How Does the Consolidated Appropriations Act of 2021 Affect Taxpayers?

In late December, President Trump combined a long-awaited stimulus bill with an omnibus spending bill called The Consolidated Appropriations Act of 2021. The bill’s main focus is on individual stimulus payments as well as the expansion of the Paycheck Protection Program.

With respect to expenses that have be paid for with forgiven PPP Funds, the bill confirms that no amount is to be included in the gross income of eligible recipients by reason of forgiveness and that no deductions will be denied; tax attributes will not be reduced, and basis increase will not be denied for the reason of exclusion from gross income. This means that forgiven amounts from PPP loans will not have an effect on income or tax credits in regard to wages paid.

Besides the stimulus, The Consolidated Appropriations Act of 2021 includes extensions to expiring tax positions including, but not limited to the 179D Energy-Efficient Commercial Buildings Deduction. In its creation in 2005, the 179D deduction incentivized the construction of energy-efficient buildings. Section 179D allowed up to $1.80 per square foot of deduction for the construction of energy-efficient buildings. Originally this was seen as temporary but has been regularly extended every few years. With the bill, the 179D deduction has now been permanently extended; but Congress has required the properties to meet a stricter set of criteria to be able to claim the deduction. This means that business owners can rely on the deduction long term, but few properties will qualify.

The new law also includes an extension for one-year extensions to the 45L Energy-efficient Home Credit. While 45L was supposed to expire at the end of 2020, the bill extended the end date to the end of 2021, meaning the $2,000 per unit credit will still be applicable for building energy-efficient homes. This will assist home builders and apartment developers this year as they recover from COVID-19 and the economic crisis.

It is important to note that The Consolidated Appropriations Act of 2021 does not change the current laws regarding meal and entertainment deductibles. Currently, the CAA has temporarily increased the deduction percentage on business-related meals and entertainment to 100 percent until the end of 2022.

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