ForNPTpurposes,consistentwithourtreatmentofthePPPprovisionsforBIRTMethodI
taxpayers,Philadelphiawill:
o ExcludefromgrossincomeanyamountforgivenunderthePPP;
o AllowbusinessdeductionsforeligibleSection1106expensestotheextenttheexpenses
werereimbursedbyforgivenPPPloans.
FederalEmployeeRetentionCredit(ERC)
TheERCisafullyrefundablepayrolltaxcreditavailabletoemployers,includingnot‐for‐profits
thathadtheiroperationsfullyorpartiallysuspendedasaresultofagovernmentorderlimiting
commerce,travelorgroupmeetings(the“suspensiontest”)duetoCOVID‐19.Thecreditisalso
providedtoemployerswhohaveexperiencedagreaterthan50%reductioninquarterly
receipts,measuredonayear‐over‐yearbasis(the“grossreceiptstest”).
TheERCisintendedtoencourageeligibleemployersfinanciallyimpactedbyCOVID‐19tokeep
employeesontheirpayrollduringtheeconomicdownturn.Theemployeeretentioncreditis
equalto50%ofupto$10,000of“qualifiedwages”1paidbyeligibleemployerspaidtoboth
hourlyandsalariedemployeesfromMarch13,2020,throughDecember31,2020.The
maximumamountofthefullyrefundablecreditis$5,000peremployee.Eligibleemployers
reporttheirtotalqualifiedwagesforpurposesoftheERContheirquarterlyfederalemployment
taxreturns,usuallyForm941.
Eligibleemployersthatcontinuetoprovidetheiremployeeswithhealthcarecoveragecannow
claimtheERCforthesecostsregardlessofwhethertheemployeescontinuetoreceiveasalary.
Update:TheConsolidatedAppropriationsAct,2021(“COVID‐19reliefbill”)extendsandexpands
theERCthroughJuly1,2021.Thebillincreasestherefundablepayrolltaxcreditfroma
maximumof$5,000to$14,000peremployeebychangingthecalculationfrom50%ofwages
paidupto$10,000to70%ofwagespaidupto$10,000foranyquarter.Thebillalsoclarifies
thatbusinesseswillnowbeabletotaketheERCandparticipateinthePPP.
PhiladelphiawillincludequalifiedwagesastaxablecompensationtotheemployeeforCity
WageTaxpurposes.BIRTMethodIItaxpayerswillfollowthefederaltreatmentofqualified
wages:1)anemployer’staxdeductionforqualifiedwages,includinghealthplanexpenses,will
bereducedbytheemployeeretentioncreditand2)theemployeeretentioncreditwillnotbe
treatedasgrossincometotheemployer.
ModificationofLimitationonBusinessInterestExpense
TheCARESActamendsIRCSection163(j)fortaxyearsbeginningin2019and2020.Withthe
exceptionofpartnerships,taxpayersmaydeductbusinessinterestexpenseupto50%oftheir
adjustedtaxableincome(ATI),anincreasefrom30%ofATIundertheTCJA,unlessanelectionis
madetousethelowerlimitationforanytaxableyear.Inaddition,foranytaxyearbeginningin
2020,ataxpayermayelecttouseits2019ATIforpurposesofcomputingthe2020Section