This article was updated April 12, 2021.
On December 27, 2020, the COVID-related Tax Relief Act of 2020 and Taxpayer Certainty and Disaster Tax Relief Act of 2020 were signed into law, as included in the Consolidated Appropriations Act, 2021 (the act).
The long-awaited COVID-19-related relief impacts Tribal governments and their businesses, extending the Coronavirus Relief Fund (CRF), adding flexibility to the Paycheck Protection Program (PPP), and more.
Below, we cover key changes introduced through the act that have implications for Tribes.
Coronavirus Relief Fund Extension
The act extends the period to use CRF monies from December 30, 2020, to December 31, 2021.
Although the act doesn’t lift any of the previous restrictions on using CRF monies, this extension will ease concerns if your Tribe was planning to fund with CRF money any construction projects necessary due to COVID-19.
Employee Retention Tax Credit Extension
The Employee Retention Tax Credit (ERTC) has been extended and enhanced for those qualifying wages paid between January 1, 2021, and December 31, 2021. These changes are applicable to Tribal governments and their businesses.
Receive ERTC and PPP Loans
Most notably, the ERTC extension allows employers to claim both ERTC and PPP loans that are retroactively effective for qualified wages paid from March 12, 2020—as long as the same qualified wages aren’t used for PPP loan forgiveness.
Effective January 1, 2021, the following ERTC enhancements apply:
- The ERTC has been increased from 50% to 70% of qualified wages
- Qualifying wages increased from $10,000 per year to $10,000 per quarter
- Eligibility for gross receipt has been decreased from 50% to 20% of the prior quarter’s gross receipts
- Employers may now claim both an ERTC and PPP loans
Families First Coronavirus Response Act Paid Leave Tax Credit
The Families First Coronavirus Response Act Paid Leave Tax Credit (FFCRA) applies to Tribal governments and businesses with fewer than 500 employees.
The following changes are effective January 1, 2021:
- Extension. The credit has been extended to September 30, 2021.
- Employer-provided FFCRA leave no longer required. After December 31, 2020, employers aren’t required to provide FFCRA leave to employees. If employers voluntarily decide to provide FFCRA-eligible leave, however, they can receive a payroll tax credit for leave provided. This would provide a 100% reimbursement to employers for any FFCRA-eligible leave provided to employees.
If your employees qualify for the credit under ERTC requirements, or if you’ve paid FFCRA-eligible leave to employees, it’s important to file Form 941-X to amend the following forms:
- Fiscal-year 2020 Q2 Form 941 and onwards to claim the credit, or
- Form 7200 to request an advance
ERTC and FFCRA payroll tax credits may relieve some costs that would otherwise need to be covered by CRF, meaning CRF can instead be used to cover other eligible expenses. These expenses can now be incurred through December 31, 2021.
Paycheck Protection Program Loan Updates
The act established a second draw to the PPP loan for eligible Tribal businesses.
Key Changes to PPP
The following PPP loan changes are now effective:
- Expanded eligibility. The program now applies to eligible businesses that have no more than 300 employees and demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020.
- Maximum loan size. The changes establish a maximum loan size of 2.5-times an entity’s average monthly payroll costs, up to $2 million.
- Additional funds for accommodations and food services. Small businesses assigned to the industry NAICS code 72—accommodation and food services—may receive PPP second-draw loans equal to 3.5-times average monthly payroll costs. This is intended to help these businesses combat onerous state and local restrictions.
The act also made improvements to PPP loans that apply to Tribal businesses by expanding PPP allowable and forgivable expenses. This allows eligible businesses to select a loan forgiveness covered period of between eight weeks and 24 weeks, and it simplifies the forgiveness application process for smaller loans up to $150,000.
Extension of Emergency Unemployment Relief
Federal support through September 6, 2021, will cover 50% of unemployment benefit costs for employees of state and local governments and not-for-profit organizations.
Provider Relief Fund
According to the act, the US Department of Health & Human Services (HHS) must now let Provider Relief Fund (PRF) recipients calculate lost revenues using guidance issued by HHS as of June 2020 in the Frequently Asked Questions (FAQ).
The FAQ from June 2020 states that PRF recipients may use any reasonable method to estimate lost revenue during March 2020 and April 2020, compared to the same period had COVID-19 not happened. For example, when calculating lost revenues, PRF recipients could use the difference between budgeted patient revenue versus actual patient revenue.
This is a departure from the currently posted General and Targeted Distribution Post-Payment Notice of Reporting Requirements, which states recipients could apply PRF payments toward lost revenue, up to the amount of the difference between their 2019 and 2020 actual patient care revenue. Important when calculating lost revenue, there’s caveat language in the new law, which states the budget health care entities utilize should be established and approved as of March 27, 2020.
The act also provides additional flexibility to recipients, letting them transfer received funds to their corporate parents and subsidiaries. Any reimbursement from the PRF may be allocated—through transfers or otherwise—among subsidiary eligible health care providers, including reimbursement marked by HHS as Targeted Distribution payments. Reporting requirements for these funds would remain with the original recipient.
February 15 Reporting Deadline Postponed
Tribal health facilities should be aware that the February 15, 2021, PRF reporting due date has been postponed.
As of January 15, 2021, the reporting requirement has been delayed and replaced with a registration process. Recipients will be notified with how to complete the registration. There isn’t a deadline to register.
In addition, the PRF Reporting Requirements have been updated related to the lost revenue. Although delayed, facilities should continue tracking and determining which expenses were attributable to COVID-19. This includes expenses incurred while:
- Treating confirmed or suspected cases of COVID-19
- Preparing for possible or actual coronavirus cases
- Maintaining health care delivery capacity
We’re Here to Help
To learn more about changes introduced in the act or for assistance applying the changes to your Tribe or Tribal government’s business, contact your Moss Adams professional.