On July 27, 2020, a version of COVID-19 Phase 4 stimulus legislation was released, collectively referred to as the Health, Economic Assistance, Liability Protection, and Schools Act (HEALS Act).
Below covers the proposed changes and additional tax relief for businesses and individuals.
Employee Retention Credit
The CARES Act – Employers affected by COVID-19 are eligible for a refundable credit equal to 50 percent of qualified wages. The credit is limited to $10,000 of qualified wages per employee for all calendar quarters, i.e. $5,000 maximum credit per employee.
The HEALS Act – The proposed legislation would increase the percentage of qualified wages from 50% to 60% and increase the annual limitation to $30,000 per calendar year.
Gross receipts would be defined to include gross receipts of tax-exempt organizations and clarifies health plan expenses are qualified wages. Changes to the definition of gross receipts would be effective retroactively.
Work Opportunity Tax Credit (WOTC)
The HEALS Act – The WOTC would be expanded to provide up to $5,000 (50 percent of the first $10,000 of qualified first-year wages) for employers hiring individuals in a new qualified group, defined as 2020 qualified COVID-19 unemployment recipients.
Safe & Healthy Workplace Tax Credit
The HEALS Act – A new refundable payroll tax credit equal to 50 percent of an employer’s qualified employee protection expenses paid after March 12, 2020, and before January 1, 2021. Qualifying expenses would include COVID-19 testing, cleaning supplies, and protective equipment. Qualified expenses would be limited to $1,000 for each of the first employees, plus $750 for each employee between 500 and 1,000 employees, and $500 for each employee over 1,000 employees.
Full Deduction for Business Meals
The HEALS Act – Under current law, deductions for business meals are subject to a 50%. As part of the relief package, the HEALS Act would allow a full deduction for business meals paid or incurred through December 31, 2020.
SBA PPP Changes
The HEALS Act – Expand eligible expenses for forgiveness to include covered operations expenditures; such as: software, cloud computing, HR and other accounting needs to cover property damage costs, worker protection costs and protection equipment. There is no change to the 60% requirement for payroll costs.
Forgiveness application is simplified for loans less than $150,000 and loans between $150,000 and $2,000,000.
It also expands PPP eligibility to include certain Section 501(c)(6) organizations, with 300 or fewer employees (excluding professional sports, political campaigns, and lobbying expenses).
Round 2 PPP applications would be available to small businesses meeting the SBA revenue size standards, no more than 300 employees, and 50% reduction in gross receipts within the first or second quarter of 2020 compared to the prior quarter.
Additional recovery rebate checks
The HEALS Act – This proposes a second round of stimulus checks, designed identically to the first round under the CARES Act ($1,200 per individual and $2,400 for married filing jointly). As for qualified dependents, under the CARES Act, the $500 payment for qualified dependents was defined to include children under the age of 17. The HEALS Act would include dependents over the age of 17 or college bound dependents.
Congress is expected to enter negotiations to finalize a relief package. We will continue to monitor COVID-19 legislation and keep you informed by posting the latest information on this link.
If you have questions or concerns, contact a KerberRose Trusted Advisor by visiting our contact page.