• Client Business Meals: 50% deductible if ordinary and necessary in carrying on business, taxpayer is present, provided to current or potential client or consultant and not lavish or extravagant
• Entertainment Related Meals: 50% deductible if charges are stated separately from the cost of entertainment, no deduction otherwise
• Meals Provided for the Convenience of Employer: 50% deductible
• Meals Provided to Employees Occasionally and Overtime Employee meals: 50% deductible
• Meals in Office during meetings of employees, stockholders, agents or directors: 50% deductible
• Meals During Business Travel: 50% deductible

Barring further action by Congress, many of the TCJA rules are scheduled to expire after 2025 and some may revert to tax rules that were effective in 2017. To learn more, review our chart of meal + entertainment deductions by category and tax year.  

Two major changes from the Inflation Reduction Act include Section 179D building deduction changes and the new direct transfer system. These go into effect January 1, 2023.

Section 179D building deduction changes

The Commercial Buildings Energy-Efficiency Tax Deduction (SS179D) provides a deduction of up to $1.88 per square foot for both building owners who construct new or renovate existing energy efficient buildings as well as designers of government-owned buildings. The IRA modifies the tax deduction for energy efficient commercial buildings with new rules for property placed in service Jan 1, 2023. These include:

• Lowering the minimum required savings in total annual energy and power cost
• Removed existing rules for partial certifications
• Provides higher deductions for meeting prevailing wage and apprenticeship requirements
• Removes the lifetime limit, permitting subsequent energy improvements
• Allows allocations of 179D deductions to all tax-exempt entities, and both public and tax-exempt organizations can allocate 179D deductions to their designers.
• Established a new retrofit program

New direct transfer system

Additionally, the IRA created two new credit monetization methods: direct pay for tax-exempt entities and full transferability of credits for taxable entities. This change establishes a market for buying and selling tax credits, as well as including all companies to take advantage of clean energy credits.

Click here to learn more about how these  two new credit monetization methods can support your company’s sustainability strategy and lower total tax liability.

Optimize your benefits with the Inflation Reduction Act (IRA) new credits and incentives. 

Understanding the opportunity of the new direct transfer system

The passage of the Inflation Reduction Act (IRA) has created a momentous opportunity for companies to advance clean energy commitments while lightening tax burdens. Signed into law on August 16, the IRA is the largest climate investment legislation in history, allocating $369 billion to clean energy programs over the next 10 years—including many new clean energy credits and incentives for businesses.

One of the law’s most significant changes is the creation of two new credit monetization methods: direct pay for tax-exempt entities and full transferability of credits for taxable entities. The transferability provision effectively creates a market for buying and selling tax credits. The new credit market means that any company, not just energy producers, can take advantage of clean energy credits. For example, a company installing a solar facility on the roof of its building may be eligible for credits that it can use or sell to another company. All companies should consider how these credits can support their sustainability strategy and lower total tax liability.

Other key credits and incentives changes in the IRA include:

• Extension of existing clean energy tax credits by 10 years, allowing organizations to plan for the long-term.
• Introduction of a base and bonus rate structure for the Investment Tax Credit (ITC) and Production Tax Credit (PTC), where businesses that meet certain apprenticeship and prevailing wage requirements are eligible for a bonus credit up to five times the base amount. Businesses may also be eligible for additional credits, and by taking advantage of these credits, may be able to achieve a bonus ITC as high as 50-60%. Additional credits include:
  • 10% domestic content credit.
  • 10% energy communities’ credit.
  • 10-20% low-income communities’ credit (applies to solar and wind projects under 5MW and only the ITC).
• Allowance for credits to be carried forward up to 22 years and carried back up to three years.

In addition, while the IRA also introduces a new 15% corporate alternative minimum tax (AMT) that will take effect in 2023, the IRA’s clean energy credits are among the AMT offsets that are available to affected taxpayers. Corporations that expect their total tax liability to increase due to the new AMT should consider buying credits to mitigate the impact.

How sellers can monetize credits

Project owners without significant tax liability must decide whether to monetize credits under the new direct transfer rules or use a traditional tax equity structure. Businesses must weigh both options to determine the best path forward for the business and the project.

Direct credit transfers may avoid higher compliance, legal and advisory costs that come with complex tax equity partnership structures but may not allow for the efficient monetization of depreciation. Based on the size and cost of the project, however, there may be an inflection point at which a traditional tax equity structure will yield greater return over a direct transfer. Building a comparative model—either in-house or by working with an advisor—can help a company determine the best structure for its project.

Another consideration concerns the capital structure for new energy projects. When opting for transferring a tax credit, project owners may have to seek additional capital for the initial investment as the credit transaction timing may not occur until the project is nearing commercial operation. To ensure credits can be sold for maximum value, it is critical for sellers of credits to clearly document that the underlying requirements have been met for the credit to achieve the expected value. Companies looking to sell credits should consider working with an independent tax consultant who can certify the underlying requirements, such as prevailing wage and apprenticeship, in a given project have been met to realize the full expected value.

For companies considering a renewable energy project, the time to start construction is now, as projects that are placed in service before year-end, or up to 60 days after the Treasury issues guidance on prevailing wage and apprenticeship requirements, will automatically be eligible for the ITC and PTC at full rates.

While it is still unclear how credits will be valued at the time of sale, the projects that can provide thorough documentation demonstrating credit requirements were achieved will likely transfer at the highest rates.

Considerations for buyers of tax credits

Buyers should perform due diligence on credit sellers’ projects when purchasing credits to confirm the underlying requirements have been met. A buyer who purchases what it believes is a 30% ITC, for example, should be sure that the bonus requirements were satisfied or else risk the purchased credit being worth less than expected. Buyers also need to determine who will take on the risk of recapture or disallowance if the credit does not meet advertised expectations. As the direct transfer market develops, buyers may seek indemnity clauses as part of the credit transfer agreement. Businesses interested in buying credits should consider working with a tax advisor who can help validate credits, ensuring they meet the advertised value.

What’s next for businesses

Treasury is scheduled to issue additional guidance on the prevailing wage and apprenticeship requirements. Here is a calendar of important upcoming dates to watch:

Written by Michael Stavish. Copyright © 2022 BDO USA, LLP. All rights reserved. www.bdo.com

Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, congratulates Buddy Newton, CPA , CVA®, on being recognized for the Construction Financial Management Association’s (CFMA) 2022 Rising Stars.

CFMA, the only nonprofit dedicated to the success and growth of construction financial professionals, announces its second class of Rising Stars. These leaders under 40 years old are honored for positively impacting their companies and the construction industry.

“It is inspiring to see these young professionals recognized for building a stronger industry,” said Tom Borgia, CFMA’s 2022-23 Chairman. “With a focus on the future, I am confident that these leaders will help guide us through the changing needs of the construction industry.”

“Leaders like these Rising Stars will surely help advance our industry, strengthen CFMA, help us innovate, and build inclusive community,” says Stuart Binstock, CFMA’s President & CEO. “I am excited to see how they will help carry the construction industry — and CFMA — into the future.”

Learn more about the winners at cfma.org/risingstars.

Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, announces staff promotions, photos attached:

• Jared Usrey – Promoted to Tax Operations Manager

Jared has a bachelor’s in business management with an emphasis in accounting from the University of Colorado Colorado Springs.  He has been in public accounting since 2016.

• Jennifer Dawson – Promoted to Accounting Services Manager

Jennifer has a degree in accounting from the University of Colorado Colorado Springs. She has been in public accounting since 2005.

About Stockman Kast Ryan + Co

SKR+CO is Southern Colorado’s largest independent certified public accounting firm providing a variety of in-depth consulting for businesses and individuals. Advisory services include tax planning, audit and assurance services, outsourced controller and contract CFO, financial reporting, estate planning, business valuations and litigation support. For more information, visit www.skrco.com. SKR+CO is an independent member firm of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting and service firms with similar client service goals.

Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, congratulates Buddy Newton, CPA , CVA®, as the eleventh member of the SKR+CO partner group. Buddy brings thirteen years of experience as a business valuation analyst and tax accountant, with a specialty focus in the construction, auto dealer and high-net worth industry.

“We are pleased to welcome Buddy to the partner team,” shared SKR+CO Tax Partner Judy Kaltenbacher. “Buddy’s extensive background, industry expertise and education will complement our team and provide more value for our clients.”

In addition to being a CPA, Buddy holds certification in Certified Valuation Analyst (CVA®). Buddy has a Master of Science in Taxation from Northeastern University and a bachelor’s in business with an emphasis in Accounting from University of Colorado, Colorado Springs.

In 2019, Buddy was recognized as one of that year’s 40 Under Forty Honorees by the National Association of Certified Valuators and Analysts® (NACVA®).  NACVA’s® 40 Under Forty program recognizes the nation’s emerging visionary leaders across all spectrums of the accounting and financial consulting professions. The honorees embody the drive, motivation and courage needed to lead the industry’s next generation.

Buddy was most recently a Senior Tax Manager at SKR+CO.  He also serves as a reserve Sergeant for the El Paso County Sherriff’s office.

About Stockman Kast Ryan + Co

SKR+CO is Southern Colorado’s largest independent certified public accounting firm providing a variety of in-depth consulting for businesses and individuals. Advisory services include tax planning, audit and assurance services, outsourced controller and contract CFO, financial reporting, estate planning, business valuations and litigation support. For more information, visit www.skrco.com. SKR+CO is an independent member firm of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting and service firms with similar client service goals.

Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, announces the hiring of Human Resources Generalist Andrew Wilson. Andrew will provide functional support for human resources and operations to include employee engagement, performance management and compliance.

Andrew brings a wealth of knowledge and experience to the team, with work history in for-profit and non-profit industries. He is skilled in areas of coaching, communication and people management.

Prior to joining SKR+CO, Andrew was Regional Human Resources Manager at VillaSport Athletic Club and Spa in Colorado Springs.

Andrew has a degree in Political Science from Southern New Hampshire University.

About Stockman Kast Ryan + Co

SKR+CO is Southern Colorado’s largest independent certified public accounting firm providing a variety of in-depth consulting for businesses and individuals. Advisory services include tax planning, audit and assurance compliance, outsourced controller and contract CFO, financial reporting, estate planning, business valuations and litigation support. For more information, visit www.skrco.com. SKR+CO is an independent member firm of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting and service firms with similar client service goals.

SKR+CO Tax Record Retention Schedule (Click Here)

The Consolidated Appropriations Act of 2021 (Act), signed into law on December 27, 2020, contains significant enhancements and improvements to the Employee Retention Credit (ERC).  The ERC, which was created by the CARES Act on March 27, 2020, is designed to encourage employers (including tax-exempt entities) to keep employees on their payroll and continue providing health benefits during the coronavirus pandemic. The ERC is a refundable payroll tax credit for wages paid and health coverage provided by an employer whose operations were either fully or partially suspended due to a COVID-19-related governmental order or that experienced a significant reduction in gross receipts.

Employers may use ERCs to offset federal payroll tax deposits, including the employee FICA and income tax withholding components of the employer’s federal payroll tax deposits.

ERC for 2020

The Act makes the following retroactive changes to the ERC, which apply during the period March 13, 2020 through December 31, 2020:

• Employers that received PPP loans may qualify for the ERC with respect to wages that are not paid with proceeds from a forgiven PPP loan.
• The Act clarifies how tax-exempt organizations determine “gross receipts.”
• Group health care expenses are considered “qualified wages” even when no other wages are paid to the employee.

Insights

• Employers that received a PPP loan and that were previously prohibited from claiming the ERC may now retroactively claim the ERC for 2020.
• With respect to the retroactive measures in the Act, employers that paid qualified wages in Q1 through Q3 2020 may elect to treat the qualified wages as being paid in Q4 2020. This should allow employers to claim the ERC in connection with such qualified wages via a timely filed IRS Form 7200 or Form 941, as opposed to requiring an amended return (IRS Form 941-X) for the prior quarter(s) in 2020.

ERC for 2021 (January 1 – June 30, 2021)

In addition to the retroactive changes listed above, the following changes to the ERC apply from January 1 to June 30, 2021:

Increased Credit Amount

• The ERC rate is increased from 50% to 70% of qualified wages and the limit on per-employee wages is increased from $10,000 for the year to $10,000 per quarter.

Broadened Eligibility Requirements

• The gross receipts eligibility threshold for employers is reduced from a 50% decline to a 20% decline in gross receipts for the same calendar quarter in 2019.
• A safe harbor is provided allowing employers to use prior quarter gross receipts compared to the same quarter in 2019 to determine eligibility.
• Employers not in existence in 2019 may compare 2021 quarterly gross receipts to 2020 quarters to determine eligibility.
• The credit is available to certain government instrumentalities, including colleges, universities, organizations providing medical or hospital care, and certain organizations chartered by Congress.

Determination of Qualified Wages

• The 100-full time employee threshold for determining “qualified wages” based on all wages paid to employees is increased to 500 or fewer full-time employees.
• The Act strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).

Advance Payments

• Under rules to be drafted by Treasury, employers with less than 500 full-time employees will be allowed advance payments of the ERC during a calendar quarter in which qualifying wages are paid. Special rules for advance payments are included for seasonal employers and employers that were not in existence in 2019.

Insights

• Employers that previously reached the credit limit on some of their employees in 2020 can continue to claim the ERC for those employees in 2021 to the extent the employer remains eligible for the ERC.
• Qualification for employers in 2021 based on the reduction in gross receipts test may provide new opportunities for businesses in impacted industries.
• Eligible employers with 500 or fewer employees may now claim up to $7,000 in credits per quarter, paid to all employees, regardless of the extent of services performed. Previously this rule was applicable to employers with 100 or fewer employees and a maximum of $5,000 in credit per employee per year. Aggregation rules apply to determine whether entities under common control are treated as a single employer.

The Act may provide significant opportunities for your company. However, the interplay between the Act, the CARES Act and various Internal Revenue Code sections is nuanced and complicated so professional advice may be needed.

NEW STIMULUS PACKAGE PASSED DECEMBER 21, 2020

The U.S. House of Representatives and U.S. Senate passed the Consolidated Appropriations Act, 2021 (bill), a massive tax, funding, and spending bill that contains a nearly $900 billion coronavirus aid package. The emergency coronavirus relief package aims to bolster the economy, provide relief to small businesses and the unemployed, deliver checks to individuals and provide funding for COVID-19 testing and the administration of vaccines. The over 5,500-page bill has been sent to President Trump, who is expected to sign it within the next week.

The coronavirus relief package contains another round of financial relief for individuals in the form of cash payments and enhanced federal unemployment benefits. Individuals who earn $75,000 or less annually generally will receive a direct payment of $600. Qualifying families will receive an additional $600 for each child. According to Treasury Secretary Mnuchin, these checks could be distributed before the end of 2020. To provide emergency financial assistance to the unemployed, federal unemployment insurance benefits that expire at the end of 2020 will be extended for 11 weeks through mid-March 2021, and unemployed individuals will receive a $300 weekly enhancement in unemployment benefits from the end of December 2020 through mid-March. The CARES Act measure that provided $600 in enhanced weekly unemployment benefits expired on July 31, 2020.

The bill earmarks an additional $284 billion for a new round of forgivable small-business loans under the Paycheck Protection Program (PPP) and contains a number of important changes to the PPP. It expands eligibility for loans, allows certain particularly hard-hit businesses to request a second loan, and provides that PPP borrowers may deduct PPP expenses attributable to forgiven PPP loans in computing their federal income tax liability and that such borrowers need not include loan forgiveness in income.

The bill allocates $15 billion in dedicated funding to shuttered live venues, independent movie theaters and cultural institutions, with $12 billion allocated to help business in low-income and minority communities.

The bill also extends and expands the employee retention credit (ERC) and extends a number of tax deductions, credits and incentives that are set to expire on December 31, 2020.

This alert highlights the main tax provisions included in the bill.

Paycheck Protection Program

The PPP, one of the stimulus measures created by the CARES Act, provides for the granting of federally guaranteed loans to small businesses, nonprofit organizations, veterans organizations and tribal businesses in an effort to keep businesses operating and retain staff during the COVID-19 pandemic. (PPP loans are administered by the Small Business Administration (SBA)).

A recipient of a PPP loan under the CARES Act (the first round) could use the funds to meet payroll costs, certain employee healthcare costs, interest on mortgage obligations, rent and utilities. At least 60% of the loan funds were required to be spent on payroll costs for the loan to be forgiven.

Eligible businesses

Business are eligible for the second round of PPP loans regardless of whether a loan was received in the first round. The bill changes the definition of a “small business.” Small businesses are defined as businesses with no more than 300 employees and whose revenues dropped by 25% during one of the first three quarters of 2020 (or the fourth quarter if the business is applying after January 1, 2021). The decrease is determined by comparing gross receipts in a quarter to the same in the prior year. Businesses with more than 300 employees must meet the SBA’s usual criteria to qualify as a small business.

Borrowers may receive a loan amount of up to 2.5 (3.5 for accommodation and food services sector businesses) times their average monthly payroll costs in 2019 or the 12 months before the loan application, capped at $2 million per borrower, reduced from a limit of $10 million in the first round of PPP loans.

The bill also expands the types of organizations that may request a PPP loan. Eligibility for a PPP loan is extended to:

• Tax-exempt organizations described in Internal Revenue Code (IRC) Section 501(c)(6) that have no more than 300 employees and whose lobbying activities do not comprise more than 15% of the organization’s total activities (but the loan proceeds may not be used for lobbying activities)
• “Destination marketing organizations” that do not have more than 300 employees
• Housing cooperatives that do not have more than 300 employees
• Stations, newspapers and public broadcasting organizations that do not have more than 500 employees

The following businesses, inter alia, are not eligible for a PPP loan:

• Publicly-traded businesses and entities created or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong that hold directly or indirectly at least 20% of the economic interest of the business or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership, or that retain as a member of the entity’s board of directors a China-resident person
• Persons required to submit a registration statement under the Foreign Agents Registration Act
• Persons that receive a grant under the Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act

Uses of loan proceeds

The bill adds four types of non-payroll expenses that can be paid from and submitted for forgiveness, for both round 1 and round 2 PPP loans, but it is unclear whether borrowers that have already been approved for partial forgiveness can resubmit an application to add these new expenses:

• Covered operational expenditures, i.e., payments for software or cloud computing services that facilitate 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, i.e., costs related to property damage and vandalism or looting due to public disturbances that took place in 2020, which were not covered by insurance or other compensation
• Covered supplier costs, i.e., expenses incurred by a borrower under a contract or order in effect before the date the PPP loan proceeds were disbursed for the supply of goods that are essential to the borrower’s business operations
• Covered worker protection equipment, i.e., costs of personal protective equipment incurred by a borrower to comply with rules or guidance issued by the Department of Health & Human Services, the Occupational Safety and Health Administration or the Centers for Disease Control, or a state or local government

To qualify for full forgiveness of a PPP loan, the borrower must use at least 60% of the funds for payroll-related expenses over the relevant covered period (eight or 24 weeks).

Increase in loan amount

The bill contains a provision that allows an eligible recipient of a PPP loan to request an increased amount, even if the initial loan proceeds were returned in part or in full, and even if the lender of the original loan has submitted a Form 1502 to the SBA (the form sets out the identity of the borrower and the loan amount).

Expense deductions

The bill confirms that business expenses (that normally would be deductible for federal income tax purposes) paid out of PPP loans may be deducted for federal income tax purposes and that the borrower’s tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness. This has been an area of uncertainty because, while the CARES Act provides that any amount of PPP loan forgiveness that normally would be includible in gross income will be excluded from gross income, it is silent on whether eligible business expenses attributable to PPP loan forgiveness are deductible for tax purposes. The IRS took the position in guidance that, because the proceeds of a forgiven PPP loan are not considered taxable income, expenses paid with forgiven PPP loan proceeds may not be deducted. The bill clarifies that such expenses are fully deductible—welcome news for struggling businesses. Importantly, the effective date of this provision applies to taxable years ending after the date of the enactment of the CARES Act. Thus, taxpayers that filed tax returns without deducting PPP-eligible deductions should consider amending such returns to claim the expenses.

Loan forgiveness covered period

The bill clarifies the rules relating to the selection of a PPP loan forgiveness covered period. Under the current rules, only borrowers that received PPP proceeds before June 5, 2020 could elect an eight-week covered period. The bill provides that the covered period begins on the loan origination date but allows all loan recipients to choose the ending date that is eight or 24 weeks later.

Loan forgiveness

PPP loan recipients generally are eligible for loan forgiveness if they apply at least 60% of the loan proceeds to payroll costs (subject to the newly added eligible expenditures, as described above), with partial forgiveness available where this threshold is not met. Loans that are not forgiven must be repaid.

Currently, PPP loan recipients apply for loan forgiveness on either SBA Form 3508, Form 3508 EZ or Form 3508S, all of which required documentation that demonstrates that the claimed amounts were paid during the applicable covered period, subject to reduction for not maintaining the workforce or wages at pre-COVID levels.

The bill provides a new simplified forgiveness procedure for loans of $150,000 or less. Instead of the documentation summarized above, these borrowers cannot be required to submit to the lender any documents other than a one-page signed certification that sets out the number of employees the borrower was able to retain because of the PPP loan, an estimate of the amounts spent on payroll-related costs, the total loan value and that the borrower has accurately provided all information required and retains all relevant documents. The SBA will be required to develop the simplified loan forgiveness application form within 24 days of the enactment of the bill and generally may not require additional documentation. Lenders will need to modify their systems used for applications to make an electronic version of the new forgiveness application available to eligible borrowers.

Employment Retention Credit and Families First Coronavirus Response Credit

The bill extends and expands the ERC and the paid leave credit under the Families First Coronavirus Response Act (FFCRA).
ERC

The ERC, introduced under the CARES Act, is a refundable tax credit equal to 50% of up to $10,000 in qualified wages (i.e., a total of $5,000 per employee) paid by an eligible employer whose operations were suspended due to a COVID-19-related governmental order or whose gross receipts for any 2020 calendar quarter were less than 50% of its gross receipts for the same quarter in 2019.

The bill makes the following changes to the ERC, which will apply from January 1 to June 30, 2021:

• The credit rate is increased from 50% to 70% of qualified wages and the limit on per-employee wages is increased from $10,000 for the year to $10,000 per quarter.
• The gross receipts eligibility threshold for employers is reduced from a 50% decline to a 20% decline in gross receipts for the same calendar quarter in 2019, a safe harbor is provided allowing employers to use prior quarter gross receipts to determine eligibility and the ERC is available to employers that were not in existence during any quarter in 2019. The 100-employee threshold for determining “qualified wages” based on all wages is increased to 500 or fewer employees.
• The credit is available to certain government instrumentalities.
• The bill clarifies the determination of gross receipts for certain tax-exempt organizations and that group health plan expenses can be considered qualified wages even when no wages are paid to the employee.
• New, expansive provisions regarding advance payments of the ERC to small employers are included, such as special rules for seasonal employers and employers that were not in existence in 2019. The bill also provides reconciliation rules and provides that excess advance payments of the credit during a calendar quarter will be subject to tax that is the amount of the excess.
• Treasury and the SBA will issue guidance providing that payroll costs paid during the PPP covered period can be treated as qualified wages to the extent that such wages were not paid from the proceeds of a forgiven PPP loan. Further, the bill strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).

The bill makes three retroactive changes that are effective as if they were included the CARES Act. Employers that received PPP loans may still qualify for the ERC with respect to wages that are not paid for with proceeds from a forgiven PPP loan. The bill also clarifies how tax-exempt organizations determine “gross receipts” and that group health care expenses can be considered “qualified wages” even when no other wages are paid to the employee.

FFCRA

The FFCRA paid emergency sick and child-care leave and related tax credits are extended through March 31, 2021 on a voluntary basis. In other words, FFCRA leave is no longer mandatory, but employers that provide FFCRA leave from January 1 to March 31, 2021 may take a federal tax credit for providing such leave. Some clarifications have been made for self-employed individuals as if they were included in the FFCRA.

Other Tax Provisions in the CAA

The bill includes changes to some provisions in the IRC:

• Charitable donation deduction: For taxable years beginning in 2021, taxpayers who do not itemize deductions may take a deduction for cash donations of up to $300 made to qualifying organizations. The CARES Act revised the charitable donation deduction rules to encourage donations following a decline after the enactment of the Tax Cuts and Jobs Act in 2017.
• Medical expense deduction: The income threshold for unreimbursed medical expense deductions is permanently reduced from 10% to 7.5% so that more expenses may be deducted.
• Business meal deduction: Businesses may deduct 100% of business-related restaurant meals during 2021 and 2022 (the deduction currently is available only for 50% of those expenses).
• Extenders: The bill provides for a five-year extension of the following tax provisions that are scheduled to sunset on December 31, 2020:
  • The look-through rule for certain payments from related controlled foreign corporations in IRC Section 954(c)(6), which was extended to apply to taxable years of foreign corporations beginning before January 1, 2026 and to taxable years of U.S. shareholders with or within which such taxable years of foreign corporations end
  • New Markets Tax Credit
  • Work Opportunity Tax Credit
  • Health Coverage Tax Credit
  • Carbon Oxide Sequestration Credit
  • Employer credit for paid family and medical leave
  • Empowerment zone tax incentives
  • Exclusion from gross income of discharge of qualified principal residence indebtedness
  • Seven-year recovery period for motorsports entertainment complexes
  • Expensing rules for certain productions
  • Oil spill liability trust fund rate
  • Incentive for certain employer payments of student loans (notably, the bill does not include other student loan relief so that borrowers will need to resume payments on such loans and interest will begin to accrue).
• Permanent changes: The bill makes several tax provisions permanent that were scheduled to expire in the future, in addition to the medical expense deduction threshold mentioned above:
  • The deduction of the costs of energy-efficient commercial building property (now subject to inflation adjustments)
  • The gross income deduction provided to volunteer firefighters and emergency medical responders for state and local tax benefits and certain qualified payments
  • The transition from a deduction for qualified tuition and related expenses to an increased income limitation on the lifetime learning credit
  • The railroad track maintenance credit
  • Certain provisions, refunds and reduced rates related to beer, wine and distilled spirits, as well as minimum processing requirements for certain craft beverages produced outside the U.S.