As we have outlined previously on this blog, the $2.3 trillion, 5,593-page Consolidated Appropriations Act, 2021 (“CAA”) is vast and far reaching. We have recently written about how the CAA affected the Employee Retention Tax Credit, but Congress added to the CAA other tax policies designed to provide economic relief. This post will outline some of the major tax provisions in the CAA and how they may affect you and your business come tax season.

Tax Treatment of PPP Loans

Way back in March when Congress established the Paycheck Protection Program (PPP) with the CARES Act, Congress made it clear that the forgivable loans provided to businesses should not be taxable. However, Congress was not explicit if business expenses funded by PPP loans would also remain deductible. The IRS did not allow businesses to claim the normal tax deductions for business expenses funded by PPP loans. Congress clarified their intent in the CAA by explicitly allowing businesses to claim such deductions.

Business Meal Deduction

The Tax Cuts and Jobs Act of 2017 limited the deduction of meal expenses by businesses to 50% of the cost for food and beverages provided by a restaurant. Pushed heavily by the White House, the CAA brings back the so-called “3-Martini Lunch” by temporarily increasing the business meal deduction to 100% during 2021 and 2022.

Extension of Credits for Paid Sick and Family Leave

The Families First Coronavirus Response Act provided a refundable payroll tax credit to reimburse businesses the costs associated with paid sick and family leave due to the pandemic. This credit was set to expire at the end of 2020. The CAA extended the paid sick and family leave credit through March 31, 2021. Businesses are not required to provide this paid sick and family leave between January 1, 2021 and March 31, 2021, but if they do, they are eligible for this tax credit.

Extension of Deferred Payroll Taxes

In August, President Trump issued a memorandum allowing businesses to elect to defer payroll taxes from September 1, 2020 through December 31, 2020. Under the terms of the memorandum, the repayment period for the deferred taxes was January 1, 2021 through April 30, 2021, meaning penalties and interest on these taxes would begin to accrue on May 1, 2021. The CAA extended the repayment period until December 31, 2021.  Accordingly, penalties and interest will not accrue until January 1, 2022.

Individual Tax Provisions in the CAA

Although many of the tax provisions in the CAA are aimed at helping businesses, Congress also added some provisions intended to help individuals who have been affected by the pandemic.

The CAA allows a temporary lookback for the Earned Income Tax Credit (“EITC”) and the Child Tax Credit (“CTC”). The EITC and CTC offer refundable tax credits to individuals, however, to earn these credits, the taxpayer needs to show their earned income for the year. Typically, the credit a taxpayer receives is larger as you earn more income. The CAA allows individuals to receive EITC and CTC based on their 2019 income. This will help individuals who lost wages or employment in 2020 due to the pandemic.

The CAA also allows individuals who take the standard deduction an “above-the-line” deduction for charitable contributions up to $300 for 2021.


If you have questions concerning the Consolidated Appropriations Act, 2021 the attorneys at the Wladis Law Firm may be reached at (315) 445-1700 or by emailing your usual firm contacts. We will do our best to provide you with updates and will be available to answer questions as circumstances change.