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A Look at What’s in the Second Stimulus Package


On Sunday, December 27, 2020, the Consolidated Appropriations Act, 2021 (H.R. 133) was signed into law.  The bill contained the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (“Coronavirus Relief Act”), which aimed to provide additional pandemic relief.

The following are the major components of the Coronavirus Relief Act, which modifies and enhances the CARES Act which was passed on March 27, 2020.



Paycheck Protection Program (PPP) – Second Draw PPP Loan

The Coronavirus Relief Act provided round 2 of Paycheck Protection Program forgivable loans to eligible recipients.  Eligible recipients for Second Draw PPP Loans include businesses and self-employed individuals that generally:

    1. Have fewer than 300 employees; and
    2. Demonstrate that the business has had a 25 percent (or greater) reduction in gross receipts during the first, second, third or fourth quarter in 2020, compared to the same quarter in 2019.

For Second Draw PPP Loans, recipients will calculate the maximum loan amount using the same method as First Draw PPP Loans (2.5 times average monthly payroll costs).  The average payroll costs will use the calendar year 2019 payroll, or the payroll for the 1-year period before the date the new loan is made.  However, for Second Draw PPP Loans there will be a $2 million maximum loan amount.  The hotel and restaurant industry (covered under NAICS Code 72) will calculate the loan amount using 3.5 times the monthly average payroll costs but will still be subject to the $2 million maximum loan amount.

The Coronavirus Relief Act allows a PPP recipient to select the “covered period,” to better align with payroll and full-time equivalent (FTE) counts.  The covered period must be at least 8 weeks and cannot exceed 24 weeks.  The Coronavirus Relief Act also provides for additional “eligible” expenses to include “covered supplier costs” and “covered worker protection expenditures,” among others.

Eligible recipients may apply for a Second Draw PPP Loan through March 31, 2021.  Recipients of an original First Draw PPP Loan do not need to have applied for forgiveness to receive a Second Draw PPP Loan; however, the recipient must have used, or will use, the full amount of the First Draw PPP Loan on eligible expenses before the Second Draw PPP Loan is disbursed.

Paycheck Protection Program (PPP) – Deductibility of PPP Expenses & EIDL Advance

The Coronavirus Relief Act provided much anticipated relief to recipients of First Draw PPP Loans.  As intended in the CARES Act, the Coronavirus Relief Act provides for allowable tax deductions for expenses paid with forgivable PPP loan funds.

Under the CARES Act, a recipient’s PPP loan forgiveness was required to be reduced by the Economic Injury Disaster Loan (EIDL) advance received (up to $10,000).  The Coronavirus Relief Act repealed the provision reducing PPP forgiveness by an EIDL advance.

Stimulus Payments to Individuals

A second round of direct payments to eligible individuals was introduced under Coronavirus Relief Act, many of which have already been provided to eligible taxpayers.  The direct payments are similar to the first round of payments made to individuals under the CARES Act in March 2020.  However, the second round payments will be up to $600 per eligible individual and $600 per child.

The direct payments to individuals are limited based on adjusted gross income (“AGI”).  Taxpayers with an AGI of up to $75,000 per year ($150,000 if married filing a joint return) will be eligible for the full direct payments.  Individual payments will be reduced for individuals earning over $75,000 and less than $87,000 ($150,000 to less than $174,000 if married).  Taxpayers with an AGI of $87,000 or more ($174,000 if married) would not be eligible for a second direct payment.  The income requirements will be based upon 2019 income tax return filings.  For taxpayers that were not eligible based on the 2019 tax return, but will be eligible for 2020, the individual will be able to claim the Economic Impact Payments on their 2020 tax return to provide both first and second round direct payments.

Unemployment Benefits

The Coronavirus Relief Act will provide an additional $300 per week Federal unemployment benefit to recipients.  The additional $300 Federal benefit will be in addition to state unemployment benefits and will apply to self-employed individuals and gig workers.  The extra $300 benefit will begin after December 27, 2020 (the date signed into law) and expire on March 14, 2021.

Full Deduction for Business Meals in 2021 and 2022

The Coronavirus Relief Act provides for a two-year full deduction for business meals, where a tax deduction was previously limited to 50 percent of the amount spent.  The 100 percent deduction for business meals applies to the 2021 and 2022 tax years (not retroactively to 2020).  The food and beverages must be provided by a restaurant to qualify for the full deduction.

Expansion of the Employer Retention Credit (ERC)

The Coronavirus Relief Act extends and expands the Employer Retention Credit to eligible businesses for calendar quarters through July 1, 2021.  The ERC refundable tax credit was increased from 50 percent to 70 percent, resulting in a maximum credit of $7,000 per employee per quarter.

Eligible employers must demonstrate that gross receipts for the calendar quarter are less than 80 percent of the gross receipts of the employer for the same calendar quarter in 2019 (more than a 20 percent reduction).  An employer may elect to determine the gross receipts test based upon the prior quarter.  Eligible employers also include businesses that experienced a full or partial suspension of operations due to a governmental order.

An employer that receives a First Draw PPP Loan or Second Draw PPP Loan can still qualify for the ERC, however the same wages may not be used for both the ERC and PPP forgiveness.


Contributing author: Brian J. Potter, CPA, CDA, is a tax partner at Dannible & McKee, LLP.  Brian has over 14 years of experience providing tax and consulting services to a wide range of clients.  He has extensive experience in individual and corporate tax planning, financial planning, multi-state taxation, research and development, New York State income tax credits and ownership transition issues.