[av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] Planning for the Unknown: Preparing for Potential Tax Increases Under The Biden Administration
[/av_textblock] [/av_one_full][av_one_half first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] The Biden Administration’s American Families Plan and other tax proposals may complicate the tax landscape for high-income earners. Many of the proposals target taxpayers earning more than $400,000 per year.

The American Families Plan proposals include:

• Increasing the top marginal income tax rate to 39.6% for households making over $400,000;
• Taxing long-term capital gains at 39.6% for households making over $1 million;
• Reducing the step-up in basis for gains in excess of $1 million at death and taxing the gains if the property is not donated to charity;
• Eliminating carried interest and taxing that income at ordinary income rates;
• Permanently extending excess business loss limitation rules; and
• Applying the 3.8% net investment income tax consistently for those making over $400,000.

[/av_textblock] [/av_one_half][av_one_half min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-4pizyf’] [av_image src=’https://vcpa.com/wp-content/uploads/2021/05/im-331273.jpg’ attachment=’1679′ attachment_size=’full’ copyright=” caption=” styling=” align=’center’ font_size=” overlay_opacity=’0.4′ overlay_color=’#000000′ overlay_text_color=’#ffffff’ animation=’no-animation’ hover=” appearance=” link=” target=” id=” custom_class=” av_element_hidden_in_editor=’0′ av_uid=’av-kij8njkq’ admin_preview_bg=”][/av_image] [/av_one_half][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] To add significance to these proposals, President Biden also proposes earmarking $80 billion for IRS audit efforts that will target high-income individuals who have engaged in tax avoidance or other tactics to reduce their taxable income. The additional funding will be accompanied by increased IRS enforcement powers.

In addition, President Biden put forth the following proposals during his election campaign:

• Phasing out the 20% qualified business income tax deduction;
• Limiting the benefit of itemized deductions to 28% of their value and restoring the “Pease limitation” cap on itemized deductions;
• Reducing the lifetime estate tax exemption from $11.7 million to $3.5 million (i.e., back to 2009 levels) and increasing the estate and gift tax rate from 40% to 45%; and
• Imposing the 12.4% social security payroll tax on earned income above $400,000.

These proposals, although not specifically mentioned in the American Families Plan, continue to be part of the President’s tax agenda.

What can taxpayers do now?

Given the real possibility of targeted tax increases on the wealthy, as well as the uncertainty of when any increases might take effect, individuals, business owners and family offices should review their current situations to identify opportunities in which their overall federal and state tax liabilities could be minimized.

• Taxpayers should evaluate the extent to which they can time the recognition of income and deductions within a desired tax year. Planning should not only be driven by current and future tax rates but also by the taxpayer’s individual facts and circumstances, including income and cash goals.
• Due to the uncertainty of whether tax legislation will ultimately be passed, and to what extent, tax planning efforts should include multiple “what-if” scenarios to prepare for a range of possible legislative outcomes and effective dates.
• As the future tax landscape takes shape, taxpayers should consider strategies to minimize tax on their capital gains, such as:
• Accelerating capital gains to take advantage of lower rates;
• Managing levels of other taxable income to avoid higher rates on capital gains;
• Timing when tax is due by using or electing out of the installment method; and
• Using deferral strategies such as like-kind exchanges, investments in qualified opportunity zones, and ESOP rollover transactions.

• Individuals and families should revisit their estate plans in light of President Biden’s tax proposals. Individuals—especially those with large estates—should evaluate the benefits of multi-generational wealth transfers, the use of trusts and other estate planning opportunities, and be prepared to implement strategies in advance of proposals becoming law.

How we can help

We can provide comprehensive tax and financial planning assistance to wealthy individuals and their families, as well as for their business interests, whether in a domestic or cross-border context. We are experienced in all aspects of estate, income, gift, and trust tax consulting and compliance; charitable giving and philanthropic foundations; executive compensation; and cash flow, retirement, and life insurance planning.

Our professionals can keep you up to date on the status of tax proposals, provide insights on how new policies will affect your tax position, assist in assessing planning opportunities, and perform scenario planning and tax calculations. Our professionals also can assist with IRS audits and other inquiries.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-3z7fav’] [av_comments_list av-desktop-hide=” av-medium-hide=” av-small-hide=” av-mini-hide=” alb_description=” id=” custom_class=” av_uid=’av-25giyv’] [/av_one_full]

[av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”]

American Families Plan to Invest in Education, Childcare, and Family Programs

[/av_textblock] [/av_one_full][av_one_half first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] On April 28, 2021, President Biden introduced the American Families Plan to a joint session of Congress.  The plan confirms previous statements from the Biden administration, indicating that it would propose tax increases on wealthy households and tax breaks for low- and middle-income families.

The $1.8 trillion plan consists of $1 trillion in investments and $800 billion in tax cuts. It proposes investments in education, including free universal preschool, two years of free community college and programs to address teacher shortages. The plan also addresses direct support for childcare, school-related nutrition programs and a national paid family and medical leave program.
[/av_textblock] [/av_one_half] [av_one_half min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-4pizyf’] [av_image src=’https://vcpa.com/wp-content/uploads/2021/05/ewscripps.brightspotcdn.com_-1030×541.png’ attachment=’1672′ attachment_size=’large’ copyright=” caption=” styling=” align=’center’ font_size=” overlay_opacity=’0.4′ overlay_color=’#000000′ overlay_text_color=’#ffffff’ animation=’no-animation’ hover=” appearance=” link=” target=” id=” custom_class=” av_element_hidden_in_editor=’0′ av_uid=’av-kij8njkq’ admin_preview_bg=”][/av_image] [/av_one_half] [av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] The plan further proposes the following tax breaks for low- and middle-income families:

• Extend child tax credit increases in the American Rescue Plan Act through 2025 and make the credit permanently fully refundable
• Permanently extend the child and dependent care credit and make the credit refundable
• Permanently extend earned income tax credit for childless workers
• Extend expanded Affordable Care Act (ACA) premiums tax credits in the American Rescue Plan Act

The plan proposes to pay for those investments and tax breaks by:

• Increasing the top rate to 39.6% for households making over $400,000
• Increasing tax rates on capital gains and qualified dividend income to 39.6% for households making over $1 million
• Reducing the step-up in basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) at death and taxing the gains if property not donated to charity
• Eliminating carried interest and taxing that income at ordinary income rates
• Eliminating like-kind exchanges for gains greater than $500,000 on real estate exchanges
• Permanently extending excess business loss limitation rules
• Applying 3.8% net investment income tax consistently for those making over $400,000
• Increasing IRS audits for higher-income individuals

The Biden administration estimates that these proposed tax increases will raise $1.5 trillion over ten years.

Noticeably absent from the plan was any mention of reducing the estate tax exemption or raising the estate tax rate to 45%, which was a Biden campaign proposal. While the estate tax does not generate a large amount of revenue, reducing the federal estate tax exemption continues to be at the forefront of the Democrats’ legislative plans.

The American Families Plan likely is more ambitious than what eventually will be implemented, and legislation that is eventually passed likely will not be retroactive. One cannot predict with certainty when and what the final outcome will be; however, tax increases seem inevitable. Proper tax planning remains essential.

Taxpayers are encouraged to contact their Private Client Services tax advisor to evaluate their current estate plans and discuss strategies for minimizing the impact of future potential tax changes.
[/av_textblock] [/av_one_full] [av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-3z7fav’] [av_comments_list av-desktop-hide=” av-medium-hide=” av-small-hide=” av-mini-hide=” alb_description=” id=” custom_class=” av_uid=’av-25giyv’] [/av_one_full]

[av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”]

Early Priorities for The Biden Administration: Areas to Watch

[/av_textblock] [/av_one_full] [av_one_half first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] The Biden administration’s first 100 days are officially over.

In what is typically a period characterized by a flurry of executive orders that establish early policy priorities, President Joe Biden has understandably focused much of his energy on one of the most pressing challenges the United States has faced in generations: bringing an effective end to the COVID-19 crisis.

During the first three months in office, the Administration has been able to accelerate vaccination distribution after a record-speed vaccine development process, offering hope of a world less impacted by the spread of the pandemic.

However, with 100 days now in the rearview mirror, the Biden administration is setting its sights on the future—one in which the United States still faces both short- and long-term challenges that would be daunting for any administration. From continuing to chip away at a COVID-heightened unemployment rate to addressing domestic and social unrest to thinking through a climate change strategy, the Administration has its hands full over the next few years. With a challenging midterm election on the horizon, the motivation to advance its agenda quickly and decisively is top of mind.
[/av_textblock] [/av_one_half] [av_one_half min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-4pizyf’] [av_image src=’https://vcpa.com/wp-content/uploads/2021/05/np_file_64875-scaled-1-1030×686.jpeg’ attachment=’1666′ attachment_size=’large’ copyright=” caption=” styling=” align=’center’ font_size=” overlay_opacity=’0.4′ overlay_color=’#000000′ overlay_text_color=’#ffffff’ animation=’no-animation’ hover=” appearance=” link=” target=” id=” custom_class=” av_element_hidden_in_editor=’0′ av_uid=’av-kij8njkq’ admin_preview_bg=”][/av_image] [/av_one_half] [av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] For business leaders, the intersection between politics, economy, consumer behavior, public health, social issues and environmental issues has never been so large—or important. Businesses will continue to be tested in ways that they could not have imagined just a few years ago. Those that can navigate these challenges well will come out ahead.

While there are dozens of policies that will unfold over the next four years, there are several key areas for leaders to watch in the short term and consider for future opportunities and challenges that arise.

Priority: Putting the Pandemic Behind Us

When the American Rescue Plan Act (ARPA) was passed in March, it offered a re-upping of the stimulus—nearly $6 trillion worth in total—that the U.S. economy has been leaning on for support since the pandemic began. The $1.9 trillion ARPA relief plan centered on stimulus checks, expanded unemployment support, expanded paid sick leave, emergency paid leave, reimbursements to small businesses, funds for state and local governments and resources for vaccination programs and testing sites.

This has been the priority for the Biden administration. If the Administration can continue to oversee a successful rollout of vaccinations, the idea is that everything else will fall into place. While the Biden administration moved quickly to juggle multiple priorities in its first 100 days, the faster and more successfully the vaccination rollout goes, the faster the economy can put the COVID-19 lockdowns behind it—and move on to what’s next.

WHAT TO WATCH

While the coronavirus will eventually begin to fade from center stage in American life, the trends that the pandemic turbocharged—from consumer shopping behavior to workplace traditions to upending whole industries—show no signs of turning back.

A so-called “return to normalcy” will have enormous implications for business leaders in terms of planning for employees, customers and business strategy. However, the most successful businesses will not be those looking to go back to business as usual. The companies that drive outsized growth will be those that act on the lessons learned over the past year and adapt for a future where the rules of business are continually reinvented.

While we hope to never experience a pandemic of this scale again in our lifetimes, massive disruption events are proliferating, from natural disasters to widespread cyberattacks to financial turmoil. The next black swan won’t wait 100 years. And while you can’t plan for the unpredictable, you can improve your readiness to respond
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’climate’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Doing Well by Doing Good

Beyond tackling the pandemic, one of President Biden’s next highest priorities is around promoting broad environmental, social and governance (ESG) initiatives.

On the environmental front, battling climate change has been a central pillar of President Biden’s campaign, starting with reentering the Paris Agreement hours after he took office through a series of executive orders that placed climate change at the forefront of domestic and foreign policy. President Biden has intrinsically tied his climate policy to his plan for economic recovery, promising a move towards a “Clean Energy Revolution.”

The Administration’s goals are lofty. Included in his $2 trillion proposed climate proposal are plans to:

• Eliminate fossil fuel emissions entirely from the energy sector by 2035 and in the economy more broadly by 2050.
• Reengineer old infrastructure to be able to endure the effects of climate change.
• Encourage electric vehicles and the system of charging stations that would keep them running.
• Expand zero-emission public transportation.
• Invest in eco-friendly buildings and housing construction.
• Improve sustainable agriculture practices.
• Develop new technologies for clean energy.

On April 21, during his Earth Day Climate Summit speech, President Biden went a step further, calling for the United States to cut emissions 50-52% from 2005 levels by 2030, as well as establish a federal climate task force to help achieve those targets.

In addition to the focus on climate change, the Biden administration has made it clear that it will embrace further mandatory regulatory requirements around ESG reporting broadly.

The first step for regulators will be deciding upon a reporting framework designed to provide more consistent, comparable, and reliable information for investors. Establishing the baseline will help businesses better understand, report, measure and track against key metrics more easily and consistently.

In March, the SEC launched a Climate and ESG Task Force in a concerted effort to encourage businesses to improve corporate practices around environmental, gender, racial and social issues. Consistent with increasing investor focus and reliance on climate and ESG-related disclosure and investment, the Task Force will also develop initiatives to proactively identify and address ESG-related misconduct.

For many boards, the issue of ESG has moved its way up the shareholder meeting agenda in recent years. As sustainability becomes standard and more scrutiny is put on action versus talk, boards are focusing more attention than ever before on issues of diversity, equity, inclusion and environmental stewardship.

The focus on ESG will only continue to increase—both in the public discourse as well as the in the eyes of regulatory watchdogs. Public sentiment around climate change, corporate ethics, diversity, equity & inclusion, worker health & safety, sustainability and other related issues are stronger than ever, and the momentum around ESG reporting is unlikely to reverse course.

WHAT TO WATCH

The good news for the Biden administration and others who see climate change and ESG matters as key concerns is that these issues are increasingly in focus across society—politically, socially and economically. Popular sentiment is pushing companies to think more critically about their relationships with employees, customers, shareholders, communities, the environment, the economy and the general public overall.

The economy itself has already shifted over the past several years toward accepting and championing clean energy and sustainability as a core global priority. Sustainability, racial equity, diversity and corporate responsibility are increasingly baked into what it means to do business—and the link to ROI in higher profitability, higher valuations and lower investment risk is strengthening.

However, the relative lack of clarity and consistency on reporting criteria and lack of regulatory oversight has made the issue of ESG subjective and difficult to substantiate.

For businesses that haven’t had a corporate purpose centered on sustainability or broader ESG issues in the past, making that transition toward a new approach without clear guidelines can be tricky. However, it is clear that the issue of ESG is becoming one that corporate boards and leadership teams are increasingly focused on. The move requires a top-down commitment to alter—sometimes dramatically—the way the company operates, redefining success in terms that marry profit with purpose.

Attitudinal shifts from employees and executives alike have led many businesses—large and small—to focus on addressing ESG issues as a corporate goal, and major investors have made it a prerequisite. When you can do well by doing good, everyone wins.

More than ever before, people want to work for organizations that stand for clear values. Whether around racial justice, gender equity, environmental protection, wealth equity, or any other cause, businesses are learning to get the most out of their workforces by leading by example.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’tech’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Innovation in the Spotlight

The Biden administration inherited a country that is more reliant on technology than ever before. From technologies that have helped large parts of the economy run remotely for a year to those that kept us connected in isolation to those that have helped towards solving the pandemic itself, the trends in how businesses are using technology have accelerated years within the space of months.

There is no doubt that the technology sector has, by and large, benefitted from these changes. At the same time, the Biden administration appears to have an increasingly scrutinous eye on Big Tech’s influence, leaning into a bipartisan effort to put guardrails up around the country’s largest tech firms—in many cases guardrails that technology leaders themselves are on the record as welcoming.

The United States’ reliance on technology brings enormous opportunities but also vast vulnerabilities in the form of antitrust concerns, cybersecurity and privacy threats, in addition to malevolent uses of social media for purposes of spreading misinformation.

As Biden considers a permanent nominee to the Federal Communications Commission, whoever ends up sitting in that role will have important implications for the Tech community, ensuring that while innovation occurs, it is done with what’s best for the greater good in mind.

The push and pull between innovation and risk is continual, and businesses—both in the technology industry and those that rely on technology—will have to contend with increasing regulatory guidelines to better manage the true impact that these technologies have on the economy and on society.

WHAT TO WATCH

An increase from the Biden administration in regulation around the tech industry brings greater scrutiny on companies of any industry that collect and store data. Privacy rules are constantly evolving and, with more focus on data privacy and consumer rights, both globally and in the United States, the more that businesses can effectively manage their customer data, the less risk they will take on.

Finding the right balance between investment in digital capabilities and ensuring compliance with data privacy and cybersecurity regulations is not easy.

The opportunity is clear. According to BDO’s recent CFO Outlook Survey:

• 55% of CFOs said they will increase R&D spending in the next year
• 39% of CFOs said the pandemic has accelerated their investment in digital transformation

However, being able to effectively manage digital risk and compliance will be more important than ever.

This Administration is likely to tilt the balance of data privacy in favor of the consumer over the business. How businesses adapt to changing dynamics will be crucial. As on the global geopolitical stage, businesses that invest in new technologies will be those that succeed, and the rate of progress is only getting faster. Investing today will no doubt pay off dividends in the economy of tomorrow—as long as data privacy, cybersecurity and regulatory compliance stay priorities along the way.

Privacy laws are constantly evolving around the world and in the United States, at both a statewide and federal level.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’bidencare’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Defining Bidencare

The healthcare industry has been in the spotlight for the past decade, since the Affordable Care Act was signed in March 2010. After numerous lawsuits and challenges, including in the U.S. Supreme Court, the ACA is set to be bolstered in the Biden administration. The President has already used executive orders to expand enrollment periods for the ACA in an effort to strengthen the program in the short term before turning his eye to his vision of Bidencare.

What might Bidencare include? In short, it will build on the ACA, focusing on lowering premiums, deductibles, and the price of prescription drugs, while expanding access and adding a public option. The Biden administration was even able to secure boosts to the ACA within the COVID-focused ARPA, in the form of a removal of the income cap for health insurance premium tax credits through a federal exchange or state marketplace, as well as a limit of 8.5% of income for healthcare costs.

What Bidencare is unlikely to include, however—at least in the current political climate—is sweeping change to the industry.

While the Biden administration has been able to use multiple tools to make progress on priorities such as pandemic response and battling climate change, any major changes on the immediate future of healthcare in the United States remain in doubt.

WHAT TO WATCH

COVID-19 underscored that healthcare is as important today as it has ever been, in the United States and around the world. While a grand “Medicare for All” plan is unlikely to happen in this Congress, expanding the reach of the ACA while lowering costs to individuals would bring benefits to the economy.

Employer-sponsored healthcare plans continue to be an important recruitment and retention tool for businesses. Providing access to expanded types of care, which took on greater importance during the pandemic, such as mental health and wellness care, are and will continue to be increasingly important.

Interactive: Building Long-Term Resilience

There were many regulatory, legislative, and compliance-related changes that occurred during the pandemic, including several stimulus options, new compliance considerations and an expectation of new and updated regulatory guidance.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’build’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Building Back Better

On the campaign trail, then-candidate Biden outlined his vision of an infrastructure plan dubbed the “Build Back Better” plan.

The new bill, announced in full in late March as the American Jobs Plan, includes several proposed investments in both traditional and modern infrastructure systems.

• Roads & bridges
• Public Transport
• Ports
• Airports
• Nationwide electric vehicle charging grid
• Water Systems
• Electric Grid Upgrades
• Increased Broadband Access

In addition, President Biden is pushing for investment in care for elderly and disabled Americans, new affordable housing and schools, and funding for manufacturing, R&D and job training.

The Biden administration has argued that decades of a lack of investment has left the United States lagging behind others when it comes to competitiveness on the global stage. In particular, the Administration sees this as an opportunity to level the playing field, financing more projects in rural and disadvantaged communities, with a focus on sustainability and “clean infrastructure” investments.

Infrastructure is often seen as a “both-sides-of-the-aisle” issue, yet an agreement has recently been hard to come by. Whether President Biden and his team—particularly Vice President Kamala Harris and Transportation Secretary Pete Buttigieg—will be able to galvanize both sides of the aisle to come together on this shared goal of fixing the widely acknowledged problem of the United States’ aging infrastructure remains to be seen.

WHAT TO WATCH

If President Biden is able to rally both parties, a large-scale infrastructure plan would increase spending and economic activity in the short term and could vastly improve productivity in the medium and long term.

Businesses that rely on a supply chain—most industries—could stand to profit from an increase in infrastructure spending. At the same time, most businesses in the country would benefit from a workforce, particularly in rural areas, with expanded access to broadband internet and training programs.

Beyond the issue of improving transportation, there is a broader question of investing in America—as a place to live, to work, and to do business. The United States has always positioned itself as a land of opportunity and possibility. With a strong infrastructure bill that rebuilds, rather than papers over, key areas of infrastructure, the United States—and the businesses based here—stand to gain in the short and long term.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’taxes’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Tax Increases on the Table

President Biden has made it clear that he is willing to consider raising individual, corporate and capital gains marginal tax rates, along with tax treatments of other issues such as pass-through entities, estate taxes and gift taxes, in part to help offset costs of the ARPA and other priority spending packages. During the campaign, he floated raising taxes on those making $400,000 per year and above, in addition to increasing corporate taxes from 21% to 28%.

Tax rates have been a hotly discussed topic since the 2017 Tax Cuts and Jobs Act (TCJA) was passed without bipartisan support. However, while Democrats control the White House and both chambers of Congress, it remains difficult—but not impossible—to see a standalone tax reform bill passing through the Senate due to filibuster rules. The use of the Budget Reconciliation procedures to pass tax legislation, therefore, continues to be a point of discussion.

However, the Biden administration is finding ways to make progress against their tax goals. Included within the ARPA were what resulted in several tax hikes such as removing deductions for wealthy individuals and corporations as Congressional Democrats sought to balance certain tax cuts—for example waiving taxes on unemployment benefits.

In addition, the corporate tax rate increase to 28% proposed as part of the infrastructure plan will no doubt be subject of great debate in Congress as well. Whether the final infrastructure bill includes this exact tax change remains to be seen. Regardless, there will be other opportunities for the Biden administration to introduce incremental change in tax policy, but the future of sweeping legislative reform is still uncertain.

The 2021 BDO Tax Outlook Survey, which polled senior tax executives at middle market companies, outlined key takeaways on the tax landscape.

Highest priorities:

• Changes to the federal income tax rate (35%)
• International tax changes (25%)
• Payroll tax adjustments (24%)
• Trade & tariffs (17%)

Percentage of tax executives who believe the U.S. federal corporate tax rate will increase within the next year: 92%

WHAT TO WATCH

For tax professionals keeping a close eye on the Biden administration’s approach to corporate tax rates, there is good reason to assume that there will be increases to rates at some point during the first two years of President Biden’s term.

In addition to the corporate rate, there is potential to reinstate the corporate alternative minimum tax, increasing the global intangible low-taxed income (GILTI) rate, enhancing policies that promote a wider U.S. tax base, small business deductions, and other assorted surtaxes and tax credits centered on keeping jobs—and tax bases—within the United States.

The questions around how that will happen, and when the effective date would be, remain.

Depending on the results of the midterm elections, following 2022, there is a chance that any tax-only bill that includes broad tax increases would be a non-starter. Until then, whether there ends up being comprehensive tax reform pre-midterms, minor tweaks of the 2017 TCJA, or something in between, there are certain things that tax professionals are expecting and can begin to plan ahead for.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-351lsn’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=’wallstreet’ custom_class=” av_uid=’av-kij8l07s’ admin_preview_bg=”] Priority: Regulating Wall Street

The Biden administration wasted no time in establishing its stance on regulation of the financial services industry, appointing Gary Gensler as head of the Securities and Exchange Commission and Rohit Chopra to direct the Consumer Financial Protection Bureau. Both Gensler and Chopra have already signaled their intent for increased oversight and enforcement.

In general, the Biden administration aims to be more aggressive in enforcement over the financial sector than his predecessor. While the Federal Reserve and the Department of the Treasury may play the most high-profile roles in the financial markets during the next four years, particularly on the topic of setting interest rates and issuing government debt, respectively, other agencies such as the SEC, the CFPB, the CFTC and others will take steps to increase enforcement of financial regulation.

WHAT TO WATCH

As has been the case in recent years, a Democratic presidential administration typically translates to increased regulation and tougher oversight.

Regardless of the administration, robust regulatory reporting and compliance has transformed in recent years from merely a necessity to a potential competitive advantage. As local, state, national and global regulations continue to evolve, businesses that have healthy data governance systems and strong compliance procedures will be able to stay ahead of the curve.

What a Biden administration Means for Businesses

Businesses are being tasked at the moment with navigating a challenging economic recovery while at the same time performing a duty to their customers, their communities and the environment around them. Understanding the political landscape and priority policies of this Administration will help executives make better decisions about their own futures, in the short and long term.

With the ARPA signed into law and the vaccine rollout well under way, the Biden administration has already shifted gears from pandemic response to its other priorities. With a midterm election quickly approaching, President Biden and his allies in Congress will want to make as much progress as possible over the next two years—and businesses should be prepared for swift movement in ESG, innovation, infrastructure, tax policy and other areas of focus.

However, whether President Biden is able to make progress on everything he has set out to accomplish remains to be seen. In a hyper-partisan environment, one where the pendulum may soon—potentially as early as 2023—swing back to a divided government, compromise is rare and trust in the federal government is at historical lows. When progress is slow, leaders step up to fill the void—and that leadership role may ultimately fall to the private sector.

Businesses can—and should—play a role in driving the change they want to see. Over the course of the Biden administration, corporate policy should be shaped not only by new rules and regulations, but by the pursuit of a higher purpose.
[/av_textblock] [/av_one_full][av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-3z7fav’] [av_comments_list av-desktop-hide=” av-medium-hide=” av-small-hide=” av-mini-hide=” alb_description=” id=” custom_class=” av_uid=’av-25giyv’] [/av_one_full]

[av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”]

 

[/av_textblock] [/av_one_full] [av_two_third first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] As you are likely aware, the Internal Revenue Service has extended the 2020 Tax Filing Deadline to May 17, 2021. Unfortunately, this extension does not apply to all Forms, one of which is Form 709 (Federal Gift Tax Return), which is filed to report gifts to another person. Generally, if you have gifted another person more than $15,000 (whether outright or in trust) in total during 2020, you are required to file Form 709 to report these gifts. These would be personal gifts (to a son, daughter, niece, nephew, friend, cousin, coworker, etc.), not to be confused with Charitable Contributions which are reported on your individual tax return.  You may also be required to file a gift tax return for certain gifts under $15,000 (e.g., gifts to certain trusts or to report gifts of hard-to-value assets, such as artwork or interest in a closely held entity).
[/av_textblock] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8ukp4′ admin_preview_bg=”] [/av_textblock] [/av_two_third][av_one_third min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-4pizyf’] [av_image src=’https://vcpa.com/wp-content/uploads/2021/04/gift-money-red-ribbon-on-american-irs-gift-tax-ss-Feature-1030×577.jpg’ attachment=’1655′ attachment_size=’large’ copyright=” caption=” styling=” align=’center’ font_size=” overlay_opacity=’0.4′ overlay_color=’#000000′ overlay_text_color=’#ffffff’ animation=’no-animation’ hover=” appearance=” link=” target=” id=” custom_class=” av_element_hidden_in_editor=’0′ av_uid=’av-kij8njkq’ admin_preview_bg=”][/av_image] [/av_one_third] [av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-3z7fav’] [av_comments_list av-desktop-hide=” av-medium-hide=” av-small-hide=” av-mini-hide=” alb_description=” id=” custom_class=” av_uid=’av-25giyv’] [/av_one_full]

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ARPA’s Enhancements to The Premium Tax Credit

[/av_textblock] [/av_one_full] [av_one_half first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] The premium tax credit (PTC) is a refundable credit that assists individuals and families in paying for health insurance obtained through a Marketplace established under the Affordable Care Act. Recent COVID relief legislation (the 2021 American Rescue Plan Act, or ARPA) made several significant enhancements to this credit. Here is an overview of these changes.

Taxpayers with Household Income Over 400% of FPL Made Eligible for PTC

Under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) weren’t eligible for the PTC.

Under ARPA, for 2021 and 2022, the PTC is available to taxpayers with household incomes that exceed 400% of the FPL. This change will have the effect of increasing the number of people who are eligible for the PTC.

Illustration: A 45-year-old single individual with income of $58,000 (450% of FPL) in 2021 wouldn’t have been eligible for the PTC under pre-ARPA law. Under ARPA, that individual is eligible for a PTC of about $1,250.

New Percentage Tables Will Increase PTC for 2021 and 2022

The PTC is computed on a sliding scale based on household income, expressed as a percentage of the federal poverty line (FPL). The amount of the PTC is limited to the excess of the premiums for the applicable benchmark plan over the taxpayer’s required share of those premiums.
[/av_textblock] [/av_one_half] [av_one_half min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-4pizyf’] [av_image src=’https://vcpa.com/wp-content/uploads/2021/03/Web-Post-2-1030×629.jpg’ attachment=’1646′ attachment_size=’large’ copyright=” caption=” styling=” align=’center’ font_size=” overlay_opacity=’0.4′ overlay_color=’#000000′ overlay_text_color=’#ffffff’ animation=’no-animation’ hover=” appearance=” link=” target=” id=” custom_class=” av_element_hidden_in_editor=’0′ av_uid=’av-kij8njkq’ admin_preview_bg=”][/av_image] [/av_one_half] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8ukp4′ admin_preview_bg=”] The required share comes from a table that is divided into income tiers.

Because the required share is less under the new tables for 2021 and 2022 than it otherwise would have been, the PTC will be greater. Under pre-ARPA law, a taxpayer might have had to spend as much as 9.83% of household income in 2021 on health insurance premiums. Under ARPA, that amount is capped at 8.5% for 2021 and 2022.

Illustration: Under pre-ARPA law, a 21-year-old with income at 150% of FPL in 2021 would have been eligible for a PTC of about $3,500. Under ARPA, that individual’s PTC will be about $4,300.

Premium Tax Credit Increased for Taxpayers Receiving Unemployment Compensation in 2021

If you receive or are approved to receive, unemployment compensation for as little as one week during 2021, you qualify for special PTC rules for the entire year. Under these rules:

• You are automatically treated as an “applicable taxpayer” who qualifies for the PTC. You still won’t be able to claim the PTC, however, if you are eligible for affordable employer-sponsored insurance.
• Your household income in excess of 133% of the FPL for a family of the size involved isn’t taken into account in figuring your PTC.

As a result of the second rule, if your household income for 2021 exceeds 133% of FPL, your PTC will be calculated as if the income was 133% of FPL. This will increase your PTC, since your required share of the premiums will be lower.

No Repayment of Excess Advance PTC Payments for 2020

Many taxpayers arrange to have advance payments of their PTC made in advance directly to the insurer. The amount of these payments is based on income estimated from tax returns for prior years.

If your actual PTC turns out to be more than the advance payments, you will receive a refundable income tax credit for the excess. But if your advance payments exceed your PTC, you generally must pay back the excess as additional income tax, subject to a repayment cap based on your household income.

However, a special rule applies for 2020 under ARPA. Under that rule, if you file a 2020 return reconciling your advance PTC payments with your actual PTC, no additional income tax will be imposed if the advance payments are greater. You can retain the benefit of the advance payments even though they exceed the PTC to which you are entitled.

Note: Currently, the IRS is telling taxpayers who’ve already filed 2020 returns and paid the excess credit back as an additional tax not to file amended returns to claim a refund. The IRS has said it will provide more details on how to claim a refund of additional tax soon.

Please contact us for more information 561-995-0064
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American Rescue Plan Act passes

 

[/av_textblock] [/av_one_full] [av_one_half first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-6gjy1z’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-kij8lemh’ admin_preview_bg=”] The American Rescue Plan Act H.R. 1319, passed Wednesday, March 10th 2021 by the House of Representatives. Here is a look at the final version of the tax provisions:

Unemployment benefits
The act makes the first $10,200 in unemployment benefits tax-free in 2020 for taxpayers making less than $150,000 per year.

Recovery rebates
The act creates a new round of economic impact payments to be sent to qualifying individuals. The same as last year’s two rounds of stimulus payments, the economic impact payments are set up as advance payments of a recovery rebate credit. The act creates a new Sec. 6428B that provides individuals with a $1,400 recovery rebate credit ($2,800 for married taxpayers filing jointly) plus $1,400 for each dependent (as defined in Sec. 152) for 2021, including college students and qualifying relatives who are claimed as dependents. As with last year’s economic impact payments, the IRS will send out the advance payments of the credit.

For single taxpayers, the credit and corresponding payment will begin to phase out at an adjusted gross income (AGI) of $75,000, and the credit will be completely phased out for single taxpayers with an AGI over $80,000. Married taxpayers who file jointly, the phaseout will begin at an AGI of $150,000 and end at AGI of $160,000. And for heads of household, the phaseout will begin at an AGI of $112,500 and be complete at AGI of $120,000.
The act uses 2019 AGI to determine eligibility, unless the taxpayer has already filed a 2020 return.
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The act provides COBRA continuation coverage premium assistance for individuals who are eligible for COBRA continuation coverage between the date of enactment and Sept. 30, 2021. The act creates a new Sec. 6432, which allows a COBRA continuation coverage premium assistance credit to taxpayers. The credit is allowed against the Sec. 3111(b) Medicare tax. The credit is refundable, and the IRS may make advance payments to taxpayers of the credit amount.

The credit applies to premiums and wages paid after April 1, 2021, and through Sept. 30.
Under new Sec. 6720C, a penalty is imposed for failure to notify a health plan of cessation of eligibility for the continuation coverage premium assistance.
Taxpayers who receive the COBRA continuation coverage premium assistance credit are not also eligible for the Sec. 35 health coverage tax credit.
Under new Sec. 139I, continuation coverage premium assistance is not included in the recipient’s gross income.

Child tax credit
In a few ways the act expands the Sec. 24 child tax credit and taxpayers can receive the credit in advance of filing a return. The act makes the credit fully refundable for 2021 and makes 17-year-olds eligible as qualifying children.

The act increases the amount of the credit to $3,000 per child ($3,600 for children under 6). The increased credit amount phases out for taxpayers with incomes over $150,000 for married taxpayers filing jointly, $112,500 for heads of household, and $75,000 for others, reducing the expanded portion of the credit by $50 for each $1,000 of income over those limits.
The IRS is directed to estimate taxpayers’ child tax credit amounts and pay monthly in advance one-twelfth of the annual estimated amount. Payments will run from July through December 2021.
The IRS must set up an online portal to allow taxpayers to opt out of advance payments or provide information that would be relevant to modifying the amount.

The taxpayer in general will have to reconcile the advance payment amount with the actual credit amount on next year’s return and increase taxable income by the excess of the advance payment amount over the actual credit allowed. But taxpayers whose modified AGI for the tax year does not exceed 200% of the applicable income threshold ($60,000 for married taxpayers filing jointly) will have the increase for an excess advance payment reduced by a safe harbor amount of $2,000 per child.

Earned income tax credit
Several changes are made to the Sec. 32 earned income tax credit. It introduces rules for individuals with no children: For 2021, the applicable minimum age is decreased to 19, except for students (24) and qualified former foster youth or homeless youth (18). The maximum age is eliminated.
The credit’s phaseout percentage is increased to 15.3%, and the phaseout amounts are increased.
The credit would be allowed for certain separated spouses. The threshold for disqualifying investment income would be raised from $2,200 to $10,000.
Temporarily, taxpayers would be allowed to use their 2019 income instead of 2021 income in figuring the credit amount.

Child and dependent care credit
Various changes to the Sec. 21 child and dependent care credit are made, effective for 2021 only, including making it refundable. The credit will be worth 50% of eligible expenses, up to a limit based on income, making the credit worth up to $4,000 for one qualifying individual and up to $8,000 for two or more. Credit reduction will start at household income levels over $125,000. For households with income over $400,000, the credit can be reduced below 20%. It also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.

Family and sick leave credits
The act codifies the credits for sick and family leave originally enacted by the Families First Coronavirus Response Act (FFCRA), P.L. 116-127, as Secs. 3131 (credit for paid sick leave), 3132 (credit for paid family leave), and 3133 (special rule related to tax on employers). The credits are extended to Sept. 30, 2021. These fully refundable credits against payroll taxes compensate employers and self-employed people for coronavirus-related paid sick leave and family and medical leave. The act increases the limit on the credit for paid family leave to $12,000.

The number of days a self-employed individual can take into account in calculating the qualified family leave equivalent amount for self-employed individuals increases from 50 to 60. The paid leave credits will be allowed for leave that is due to a COVID-19 vaccination.
The limitation on the overall number of days taken into account for paid sick leave will reset after March 31, 2021.
The credits are expanded to allow 501(c)(1) governmental organizations to take them.

Employee retention credit
The act codifies the employee retention credit in new Sec. 3134 and extends it through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees. Under the act, the employee retention credit would be allowed against the Sec. 3111(b) Medicare tax.

Premium tax credit
The act expands the Sec. 36B premium tax credit for 2021 and 2022 by changing the applicable percentage amounts in Sec. 36B(b)(3)(A). Taxpayers who received too much in advance premium tax credits in 2020 will not have to repay the excess amount. A special rule is added that treats a taxpayer who has received, or has been approved to receive, unemployment compensation for any week beginning during 2021 as an applicable taxpayer.

Student loans
The act amends Sec. 108(f) to specify that gross income does not include any amount that would otherwise be included in income due to the discharge of any student loan after Dec. 31, 2020, and before Jan. 1, 2026.

Miscellaneous tax provisions
It amends Sec. 162(m), for years after 2026, to add a corporation’s five highest-compensated employees (besides the employees already covered by Sec. 162(m)) to the list of individuals subject to the $1 million cap on deductible compensation.
The act extends the Sec. 461(l) limitation on excess business losses of noncorporate taxpayers for one year, through 2027.
The act also repeals Sec. 864(f), which allows affiliated groups to elect to allocate interest on a worldwide basis.
The act provides that targeted Economic Injury Disaster Loan (EIDL) grants received from the U.S. Small Business Administration (SBA) are not included in gross income and that this exclusion from gross income will not result in a denial of a deduction, reduction of tax attributes, or denial of basis increase. Similar treatment is afforded SBA restaurant revitalization grants.
The act temporarily delays the designation of multiemployer pension plans as in endangered, critical, or critical and declining status and makes other changes for multiemployer plans in critical or endangered status.
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If you have not received a PPP loan before, First Draw PPP Loans may be available to you.

Two things to know about the Paycheck Protection Program (PPP) first draw enacted on December 27, 2020:

• The first draw is for those who missed getting in on the original PPP, which expired on August 8, 2020.
• Don’t think of a PPP draw as a loan. It’s not a loan. It’s a cash infusion. You have to repay a loan. You don’t have to repay the PPP funds.

Who qualifies for first-draw PPP money today? You, most likely—if you file a business tax return and have not yet received any PPP monies.

But don’t wait. The money is going to run out fast, and once it’s gone, so is the PPP. And the new PPP ends March 31, even if the money is not gone by then.

You qualify for the PPP if any of the following are true:

• You file your taxes on Schedule C of your tax return. Businesses that file on Schedule C include independent contractors (often called 1099 folks), single-member LLCs, proprietorships, and statutory employees such as life insurance salespeople.
• You file your taxes on Schedule F (ranchers and farmers).
• You are a general partner in a partnership, but the partnership asks for and receives the money based on your and the other partners’ combined self-employment incomes, as adjusted.
• You operate as an S corporation.
• You operate as a C corporation.
• You are the only worker in the business—and if you have employees in the business, you qualify on both your ownership worker status and your employees’ W-2 status.

 

 

[av_one_full first min_height=” vertical_alignment=” space=” row_boxshadow=” row_boxshadow_color=” row_boxshadow_width=’10’ custom_margin=” margin=’0px’ mobile_breaking=” border=” border_color=” radius=’0px’ padding=’0px’ column_boxshadow=” column_boxshadow_color=” column_boxshadow_width=’10’ background=’bg_color’ background_color=” background_gradient_color1=” background_gradient_color2=” background_gradient_direction=’vertical’ src=” background_position=’top left’ background_repeat=’no-repeat’ highlight=” highlight_size=” animation=” link=” linktarget=” link_hover=” title_attr=” alt_attr=” mobile_display=” id=” custom_class=” aria_label=” av_uid=’av-2b7s0h’] [av_textblock size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” font_color=” color=” id=” custom_class=” av_uid=’av-k8ewweci’ admin_preview_bg=”] New Coronavirus Bill Shows Promise for Individuals and Small Businesses

On December 21, 2020, Congress revealed its newest spending bill, H.R. 133, the “Consolidated Appropriations Act (CAA), 2021” which includes division N – Additional Coronavirus Response and Relief (ACRR), and Division EE – Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR).  The bill was approved by the Senate with a 92-6 vote at about 11:45pm yesterday evening just a few hours after the house approved it 359-53.  The bill is on its way to President Trumps desk, who is expected to sign it into law.  This could take a few days, as the bill needs to be printed and signed by the appropriate House and Senate officials before being submitted to the President for signature.  Please note that the below is a highly summarized version of some of the provisions we feel are most relevant to our client base, in general.  The bill clocks in at just over 5,500 pages, so do expect to see more information coming to light as we and other professionals have more time to read through the bill.

Notably, and what most have been waiting to hear about, the bill includes $600 stimulus payments to individuals making up to $75,000 ($150,000 for married couples), as well as a $600 payment for each child dependent. The bill also adds $300 in extended weekly unemployment benefits and provides more than $300 billion in aid for small businesses.

Another neat and notable provision of this bill, Business Meals.  To drum up business for restaurants throughout the country, the bill is allowing a 100% business expense deduction for meals (as opposed to the normal 50%) so long as the expense is for food or beverages provided by a restaurant.  The provision is effective for expenses incurred after December 31, 2020 and expires at the end of 2022.

PPP Update and Second Round Funding

Everyone reading this newsletter is likely already aware of the PPP loans available under the CARES act, which provided businesses cash-flow assistance through an SBA loan, which is 100% forgivable so long as businesses comply with a couple of stipulations, notably payroll cost and headcount (Full-Time Equivalents). The Paycheck Protection Program Flexibility Act (PPPF) made a few changes to the original requirements of the PPP loan, notably lowering the payroll cost requirement from 75% to 60%, freeing up cash from the loan to be used on rent, mortgage interest and utilities. The SBA began processing PPP forgiveness applications and remitting payments to lenders on October 2, 2020.

PPP Expense Deductibility: Something that has been in the news a lot lately and what business owners have been in the dark on – is my PPP loan forgiveness taxable income and are the expenses I paid with the loan tax deductible.  Logically speaking from a tax perspective, we would normally err on the side of caution and say the forgivable loan would be taxable income, which would then make the expenses of that loan deductible, OR the loan would be not taxable income, and the corresponding expenses would also NOT be deductible.  However, going against all logic, it seems the government has made the decision to allow taxpayers to “Double Dip,” not be taxed on the loan forgiveness, and deduct all the expenses they paid with their PPP money.  It is an unprecedented move to aid small businesses in getting back on their feet amidst the seemingly never-ending pandemic.

Economic Injury Disaster Loan: the bill repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

ACRR permits additional PPP loan funds to be disbursed by lenders.  Due to some of the lessons learned in the first round of funding, representatives worked hard to close loopholes exposed by certain companies such as Shake Shack and Ruth’s Chris.  Accordingly, the ACRR permits certain businesses who experienced a 25% reduction in gross receipts to take a second draw from the PPP of up to $2 million.  To be eligible for this funding, your business must meet the following conditions:

• Employ no more than 300 employees per physical location;
• Have used or will use the full amount of their first PPP loan; and
• Demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same quarter in 2019. You may also choose to use the fourth quarter of 2020, so long as your application is submitted on or after January 1, 2021.

The following are eligible entities for this loan program: for-profit businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independents contractors, and small agricultural cooperatives.

Funding: So long as a business meets the above conditions, it may apply for a second loan with similar terms to the first round of PPP funding, with some exceptions.  For most businesses, the maximum loan amount will be 2.5 times the average monthly payroll costs in the one year prior to the loan (trailing 12 months) or the calendar year (2019 if applying in 2020, or 2020 if applying in 2021), up to $2 million.  There is a special stipulation for borrowers in the hospitality or food services industry, which permits loans up to 3.5 times the average monthly payroll cost, still capped at $2 million.  This is sure to be a huge help for our hospitality and food services clients that have been hardest hit by this pandemic.  Obviously, only a single second draw from the loan program is permitted per business.

The bill also allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.

Simplified Certification of Revenue, Forgiveness, and eligible expenses: Another interesting piece of this second round of funding is a new simplified forgiveness process.  In short, if your loan amount is $150,000 or less, you may submit a certification, on or before the date the loan forgiveness application is submitted, attesting that the business meets the applicable revenue loss requirement. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

Like the first round of funding, the second loan will be forgivable so long as at least 60% of the proceeds are used for payroll costs, and the remaining 40% are used on nonpayroll costs such as rent, mortgage interest and utilities.  The second round of PPP funding also allows other expenses, such as:

• Covered worker protection and facility modification expenditures (i.e., masks, personal protective equipment to comply with COVID-19 federal health and safety guidelines, barriers between desks, etc.)
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations
• Covered operating costs such as software, cloud computing services and accounting needs

Application of exemption: ACRR extends the current safe harbors on restoring full-time employees and salaries and wages.  Specifically, loan forgiveness will be reduced for the business that reduces headcount or employees’ salaries more than 25%.

Grants for Shuttered Venue Operators

Section 324 of the bill specifically sets aside $15 billion for the SBA to make grants to eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25% reduction in revenues and was fully operational on February 29, 2020.

As of the date of the grant under this section venue operator or promoter must be currently or intending to resume operations organizing, promoting, producing, managing, or hosting future live events.

The awarding of grants by the SBA will be in a tiered system to ensure those who need aid most will receive it before funding runs out.  The first priority window for grants will last for 14 days, and grants will be awarded to venues/individuals whose revenue, for the period April 1, 2020 through December 31, 2020 is not more than 10% of the revenue for the eligible venue/individual during the period beginning on April 1, 2019 and ending on December 31, 2019, due to the COVID-19 pandemic.  In other words, if you had a 90% or more drop in revenue for 2020 compared to 2019 for April-December, you are eligible for funding in the first window.

The second priority window will run for the next 14 days and will be for any venue/individual with revenue that is not more than 30% of prior year (you experience a 70% or more drop in revenue from April 2019-December 2019 compared to April 2020-December 2020).

After the initial 28-day period, any other eligible person or venue may apply for a grant.

The bill also specifically sets aside a minimum of $2 billion to be granted to venues or persons who employ less than 50 full-time employees during the first 60 days of granting.

Extension of Paid Sick and Family Leave Credits

Section 286 of the ACRR extends the refundable tax credits available to employers who provide paid sick and family leave related to the coronavirus pandemic.  This provision was originally enacted under the Families First Coronavirus Response Act and was set to expire on December 31, 2020.  It is now extended through March 31, 2021 and requires certain employers to provide paid leave to workers who are unable to work due to circumstances related to COVID-19.

Section 287 of the ACRR similarly extends the credits available to self-employed individuals and allows them to use reported wages from Tax Year 2019, instead of Tax Year 2020 when computing any credits.

Section 288 aligns the definitions of qualified wages for paid sick and family leave with the Internal Revenue Code – it allows employers paying employees under this provision to exclude these payments from employer Social Security employment taxes.

Deferred Payroll Taxes

Many recall on August 8, 2020 when Trump signed a Presidential Memo directing the Treasury Secretary to permit the postponement of the withholding, deposit, and payment of the employee’s share of Social Security tax (6.2%).  While the intention of this memo was to provide Americans an additional 6.2% of take-home pay, the President does not have the authority to eliminate these taxes, and unless further legislation is passed, Americans will ultimately be required to pay back the amounts not withheld.  As a result, few, if any, employers have suspended collecting these amounts from employees pay.

For any employers that did postpone the collection, Section 274 of ACRR extends the repayment period of the deferred taxes through December 31, 2021.  It also provides that penalties and interest will not begin to accrue on the deferred amounts until January 1, 2022.

Employee Retention Credit Expansion

The CARES Act provided an Employee Retention Credit (ERC) which provided a payroll tax credit for 50% of qualified wages up to $10,000 per employee, for a maximum credit of $5,000 per employee.  Under CARES, the ERC may be claimed for wages paid after March 12, 2020 and before January 1, 2021.  Eligible employers for this credit included private-sector businesses and tax-exempt organizations whose operations have been fully or partially suspended because of a government order limiting commerce, travel, or group meetings.  The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured in a year-over-year basis.

Section 206 and 207 of TCDTR expands upon the ERC afforded under CARES with the following changes (we are included only those we feel would be relevant to our clients):

• ERC Credit is now available until the middle of 2021
• The ERC rate is increased from 50% to 70% of qualified wages
• Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter.
• Provides rules to allow new employers who were not in existence in all or part of 2019 to be able to claim the credit
• Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees

Unemployment Extensions and Provisions

Earlier in 2020, the federal government enacted legislation which included unemployment-related provisions in the CARES Act and the FFCRA.  Notably, COVID-19 relief included an additional $600 per week in unemployment compensation, which lasted through July 31, 2020.  A Presidential Memo created a “Lost Wages Assistance” program through FEMA which allowed for an additional $300 per week in unemployment benefits after the additional $600 per week benefit expired.

Section 201 of the CAA extends unemployment assistance for the pandemic through March 14, 2021.  Individuals may continue to receive unemployment assistance through April 5, 2021, so long as the individual has not reached the maximum number of weeks (which has been increased from 39 to 50 weeks).  Section 203 of the bill restores the Federal Pandemic supplement to all state and federal unemployment benefits at $300 per week, starting after December 26, 2020 and ending March 14, 2021.  Section 251 of the bill requires states to have methods in place to address situations when claimants of unemployment compensation refuse to return to work or refuse to accept an offer of suitable work without good cause including a reporting method for employers to notify the state when an individual refuses employment.
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Approximately 50,000 “catch-up” economic impact payments will be made to individuals whose portion of the stimulus payment was diverted by the federal government to pay their spouse’s past-due child support by the IRS.

These funds are expected to be sent in early to mid-September and will mailed as checks to any eligible spouse who filed a Form 8379, Injured Spouse Allocation, along with their 2019 federal income tax return, or in some cases, their 2018 return. The IRS will automatically issue the portion of the EIP that was applied to the other spouse’s debt. These individuals do not need to take any further action to receive the extra economic impact payment money.

Under the CARES Act, the IRS deposited or mailed stimulus payments known as economic impact payments of $1,200 to eligible taxpayers, along with an extra $500 per child. However, in some cases the IRS subtracted money from the payments for those who owed child support to their former spouses. The IRS plans to send the money to 50,000 individuals who were owed child support.

The IRS has noted that it is aware that some individuals did not file a Form 8379, Injured Spouse Allocation, and therefore did not receive their part of the EIP for the same reason. The IRS doesn’t yet have a timeframe but plans to automatically issue the part of the EIP that was applied to the other spouse’s debt at a later time. If you are effected by this, you can check the status of their EIP by using the Get My Payment tool, available only on IRS.gov.

The Small Business Administration (SBA), in consultation with the Department of the Treasury released a set of “Frequently Asked Questions” (FAQs) addressing loan forgiveness issues under the Paycheck Protection Program (PPP) as administered by the Small Business Administration (SBA).

Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation, in consultation with the Department of the Treasury, of the CARES Act, the Flexibility Act, and the Paycheck Protection Program Interim Final Rules (“PPP Interim Final Rules”)

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Newly Released SBA FAQ Sections & Highlights

General Loan Forgiveness FAQs:

This section contains three FAQs. The first one clarifies that sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to use the PPP Loan Forgiveness Application Form 3508EZ.

Loan Forgiveness Payroll Costs FAQs:

This section contains eight FAQs here are some highlights from this section.

Question No. 4 explains that the gross amount before deductions for taxes, employee benefits payments, and similar payments, or the net amount paid to employees should be used when calculating cash compensation.

Question No. 5 gives more detail on Payroll costs covered by the loan forgiveness, which include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay. Note that forgivable cash compensation per employee is limited to $100,000 on an annualized basis.

Question No. 8 explains how is the amount of owner compensation that is eligible for loan forgiveness determined. The answer explains that the amount of compensation of owners who work at their business that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-week Covered Period. It also provides examples for owners of C and S corporations, self-employed Schedule C (or Schedule F) filers, general partners, and LLC owners. An owner-employee is defined as someone who is both an owner and an employee of a C corporation. The term was previously referred to in the PPP loan forgiveness application but not defined. Also addressed are partial pay periods, group health care benefits, and two questions related to payroll costs that were incurred or paid outside of the eight-week or 24-week covered periods.

Loan Forgiveness Nonpayroll Costs FAQs:

This section includes seven FAQs which address rent, lease, and mortgage payments, utilities, and transportation.

Question No. 6 provides that payments of transportation utility fees assessed by state and local governments are eligible for loan forgiveness. Also answered are two questions related to nonpayroll costs that were incurred or paid outside of the eight-week or 24-week covered periods and whether the Alternative Payroll Covered Period for payroll costs also applies to nonpayroll costs (it doesn’t).

Loan Forgiveness Reductions FAQs:

This section includes five FAQs which give more clarity on FTE employees, seasonal employers, and alternative payroll.

Question No. 4 addresses how calculations should be made by borrowers for the reduction in their loan forgiveness amount arising from reductions in employee salary or hourly wage. Three examples of the salary/hourly wage reduction are included which provide more insight.

Download the Full FAQ’s Document Click Here

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The AICPA will provide more analysis and insights into the FAQs on Thursday, August 6th during its next PPP town hall, which will start at 3 p.m. ET.

“The FAQs have addressed a number of the outstanding questions, but there are still some gray areas,” said Lisa Simpson, CPA, CGMA, director–Firm Services for the Association of International Certified Professional Accountants. “In addition, there are still remaining open items such as how will FTE reductions work if applying for forgiveness before the end of the covered period. We will discuss all of this in greater detail on Thursday’s town hall.”

Through July 31, the PPP has funded nearly 5.1 million forgivable loans totaling more than $521 billion to help small businesses and other eligible entities impacted by the recession sparked by the COVID-19 pandemic. More than $130 billion is still available in the PPP, which has an Aug. 8 deadline for applications to be approved by SBA. Congress is currently considering a follow-up to PPP that would provide more targeted assistance to small businesses.

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Quick Summary of the Paycheck Protection Program

The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. Created by Congress as part of a $2 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. These funds can also be used to pay interest on mortgages, rent, and utilities.

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $659 billion toward job retention and certain other expenses. Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.

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