgiveness. The provision is effective as of the date of enactment of the CARES Act. The provision provides similar treatment for Second Draw PPP loans, effective for tax years ending after the date of enactment of the provision. The bill also gives Treasury authority to waive information filing requirements for any amount excluded from income by reason of the exclusion of covered loan amount forgiveness from taxable income.

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