COVID-19 Tax Updates

The persistent COVID-19 pandemic continues to create economic and financial challenges for government agencies, businesses, organizations, and individuals. While there has been a reduction in the number of new cases, thanks in part to the vaccine, many of the protective restrictions across Atlanta remain. It is against this backdrop that President Biden signed the American Rescue Plan Act of 2021 (the Act) into law.

On Saturday, March 6, 2021, the U.S. Senate passed the American Rescue Plan Act of 2021, (the Act) the latest in a series of COVID-19 relief legislation. The package, which includes $1.9 trillion in aid, is set to be signed into law by President Biden within days. While much of the Plan is focused on relief for individuals and families as well as vaccine distribution, a substantial portion is aimed at supporting Atlanta businesses still impacted by the ongoing pandemic.

To the relief of many Atlanta area businesses and nonprofits another round of COVID-19 financial relief is coming, but final details on what and who will be covered and to what extent still linger. Congress is debating the specifics of what will be included in this latest round of relief; although after the Senate Democratic majority’s use of a budget resolution to pass muster, it is not a question of if the legislation will get passed, but when. Given the length and complexity of what is being called, the American Rescue Plan, many are wondering what type of relief is expected to be included when it is passed by Congress and signed into law.

As the second wave of the COVID-19 pandemic intensifies many Atlanta businesses continue to be limited by government orders. This has left many unable to stay open or are doing so under drastically different conditions. The result has been a series of ongoing challenges that have left many businesses and individuals eagerly waiting for relief. It is against this backdrop that Congress and the White House passed another round of COVID-19 relief. The Consolidated Appropriations Act, 2021, (the Act) provides economic stimulus payments, expanded unemployment benefits, expanded tax savings for businesses, and changes to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

The challenges of managing through the COVID-19 pandemic have impacted each Atlanta individual and family differently. While some have been able to tolerate the changes with little difficulty, others have been required to make tough decisions about expenses and finances. As the pandemic has persisted the related challenges continue to grow. Earlier this week President Trump signed the Consolidated Appropriations Act, 2021, which included the COVID Related Tax Relief Act of 2020 (the Act) that provides the comprehensive relief many have been awaiting. This includes economic impact payments, extended unemployment benefits, and an expansion of penalty-free plan withdrawals.

Businesses in Atlanta and across Georgia breathed a collective sigh of relief when it was announced yesterday afternoon President Trump signed the COVID-19 Relief Bill. It had been over 9 months since the last round of economic stimulus had been passed by Congress despite several failed attempts during the summer and fall. Significant differences in the amount of relief, which incentives and benefits to extend, and the introduction of new programs kept sides apart. The Continuing Appropriations Act, 2021 and Other Extensions (the Act) provide relief for businesses through an expanded PPP (known as PPP2), modifications to Economic Injury Disaster Loans (EIDLs), and changes to several COVID-19 business tax provisions. Given the breadth of changes, the focus of this post will be on business tax opportunities.

One of the many lessons learned from the COVID-19 pandemic is the importance of cash flow and the need for cash flow planning. When the pandemic first arrived in Atlanta many businesses were scrambling to adjust to the various government orders including forced business closures. This meant some had to make challenging decisions to reduce costs when limited, to no revenue, was generated.  Congress stepped in offering a lifeline in the form of the CARES Act which not only created the Paycheck Protection Program (PPP) but also introduced the  Employee Retention Tax Credit (Credit).

The COVID-19 pandemic caught many businesses by complete surprise when stay at home orders and forced business closures were announced.  Main street businesses and larger companies were required to reduce operations, modify service offerings, or completely close. The aftershock of these changes resulted in some organizations going out of business while others had to drastically cut expenses, including employees, to maintain financial solvency. Six months later it appears the situation is turning around. In fact, it was recently announced that in August there were $642M in new investments across the state including the creation of 4,036 new jobs. As the shift to recovery continues, many Atlanta businesses are looking for ways to bolster working capital to meet expenses and make new strategic investments.

The Paycheck Protection Program (PPP) has been a useful tool in helping construction contractors weather the COVID-19 pandemic. As of June 30th, over 466,000 loans have been issued to industry companies totaling more than $64B. These numbers are stunning and reflect not only the depth of economic impact but also the popularity of the program.

Heading into the second half of 2020, the construction industry is bracing for slow growth and continued business disruption. Contractors are looking at lower revenues, tighter profit margins, project delays and cancellations, and potential workforce shortages as COVID-19 fluctuates.