The most recent coronavirus relief bill, the Consolidated Appropriations Act, 2021, (the “2021 Act”) expands on and extends existing programs created by previous relief acts.
The main updates expand and continue programs under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, including the Paycheck Protection Program and the employee retention credit program, and the Families First Coronavirus Response Act (“FFCRA”).
The original CARES Act loan programs raised significant religious liberty concerns, which continue to be of concern in the 2021 Act, as outlined in our recent article. Nevertheless, for some organizations, the risks may be worthwhile or necessary for their financial survival.
For organizations that are able to opt out of the CARES Act loan programs, the employee retention tax credit program and the FFCRA leave programs offer financial relief without the same religious liberty concerns and “strings attached.”
With this in the background, the following is a list of highlights of the 2021 Act which may be of interest to faith-based nonprofits.
1. PPP is reopened through March 31, 2021. (2021 Act, Division N, Title III, §§ 323 and 343). The application window for loans under the original Paycheck Protection Program (“PPP1”) expired on August 08, 2020. Under the Consolidated Appropriations Act (the “2021 Act”), the application window for new borrowers has extended through March 31, 2021.
2. A Second PPP is now available. (2021 Act, Division N, Title III, § 311). Borrowers who received a PPP1 loan under the original program and used the loan funds for qualified expenses may be eligible for a “second-draw” PPP loan (“PPP2”). Fewer borrowers will qualify for PPP2 loans because of the stricter eligibility requirements, which aim to direct the funds to the organizations hit hardest by the pandemic and economic consequences. Mostly notably, while PPP1 loans were available for qualifying businesses with fewer than 500 employees, PPP2 loans are only available to qualifying businesses with fewer than 300 employees.
3. PPP1 and PPP2 Now Cover Additional Expenses. (2021 Act, Division N, Title III, § 304). Borrowers can now use PPP funds for a broader range of expenses, including the purchase of teleworking equipment, the installation of health precautions (such as plexiglass shields), and the repair of property destruction resulting from last summer’s civil unrest. True to the spirit of the original program, however, borrowers are still required to use at least 60% of loan funds for payroll expenses.
4. The Employee Retention Credit is Now Open to PPP Borrowers. (2021 Act, Division EE, Title II, § 206(c)(2)(B)(i)). CARES Act 2301(a) allowed employers to claim a credit against applicable employment taxes for up to $10,000 per employee. However, under the original CARES Act § 2301(j), employers that received a PPP loan were not eligible to receive this employee retention credit. The 2021 Act removed this limitation, so eligible employers may now participate in both the PPP program and request employee retention credits. However, employers cannot “double-dip” and receive a tax-credit for wages already covered by a PPP loan.
5. Employers Can Continue to Receive Tax Credits for COVID-Related Paid Leave. (2021 Act, Division N, Title II, Subtitle B, § 286). The Families First Coronavirus Response Act established a new category of paid leave and expanded the types of leave available under the Family and Medical Leave Act. Employers could receive tax credits for both types of leave. The new leave program and the expanded-FMLA leave option originally expired on December 31, 2020. However, the 2021 Act continues these programs and the related tax credits through March 31, 2021.
Federal Agency Resources:
Updates Pending - FAQs: Employee Retention Credit under the CARES Act