President Trump on December 27, 2020 (Sunday evening) signed into law the “Consolidated Appropriations Act, 2021”—legislation that includes over $900 billion for various coronavirus (COVID-19) relief programs, government funding of $1.4 trillion, and myriad tax provisions. Accordingly, the date of enactment is December 27, 2020.
Included in the tax provisions are a number of items directly related to COVID-19 relief such as a provision allowing recipients of Paycheck Protection Program (PPP) loans to deduct associated costs. Similarly, the legislation includes an extension and significant expansion of the employee retention credit originally enacted in the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act).
The tax provisions in the legislation go far beyond simply COVID-19-related items, and address, among other items, extending (or in some cases making permanent) dozens of temporary tax measures. For example, the legislation makes the railroad maintenance tax credit permanent, extends for five years the CFC look-though rule for controlled foreign corporations, and extends and expands tax credits for renewable energy. The legislation also includes significant other tax provisions (including changes relating to the low-income housing tax credit rate and to the depreciation of residential rental property), as well as provisions for disasters other than COVID-19.
Tax provisions are included in Division N of the legislation (the “COVID-Related Tax Relief Act”) as well as in Division EE, which addresses expiring provisions, miscellaneous tax provisions, and tax provisions for disasters unrelated to COVID-19.
Subtitle B of Title II of Division N of the legislation includes the “COVID-Related Tax Relief Act of 2020.” Some of the tax provisions in this part of the legislation are:
Additional COVID-19 related measures (including extension of, and modifications to, the employee retention credit) are included in Division EE of the legislation—the “Taxpayer Certainty and Disaster Tax Relief Act.” Division EE also addresses expiring provisions unrelated to COVID, miscellaneous tax matters, and tax relief for disasters other than COVID-19.
Title I of Division EE of the legislation makes permanent certain expiring tax incentives and provides temporary extensions (for varying periods of time) for other expiring provisions. Almost all of the Code sections being extended currently had been scheduled to expire at the end of 2020.
Provisions that are made permanent include:
Provisions that are extended for five years (i.e., through 2025) include:
Provisions that are extended for three years (through the end of 2023) include:
Provisions that are extended for one year include:
With enactment, there is now a smaller number of provisions scheduled to expire at the end of 2021. Nonetheless, under the 2017 tax law (Pub. L. No. 115-97)—the law that is also referred to as the “Tax Cuts and Jobs Act” (TCJA)—amortization of research and experimentation expenses is scheduled to begin in 2022. The amount of business interest expense that can be deducted also is scheduled to be reduced, in effect, for many businesses at that same time. Potential efforts in 2021 (or shortly thereafter) to postpone or eliminate both of these scheduled changes could drive future legislation and possibly provide a vehicle for other extenders to be addressed.
Title II of Division EE of the legislation contains a number of miscellaneous tax provisions, as well as some temporary provisions relating to COVID-19 relief. Provisions in this part of the legislation include:
Title III of Division EE includes a number of tax provisions directed at disaster relief. These provisions, however, do not apply to areas subject only to the ongoing COVID-19 emergency proclamation. The provisions in this part of the legislation:
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