On December 27, 2020, President Donald Trump signed into law the Consolidated Appropriations Act of 2021 (The Act) that includes government funding and a pandemic aid package. The Act comes as the previous relief measures created by Families First Coronavirus Response (FFCRA), CARES and presidential memos were set to expire at the end of 2020. The Act includes several forms of stimulus and support, including extensions and changes to the earlier COVID-related legislation. Below are some pertinent parts of The Act businesses should be aware of.
Extension of FFCRA Sick and Family Leave
In March 2020, the FFCRA required employers with fewer than 500 employees to provide specified paid sick leave to employees affected by COVID-19 and provided affected employers with a corresponding employment tax credit. Originally, these provisions were in effect through December 31, 20202020.
Here are the updates from The Act:
- Extends payroll tax credit to employers offering the use of FFCRA Emergency Sick Leave and Family Leave through March 31, 2021.
- The extension is optional, not mandatory. The Employers do not have to offer use of FFCRA Emergency Sick and Family Leave after December 31, 2020. FFCRA Emergency Sick and Family Leave is optional after December 31, 2020.
- If an employer does allow employees to use remaining FFCRA Sick and Family Leave through March 31, 2021, the employer may also claim the corresponding credit.
- The Act does not reset the FFCRA limits for 2021. This means if such amounts were exhausted for an employee in 2020, any leave payments to that employee in 2021 would not qualify for the tax credit.
California Supplemental COVID-19 Paid Sick
In California, the FFCRA’s deadline is important because California’s Supplemental COVID-19 Paid Sick Leave program was tied to the FFCRA’s expiration. In September 2020, the California Legislature enacted AB 1867, which mandated employers with 500 or more employees to provide up to two weeks of supplemental paid sick leave for certain qualifying reasons. AB 1867 stated that the supplemental paid sick leave program expires when the FFCRA does. Because the FFCRA mandate was not extended by the Consolidated Appropriations Act of 2021, it’s probable that California’s AB 1867 will expire when the FFCRA does on December 31, unless California passes additional legislation. Employers should still continue to monitor the Labor Commissioner’s AB 1867 guidance for any agency interpretation on how the FFCRA expiration affects California law.
Additionally, A number of local city and county agencies enacted ordinances this year that provided supplemental COVID-19 paid sick leave with their own rules and expiration dates unrelated to state or federal law.
Employee Social Security Tax Deferral Repayment Deadline Extended to December 2021
Per the August 8 Presidential Memorandum, employees are allowed to defer their portion of social security tax through the end of 2020. The Act has extended the recollection period from April 30, 2021 to December 31, 2021. These deferred taxes must be repaid before January 1, 2022.
Extension and Enhancement of Employee Retention Credit
Employee retention credits are extended through June 30, 2021 with additional enhancements.
- These changes are applicable to eligible wages paid after December 31, 2020.
- Percentage of applicable wages increased from 50 percent to 70 percent.
- Total applicable wages increased to $10,000 per calendar quarter instead of $10,000 total earnings through December 31, 2021.
- The qualifying wages threshold for “Large Employers” increased from 100 to 500 Employees.
- Employers with 500 or fewer employees can claim an employee retention credit whether the wages are for employees who are performing services or not.
- Adds special rules for receiving a refund via 7200 by limiting the advance refund to employers with less than 500 employees and for amounts not to exceed 70 percent of the average quarterly wages paid in 2019.
- Employers are eligible for the credit of a decline in Gross receipts of less than 80 percent compared to the same period in the prior year. Note, CARES compared the same period in the prior year at a rate of 50 percent.
- Allows employers not in business in 2019 to determine eligibility based on prior quarter.
- Removes prohibition on employers receiving Paycheck Protection or other business interruption loans from claiming the ERC, so employers can take advantage of both options.
Paycheck Protection Program Funding
The Act established a “PPP second draw,” extending the PPP program and permitting certain small employers and industries to apply for a second forgivable PPP loan. The Act extends the covered period of all PPP loans through March 31, 2021.
Eligibility for a second draw is limited to small businesses with 300 or fewer employees that have sustained a 25 percent revenue loss in any quarter of 2020. Applicable businesses must have used or will use the entire amount of their first PPP loan.
Forgivable expenses are expanded to include:
- Covered operations expenditures
- Supplier costs
- Covered property damage costs
- Investments in facility modifications
- Personal protective equipment to operate safely
Expansion of Unemployment Insurance Benefits
The Act has restored Federal supplemental unemployment insurance benefits of $300 per week on top of state benefits paid after December 26, 2020, until March 14, 2021. This creates a combined maximum benefit period of 50 weeks, which was previously set at 39 weeks. It includes a three-week phase out for benefits on claims that haven’t reached the 50-week cap.
The Act provides authority to states to waive overpayments made without fault on the part of the individual. Additionally, it limits retroactivity for additional $300 benefit to payments due after December 1, 2020.