The latest federal coronavirus relief package makes $325 billion available to small businesses hurt by the pandemic.

The money is part of the $892 billion coronavirus relief package Congress approved Dec. 21 to help struggling Americans and businesses.

The president signed the bill late Dec. 27, after earlier threatening a veto.

The $325 billion for small businesses includes $284 billion for a second round of forgivable Payroll Protection Program loans, now expanded to include nonprofits, local newspapers, and TV and radio broadcasters.

It also sets aside $12 billion for minority-owned and very small businesses that had trouble accessing the first round of PPP funding.

Eligibility

The second round of PPP loans will be limited to companies with no more than 300 employees and loans will be capped at $2 million. Publicly traded businesses are not eligible.

Small businesses that previously received a PPP loan will be eligible for a second loan if their revenues fell by 25% this year.

PPP borrowers will also be allowed to take tax deductions for covered business expenses, including rent and utilities.

The new relief package includes $20 billion for targeted grants through the U.S. Small Business Administration’s Economic Injury Disaster Loan program, $43.5 billion for continued SBA debt relief payments, and $2 billion for SBA lending enhancements.

It also includes $15 billion for independent movie theaters, cultural institutions, and live music venues.

In addition, the bill sets aside $45 billion for transit agencies, airlines, airports, state transportation departments, the motor coach industry, and Amtrak.

Employee Retention Tax Credit

Earlier PPP lending provided $525 billion to over 5.2 million businesses nationwide, including more than $6.6 million for over 63,000 Connecticut businesses.

Businesses that receive PPP loans can qualify for loan forgiveness by spending at least 60% on payroll to keep people employed, and the rest on rent, mortgage, utilities payments, and interest on existing debt.

The bill also extends and expands the Employee Retention Tax Credit through July 1, 2021.

The bill clarifies that businesses can take the Employee Retention Tax Credit and receive a PPP loan.

It increases the refundable payroll tax credit from a maximum of $5,000 to $14,000 by changing the calculation from 50% of wages paid up to $10,000 to 70% of wages paid up to $10,000 for any quarter.

The employee retention credit gives businesses of all sizes, including nonprofits, a payroll tax credit for wages paid during a suspension of their business operations or periods where they have experienced significant revenue loss.

The bill clarifies that businesses can take that tax credit and receive a PPP loan.

Additional Tax Credits

It also lowers the threshold for medical expense deductions from 10% to 7.5%, and extends credits reimbursing employers for paid sick and family leave paid to employees due to COVID-19 for three months.

The bill also:

  • Extends the Work Opportunity Tax Credit for five years, helping employers continue to hire disadvantaged individuals
  • Makes permanent the bipartisan Craft Beverage Modernization and Tax Reform Act, providing excise tax relief to the growing craft beverage industry
  • Extends the Medical Expense Deduction Expansion for an additional year, a move designed to reduce the tax costs of out-of-pocket medical expenses and long-term care
  • Extends for five years the CFC look-through rules for U.S. multinationals to allow for the efficient ability to bring back dollars trapped overseas and keep U.S. companies competitive abroad
  • Extends the New Markets Tax Credit for five years at 2020 levels

The bill also extends the Health Coverage Tax Credit by one year. This helps subsidize the cost of continued coverage for retirees and other individuals who lost their healthcare coverage—as well as pensions and other benefits—when their employers either entered into bankruptcy or laid off workers due to foreign trade.

It enables businesses with 500 or less employees to advance the Health Coverage Tax Credit at any point during the quarter based on wages paid in the same quarter in a previous year.

Payroll Taxes

The legislation also extends the period to pay back certain employee payroll taxes that the Trump administration encouraged employers to defer in August.

The administration allowed the deferral of payroll taxes in the fourth quarter of 2020, with employees to pay it back incrementally between Jan. 1 and April 30, 2021, with penalty and interest accruing on May 1.

The bill extends the repayment period through Dec. 31, 2021 with penalty and interest starting to accrue Jan. 1, 2022.

The legislation extends the refundable payroll tax credits for federal paid sick and family leave benefits.

The new relief bill also extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, through the end of March 2021.

It also modifies the tax credits so they apply as if the corresponding employer mandates were extended through the end of March 2021.

It allows individuals to elect to use their average daily self-employment income from 2019 rather than 2020 to calculate the credit.

It also includes a provision increasing the tax deduction for business meal expenses from 50% to 100%.