On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (Act), which provides another round of stimulus payments and other initiatives intended to combat the economic fallout of the COVID-19 pandemic. The Act also provides funding for general government operations.
Of particular interest to employers and small businesses, the Act makes changes to the paid sick leave requirements put into place under the Families First Coronavirus Relief Act (FFCRA), and provides funding for a second round of business loans, as well as a number of other stimulus measures. The Act also provides direct payments to individuals, extends the eviction ban, and provides funding for the COVID-19 vaccine roll out.
Employers should take note of the changes to the FFCRA that will go into effect beginning January 1, 2021 under the Act, as well as the changes made for the second round of Paycheck Protection Payment (PPP) Loans.
FFCRA in 2021
The FFCRA created two paid leave programs—the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA). Both of these paid leave provisions are set to expire as of December 31, 2020. The new Act, however, allows employers to continue to provide these benefits on a voluntary basis. Private sector employers who continue to provide paid sick leave will continue to be eligible for a tax credit for any paid sick leave taken by their employees through March 31, 2021. If employers choose to continue providing paid sick leave through March 31, 2021, they should adhere to all requirements of the EPSLA and the EFMLEA that were in place during 2020 in order to continue to be eligible for the corresponding tax credit.
With respect to the two weeks of paid leave provided under the EPSLA, the Act does not create any additional amount of leave, but rather extends the deadline by which existing leave entitlements may be accessed with employer election to continue the program from December 31, 2020 to March 31, 2021.
Public sector employers were never eligible for the tax credits under the FFCRA, and that will continue to be the case after December 31, 2020. Under the FFCRA, public sector employers were not required to pay the employer portion of Social Security taxes on paid sick leave. Beginning January 1, 2021, if public sector employers choose to voluntarily provide paid sick leave for their employees, they must pay the employer portion of Social Security taxes, along with other required payroll taxes.
Many employers have already made decisions or considered options relative to continuing the FFCRA leave programs into 2021 based on the continued impact of COVID-19. For public sector employers, those decisions need not be revisited based on this Act. For private sector employers, if you have chosen to or are considering continuing the FFCRA leave benefits into 2021, please note that you will have to extend them in their entirety in order to receive the corresponding tax benefits and to continue to count EFMLEA usage as part of the overall 12 weeks of available FMLA. With that understanding, it is also the case that employers (public or private sector) may choose not to continue the programs at all, or may choose to provide a scaled version of the FFCRA leave benefits, for example, to continue EPSLA but not EFMLEA, or to provide only EPSLA for an employee’s own illness, diagnosis, or quarantine.
Second Round of PPP Loans
Under the Act, businesses, even those that already received a PPP loan, may receive a PPP loan if they can prove their revenue in any quarter of 2020 fell by 25% or more as compared to the same quarter of 2019, and if they employ 300 or fewer employees. The maximum amount for the second round of loans will be $2 million. In addition to expenses previously allowed under the PPP program, loan recipients may now use PPP loan funds for the following:
- Covered operations expenditures, which means “payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses;”
- Covered property damage costs, which means any “cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation;”
- Covered supplier costs, meaning payments made to a supplier for goods that are essential to the operations of the loan recipient, so long as the contract or purchase order for that good existed prior to the PPP loan period (or, for perishable goods, a contract in existence prior to or during the PPP loan period);
- Covered worker protection expenditures, meaning costs related to sanitation, social distancing, and other COVID-19 safety measures (e.g., air filtration systems, sneeze guards, personal protective equipment, and health screening equipment).
In addition to expanding the list of eligible uses for PPP loan funds, the Act expands the list of eligible recipients to include, among other entities, nonprofit organizations, housing cooperatives, veterans’ organizations, Tribal business concerns, and small agricultural cooperatives.
For questions regarding this article, please contact your Renning, Lewis & Lacy, s.c., attorney.