Disaster Tax Relief Act of 2020

Highlights of Taxpayer Certainty and Disaster Tax Relief Act of 2020

Updated for Michigan

Michigan COVID Relief of $465 million was passed by the Michigan legislature and was signed by Gov. Whitmer at the close of 2020

This legislation intends to provide supplemental appropriations to small businesses and entertainment venues that have been hurt by the administration’s ongoing fight against the coronavirus.

Small Business Survival Grants – $64 million set aside to help businesses that have had their operations limited by executive orders.

Who’s Eligible: Small businesses (less than 100 employees) whose operations have been partially closed by emergency order.

Amount: Grants capped at $15K for those partially closed and $20K for those fully closed.

Allowable Expenditures: payroll, rent, utilities, and any costs incurred to reopen your business, such as cleaning supplies, plexiglass shields, or PPE.

Where to Apply: Funds are administered by the Michigan Strategic Fund through MEDC or local nonprofits that participate in the Michigan Small Business Relief Program. These new programs are not yet live, but more information can be found here: https://www.michiganbusiness.org/about-medc/covid19/small-business-relief-program/

Michigan Stages Survival Grant – Same stipulations as above, but an increased grant up to $40K for eligible entertainment venues.

Furthermore, this bill adds $220 million to the state’s unemployment coffers.

Federal Act Details

  • Paycheck Protection Program deductibility – Sec 276‐278 – No amount should be included in gross income and no deduction should be denied. 100% DEDUCTIBILITY OF EXPENSES.
  • Business Meals are 100% deductible for tax years 2021 and 2022.
  • EIDL Grants – does not reduce PPP loan forgiveness and do not need to be included in gross income.
  • Anyone who was receiving payments on SBA 7(a) loans that were granted 6mo relief in CARES Act –
  • will not be a pickup and no deduction shall be denied.
  • PPP Loans $150K or less – “rubber stamp” – Simplified 1‐page form. 60% payroll requirement N/A.
  • $150K to $2M – nothing changed. Same documentation required.
  • 2nd PPP loan “Economic Aid to Hard‐Hit Small Businesses, Nonprofits, and Venues” for those who had a 25% drop in revenue in the calendar quarter and under 300 employees. Also, includes additional eligible expenses. Additional funds available for those with NACIS Code 72 (3.5x spend instead of 2.5x for accommodation and food service)
  • 501(c)(6) corps are eligible in PPP now
  • $600 recovery rebate for individuals ($1,200 joint, plus $600 for each qualifying child) phased out
  • from $75K to $100K. Included as an advance of 2020 tax credit, just like the first payment.
  • Family First Coronavirus Response Act extended to March 31st, 2021.
  • New Market Tax Credits, Work Opportunity Tax Credits, cancellation of the debt-income exclusion for
  • a principal residence, employer payment of student loans tax credit extended to Dec 31, 2025.
  • Deferment of FICA taxes do not have to be repaid until December 31, 2021 (instead of 4/30/2021)
  • Earned income tax credit special rules for lookback comparison to 2019.
  • Amendment for ERISA Plans needs to be filed by December 31, 2022.
  • American Opportunity Tax Credit/Lifetime Learning Credit Adjusted Gross Income amended over $80K/$160K phase‐out.
  • Removed deduction for qualified tuition expenses
  • Medical expense floor 7.5% of AGI instead of 10%, starting in 2021.
  • Federal Pandemic Unemployment Assistance of $300 passed for 13 weeks.

There is a bit to navigate here and of course, you probably have questions. Reach out to us, we are Nerds and work during the holiday too.

Happy Holidays!

CPA Nerds

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