After much debate, starts and stops, Congress finally passed another round of COVID relief. It extends the above the line charitable deduction that Libby addresses below for an additional year. Most taxpayers will get another check in the mail but as usual, the provisions have many details. The Council on Foundations, of which the Moravian Ministries Foundation in America is a member, does a great job summarizing the specifics in this article:
By the Council on Foundations
On Monday afternoon, Congressional leaders released the long-awaited end-of-the-year package, which includes funding for the federal government, a COVID-19 relief package, tax extenders, and several other provisions. The House and Senate passed the over 5,000-page package Monday evening and the President is expected to sign it.
The package includes more than $900 billion in response to the ongoing COVID-19 pandemic, providing some assistance to nonprofits, businesses, families, and communities. The National Council of Nonprofits released their chart of the Nonprofit Provisions in COVID Relief Legislation. The House Appropriations Committee released a comprehensive summary of the various relief-related provisions. Below is a summary of key provisions:
Changes to the Charitable Contribution Deduction:
- Extends until 2021 the above-the-line temporary charitable deduction that was included in the CARES Act. Non-itemizer individuals in tax year 2021 can deduct $300 for cash contributions to qualifying public charities, and non-itemizer couples filing jointly qualify for $600. Donations to donor advised funds and supporting organizations are not eligible for this deduction.
- Extends for one year the increased limit from the CARES Act on deductible charitable contributions for corporations and taxpayers who itemize. The limits for 2021 will be 100 percent of AGI for individuals and 25 percent of taxable income for corporations.
Paycheck Protection Program (PPP):
Several changes to the PPP program were included, such as allowing qualifying entities to be eligible for a second loan (called “PPP Second Draw”) of up to $2 million. To be eligible, qualifying entities must:
- Employ no more than 300 workers;
- Have used or will use the full amount of their first PPP loan; and
- Demonstrate at least a 25% reduction in gross receipts during the same quarter in 2020 versus 2019.
- Organizations primarily engaged in political or lobbying activities, including public policy advocacy organizations and think tanks, are ineligible for the loan.
The bill also simplifies the loan forgiveness process for loans of $150,000 or less.
Includes another round of direct payments of $600 for individuals making up to $75,000 and $1,200 for couples making up to $150,000 and an extra $600 per eligible dependent. The bill also has a retroactive provision to the CARES Act expanding direct payments to mixed-status households.
Coronavirus Relief Funds:
Extends the Coronavirus Relief Funds, which may be used to reimburse local governments in response to the COVID-19 public health emergency, until the end of 2021.
Employee Retention Tax Credit (ERTC):
Extends and modifies the Employee Retention Tax Credit (ERTC) that was included in the CARES Act to help employers maintain employment during the pandemic during closures and reduced revenues. The bill provides that employers who received PPP may still qualify for the ERTC.
Federal Eviction Moratorium:
Extends the Centers for Disease Control and Prevention’s eviction moratorium until January 31, 2021.
Paid Sick Leave:
Extends the refundable payroll tax credits for paid sick and family leave that were established in the Families First Coronavirus Response Act, through March 31, 2021.
“Save Our Stages”:
Provides grants of up to $10 million for performance venues, independent movie theaters, and cultural institutions.
- Provides additional funding for nutrition assistance programs, schools, early childhood programs, and other services.
- Provides additional funding for vaccine distribution both in the United States and around the world, as well as additional funding for testing, mental and substance abuse services, hospitals, and other public health services.
In addition to the federal funding and COVID-19 relief, the package includes several other provisions including:
Temporary Special Rule for Determination of Earned Income:
Allows qualifying families to refer to their 2019 income when determining the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) for tax year 2020.
Establishes the Women’s History Museum and the National Museum of the American Latino within the Smithsonian Institution.
FAFSA Simplification and Pell Grant Eligibility Changes:
Makes several changes to streamline the Free Application for Federal Student Aid (FAFSA) process and expand eligibility for Pell Grants, including ending a decades-old ban on providing grants to incarcerated people.
Modifies the process for applying for a REAL ID and allows federal agencies to accept digital driver’s license and identity cards for identification purposes.
Fiscal Year 2021 Appropriations
The package includes the 12 annual appropriations bills funding the federal government for the remainder of the federal fiscal year. The House Appropriations Committee has released a comprehensive summary as well as the joint explanatory statements that accompany each divisions:
- Division A – Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
- Division B – Commerce, Justice, Science, and Related Agencies
- Division C – Department of Defense
- Division D – Energy and Water Development and Related Agencies
- Division E – Financial Services and General Government
- Division F – Department of Homeland Security
- Division G – Department of the Interior, Environment and Related Agencies
- Division H – Departments of Labor, Health and Human Services, and Education, and Related Agencies
- Division I – Legislative Branch
- Division J – Military Construction, Veterans Affairs, and Related Agencies
- Division K – Department of State, Foreign Operations, and Related Programs
- Division L – Transportation, Housing and Urban Development, and Related Agencies