December 28 2020

President Signs Legislation Extending Tax and COVID-19 Pandemic Relief

Source: IBFD Tax Research Platform News

On 27 December 2020, President Trump signed into law the legislative package, including coronavirus-related tax relief and economic stimulus, and extensions of tax and health care policies, as well as to keep the government funded for the fiscal year ending 30 September 2021.

The omnibus legislative package (H.R. 133) is entitled the "Consolidated Appropriations Act, 2021" (the Act). The Act contains the 12 regular appropriations (i.e. government funding) acts for fiscal year 2021, coronavirus relief provisions, and other matters including tax extension provisions.

The US Senate and House of Representatives had passed the legislation on 21 December 2020.

The coronavirus relief provisions include the following tax relief:

  • a refundable tax credit in the amount of USD 600 per eligible family member;
  • the extension of the repayment period for deferred withholding of employees' share of social security taxes or the railroad retirement tax equivalent from the original period of 1 January 2021 through 30 April 2021 to the new period of 1 January 2021 through 31 December 2021;
  • the treatment of personal protective equipment and other supplies used to prevent the spread of Covid-19 as eligible expenses for the educator expense deduction;
  • the exclusion from gross income for a forgiven Paycheck Protection Program (PPP) loan;
  • the deductibility for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven;
  • the exclusion from gross income of college and university students for certain emergency financial aid grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act);
  • the exclusion from gross income for forgiveness of certain loans, emergency Economic Injury Disaster Loan (EIDL) grants, and certain loan repayment assistance under the CARES Act, without reducing tax basis and other attributes; and
  • the deductibility for otherwise deductible expenses paid with the proceeds of the above-mentioned loans and grants that are forgiven.

The tax extension provisions include the following tax relief:

  • the permanent extensions of:
    • the deduction for energy efficiency improvements to commercial buildings;
    • the exclusions for qualified state or local tax benefits and qualified reimbursement payments provided to firefighters and emergency medical responders;
    • the credit for qualified railroad track maintenance in the amount equal to 50% of maintenance expenditures prior to 1 January 2023, and 40% thereafter; and
    • the reduction of certain excise taxes and simplified record-keeping requirements related to the taxation of beer, wine and distilled spirits;
  • the extensions through 2025 of:
    • the look-through treatment for payments of dividends, interest, rents and royalties between related controlled foreign corporations (CFCs);
    • annual USD 5 billion allocations of the New Markets Tax Credit;
    • an elective general business credit to employers hiring members of ten targeted groups under the Work Opportunity Tax Credit (WOTC) program;
    • the exclusion from gross income of up to USD 750,000 for a discharge of indebtedness incurred for acquisition, construction or substantial improvement of primary residence;
    • the deduction of up to USD 15 million (USD 20 million for certain areas) in the aggregate cost for qualified film, television and theatrical productions;
    • the excise tax of USD 0.09 per barrel on crude oil received at a refinery and petroleum products entered into the United States which is deposited into the Oil Spill Liability Trust Fund;
    • tax benefits for certain businesses and employers operating in empowerment zones; and
    • the employer credit as an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave;
  • the extensions through 2021 of:
    • the production tax credits for renewable power facilities beginning construction by the end of 2021;
    • the treatment of qualified mortgage insurance premiums as interest for the mortgage interest deduction;
    • the credit of up to USD 2,000 for qualified new energy efficient homes; and
    • the USD 0.50-per-gallon excise-tax credit for alternative fuel and USD 0.50-per-gallon credit for alternative fuel mixtures;
  • a 100% deduction for business meal food and beverage expenses incurred in 2021 and 2022; and
  • the use of 2019 earned income in determining the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) in 2020.

The Chairman of the Senate Finance Committee issued a Statement dated 21 December 2020, which included section-by-section summaries of the COVID-related tax relief policies and the tax extension provisions.

The House Committee on Appropriations issued a Press Release dated 21 December 2020, which included division-by-division summaries of the coronavirus relief provisions and the authorizing matters, as well as one-page fact sheets on the coronavirus relief provisions and the authorizing matters.

The Treasury Department issued a Statement dated 22 December 2020.

The White House issued a Bill Announcement dated 27 December 2020 and a Statement dated the same.