Year: 2021

Some Businesses Rely on Line of Credit to Escape Damages Caused by Pandemic

Line of Credit and Covid, Line of Credit PandemicAs businesses attempt to work their way through to a post-pandemic world, there are various means to bridge the financial gap. As recommended by the U.S. Small Business Administration (SBA), some companies can use a line of credit to reach international customers or opportunities outside the United States to make up for the damage COVID-19 caused with fewer domestic sales. How can businesses use a line of credit to increase their chance of survival and pivot to profitability as we move through 2021?

According to Debt.org, a business line of credit functions like any other line of credit that uses revolving debt. Businesses use a portion of their line of credit to meet financial obligations and repay based on the lender’s terms. Common lines of credit borrowing limits can range from $1,000 to $250,000 and are generally not secured against the business’ assets, accounts receivables, etc.

As a U.S. Bank study found, via the National Federation of Independent Businesses (NFIB), 82 percent of companies that go out of business do so because of inadequate cash flow management. The NFIB and U.S. Bank study explains that an inability to purchase inventory, satisfy employee payroll, on-board workers, or obtain some sort of financing increases the likelihood of a business failing.

However, businesses that are approved for and use a line of credit for meeting payroll, purchasing raw materials and items necessary to keep their business running (including rent or lease payments), greatly increases the business’s chance of survival. So, as revenues and profits shrink, employers can tap their line of credit to increase the chances of surviving.

Business Survivability Considerations

Continuous access to funds allows owners to have greater control over a business’s finances and helps them make better growth-driven decisions. For example, Noam Wasserman, a Harvard Business School professor, explains that oftentimes outside investors force founders out of their company – only half of founders were still the CEO three years after the business’s inception. If a line of credit gives the business enough financial flexibility, then the founders can stay in control.

Another way to leverage a line of credit is highlighted in the SBA export assistance programs due to COVID-19-related losses. Small business owners that export products directly, or indirectly to a third party that does the exporting, may be eligible.

Prior to a company completing a sale to an international client, or for prospecting for new international export markets, businesses can apply for a line of credit or a term note, up to $500,000, under the SBA’s Export Express loan program.

Through the SBA’s Export Working Capital loan program, approved applicants can obtain as much as $5 million in financing or a revolving line of credit related to the firm’s export-related business. This assistance also can help businesses better fulfill export orders as well as provide financial assistance for additional ex-U.S. sales. The financing can assist in keeping international orders through more favorable payment options for their foreign customers.

While there is never a guarantee that a business will survive, today’s companies that take advantage of different lending options, such as a line of credit, have a better chance to set themselves up for the post-COVID-19 recovery.

Sources

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

https://www.debt.org/credit/lines/

https://www.nfib.com/content/resources/start-a-business/why-do-small-businesses-fail/

https://hbr.org/2008/02/the-founders-dilemma

Four Essential Questions You Should Ask Your Tax Professional This Season Related to COVID-19

Tax Professional Question about COVID-19Good tax professionals ask the right questions to ensure they understand your situation and can help you to the best extent the law allows. Given the host of pandemic-related tax changes for 2020, it’s good to keep these four questions below in mind. If your tax preparer doesn’t ask these questions in your tax organizer or during a meeting, raise them yourself.

1. Did you receive your stimulus payment?

Not everyone received all the stimulus they were entitled to. As a result, the amount of your stimulus payments needs to be reconciled on your 2020 tax return to calculate if you qualify for the Recovery Rebate Credit.

The way the Recovery Rebate Credit works is that if you qualified for stimulus payments but didn’t receive them, then you’ll receive a credit on your 2020 tax return. On the other hand, if you received too much, there is no impact to your refund or balance due. You can’t lose here, so make sure you discuss your stimulus payments.

2. Did you work remotely? If so, when and where?

As a result of the pandemic, a lot of people worked from home for all or part of the year. If you lived in the same state you worked in, then there’s no cause for concern or further investigation. In situations where workers lived and therefore worked remotely in a different state than they normally would have commuted to when going into the office, then there could be an issue.

If you worked from another state for any part of the year, make sure you ask your tax preparer about this so you can understand the filing requirements in each state and any nexus issues. Just remember that if you are a W-2 employee, it doesn’t matter if you worked from your home, there is no home office deduction unless you’re self-employed.

3. Did you take any distributions from your retirement accounts in 2020 due to COVID-related circumstances?

Typically, early distributions from tax-advantaged retirement accounts such as 401(k) and IRAs are subject to a 10 percent penalty. There are provisions in the law that allowed penalty-free distributions in 2020 under certain circumstances related to COVID-19. Also, the income from distributions is spread over three years, which can further reduce the overall tax rate (unless you elected to tax it all in the year of distribution).

If you took distributions from a retirement account and were impacted by COVID-19, make sure your tax professional is aware of these exceptions; and ask the right questions to see if you qualify for any of the preferential treatment.

4. Are you self-employed and missed work because you were sick with the coronavirus or needed to care for someone who was ill with it?

Under the Families First Coronavirus Response Act (FFCRA), those who are self-employed can be eligible for sick and family leave credits if they or a family member had coronavirus and couldn’t work between April 1 and Dec. 31, 2020, as a result. If eligible, your tax preparer will file Form 7202 with your Form 1040 to make the claim.

Conclusion

Doing the best as a tax preparer means knowing your client’s situation and circumstances. There’s a good chance your tax professional is already on top of the COVID-19 changes, but it’s good to keep the questions above in mind just in case.

Protecting American Ports, Federal Buildings, Allies, Oceans, and Whistleblowers

Congress protects WhistleblowersSave Our Seas 2.0 Act (S 1982) – This bill was introduced by Sen. Alan Sullivan (R-AK) on June 26, 2019. The purpose of the legislation is to improve efforts to clean up marine debris, encourage recycling and strengthen domestic infrastructure to prevent the creation of new marine debris. The bill passed in the Senate in January 2020, the House in December, and was signed into law by President Trump on Dec. 18, 2020.

Digital Coast Act (S 1069) – This bill revised the National Oceanic and Atmospheric Administration Digital Coast program for critical coastal management and data tracking for the ocean and the Great Lakes coasts. It was introduced by Sen. Tammy Baldwin (D-WI) on April 9, 2019, passed in both Houses, and was signed into law on Dec. 18, 2020.

Criminal Antitrust Anti-Retaliation Act of 2019 (S 2258) – This Act was introduced by Sen. Chuck Grassley (R-IA) on July 24, 2019. It is designed to prohibit employers from retaliating against employees who report criminal antitrust violations to the federal government. The bill authorizes an employee to seek relief by filing a complaint with the Department of Labor or a lawsuit in the US. district court if he believes he is discharged or otherwise discriminated against by his employer for reporting violations. The legislation passed in the Senate in October 2019, in the House in December 2020, and was signed into law on Dec. 23, 2020.

Consolidated Appropriations Act, 2021 [Including Coronavirus Stimulus & Relief] (HR 133) – With overwhelming bipartisan support, this legislation is the vehicle for both the government funding bill for 2021 and another phase of economic stimulus in response to the coronavirus pandemic. It is the fifth-longest bill to be passed by Congress in the history of the country. The Act was signed into law by President Trump on Dec. 27, 2020.

Secure Federal Leases from Espionage and Suspicious Entanglements (LEASE) Act (S 1869) – This bill requires disclosure of ownership of high-security space leased to a Federal agency, including whether that owner is a foreign person and the country associated with the entity. It was introduced by Sen. Gary Peters (D-MI) on June 13, 2019, passed in the Senate in March 2020, the House in November, and was signed into law by the president on Dec. 31, 2020.

Securing America’s Ports Act (HR 5273) – This Act requires the Secretary of Homeland Security to develop a plan to increase by 100 percent the rate of scanning commercial and passenger vehicles and freight rail entering the United States via land ports. The plan will utilize large-scale non-intrusive inspection systems, such as X-ray and gamma-ray imaging technology. This bill was introduced by Rep. Xochitl Torres Small (D-NM) on Nov. 26, 2019. It passed in the House in February 2020, the Senate in December, and was enacted on Jan. 5 by President Trump.

Eastern European Security Act (HR 2444) – This bill authorizes the president to offer low-cost loans to NATO Eastern European allies (formerly part of the Soviet Bloc that still rely on Russian military gear) in order to more easily purchase U.S. weapons and equipment. The goal is for them to invest in American defense innovation instead of Russian or Chinese hardware. The bill was introduced by Rep. Michael McCaul (R-TX) on May 1, 2019, passed in the House last March, and in the Senate on Jan. 1. It was one of the last pieces of major legislation passed by the 116th Congress and was signed into law by President Trump on Jan. 13.

Business Process Management Systems Provide Variety of Benefits to Owners

BPMS - Business Process Management SystemsAll businesses have one thing in common, and that is processes. Business processes – whether direct or indirect – are crucial when it comes to providing products or services to customers.

Business process management (BPM) plays an important role in enhancing processes and offers numerous benefits to businesses. But imagine what greater benefits can be achieved if you choose to implement a technology product that supports your specific business process management.

Why BPM Software?

First, a little bit about BPM. Business process management was introduced to help accomplish workflow quickly and easily. Simply put, BPM enables users to design, model, implement, automate and analyze business processes of a company or an organization.

Some businesses have been doing things manually or with a number of different software applications. However, the invention of BPM software that came about with the technology evolution allows business processes to be digitized.

With the growing adoption of artificial intelligence, BPM systems are able to offer more. This is because analytics and data can be turned into actionable insights to offer optimized processes. Through machine learning, it is also easy to detect and learn patterns, organize unstructured data, and enhance the user experience with upgraded interfaces that allow voice commands and chatting.

All this is necessary due to high competition, the need to reduce costs, and the need to increase productivity.

Implementing BPM software helps a business design and analyze processes such as employee onboarding, account management, expense reporting, invoice management, customer requests, compliance management, project management, and much more.

Benefits of BPM Software

Apart from the obvious benefits, such as gaining a competitive edge, reducing costs, and improving business agility, BPM software also can provide:

  1. Business process modeling: a visual process design tool that enables you to create and test multiple processes and workflows within your business.
  2. Business rules engine: design business rules and conditions for each business process.
  3. Workflow management: design, test and implement advanced workflows by integrating team members, robust communication, other systems, and data.
  4. Overall visibility of business operations and performance: enhance process automation, allowing you to track how different processes function as well as how they are performing in real-time. This enables necessary improvements.
  5. KPI Monitoring and Measurement: easily monitor and track the performance of different processes.
  6. Integrations: combine various systems from different business domains (both internal and external).
  7. Collaboration: social collaboration software that facilitates effective communication within a company.
  8. Data Analytics: define metrics, get insights in real-time, and run reports on demand.
  9. Produce faster: due to high demands and competition, businesses are required to produce more and at a faster rate. Digitizing your business processes allows for more efficiency.
  10. Scale quickly and easily: as your business grows so do the tasks, causing your workflow to get complicated. A BPM system will help you make necessary adjustments to accommodate the growth.

Considerations Before Purchasing a BPMS

Before purchasing a BPMS because it is popular, it’s important to consider the following: first, define and analyze your business’ key processes. You should also consider your business goals, your budget, return on investment (ROI), future scalability, and deployment options whether on-site or software as a service.

A good BPM system should include a workflow, ease of use, ability to customize and collect data, regulatory compliance, and enhanced business agility.

Final Word

Business process management in any business is vital, and BPM systems are meant to make your business more efficient.

Some business owners might shy away from investing in these systems for fear of high costs. Luckily with cloud computing, you don’t need on-premise solutions – especially if you are a small business. You can choose from available software as a service option.

Businesses today have no option but to work with real-time data that will help in speed, agility, and innovation. This has been especially evident with the global COVID-19 pandemic that has affected many businesses, demanding they have systems in place to deal with unexpected situations.

How to Budget During a Pandemic

How to Budget During a PandemicRight now with everything that’s going on, navigating your finances might feel overwhelming. However, there are some strategies that will help you manage cash shortfalls. Mariel Beasley of Duke University’s Common Cents Lab offers ways to help you manage during these trying times.

Use Mental Accounting

Translated, this means prioritizing what’s most important and cutting back in those areas that aren’t. While pretty obvious, the finer point according to Beasley is this approach will help you stick to your spending plan by reminding you of your opportunity costs — i.e. what trade-offs you might be making with each purchase. For instance, you might not be able to buy that special something you’ve had your eye on, but you will be able to buy food. Here are the three buckets she recommends for your budget:

  1. Your Bills: Non-negotiable monthly bills like rent, mortgage, utilities, child care, car payment, insurance, phone, and internet.
  2. Weekly Expenses: These costs might vary, but they include groceries, gas, food delivery, and other miscellaneous expenses.
  3. Future Expenses: What’s leftover after you pay your bills and current expenses? Even if you think you don’t have much left, set aside this cash for an emergency fund or retirement savings in high-yield saving accounts like the American Express® High Yield, or Marcus account by Goldman Sachs. Alliant Credit Union even offers a 0.55 percent interest rate on savings accounts. By comparison, the national savings average is 0.05 percent APY. Make sure your money works as hard as it can.

Try Per-Spend vs. Per Month

Instead of budgeting $200 for groceries for the whole month, decide how many times you’ll go to the supermarket during the month (five times), then stick to a per trip budget ($40). You might not spend as much as you think you will. (Tip: Buy store brands, as they’re cheaper and just as good.) Whether you work a job that pays you regularly, you’re on unemployment or you’re living on Social Security, Beasley says that this will help you stretch your money longer between paychecks.

Think Ahead

This might seem like a no-brainer, but it bears repeating. Instead of waiting until you’re at a crisis point, act now to protect yourself. Here are some ways to do this:

  1. Identify Local Food Pantries. Feeding America is a nationwide network that helps you locate a food bank near you. Organizations such as churches and charities are also pitching in, offering everything from food donations to job search assistance. Government programs such as SNAP (food stamps) and Medicaid are options, as well as HEAP (heating your home), should you need something like this.
  2. Have a Plan for Your Rent/Mortgage. If you’re concerned about eviction, understand your rights as a tenant, and most importantly, stay in communication with your landlord. One solution is to get a roommate to share expenses. If you’re running behind on your mortgage, seek out help from your mortgage broker. One way to generate income is to rent out an extra room in your home. If you have family or friends who can help, reach out to them. While the latter might feel like a last resort, you could consider bartering: provide a service to them they might usually pay for like car washes, dog walking, or house cleaning in exchange for the financial help.
  3. Talk to Your Creditors. Contact your creditors to see if you can get a reduced interest rate on any of your payments. You also might ask for discounts and deferment options. Many card issuers are offering financial hardship assistance (waived late fees, flexibility with payments, even skipped payments) during the coronavirus pandemic.

The key to all this is slowing down and focusing on the basics – getting through each week and each day. While the pandemic might feel like it will never end, it will: it’s inevitable. Until then, these tactics can help you take control and stay afloat.

Sources

https://www.cnbc.com/select/how-to-budget-during-coronavirus/

https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts

Coronavirus: Credit Card Issuers Offer Financial Assistance (cnbc.com)

While Many Suffer Financially, Some Manage to Profit off Pandemic

Billionaires in CovidThe Federal Reserve recently reported that the 50 richest people in the United States increased their net worth by $339 billion during the first half of 2020. There are two primary contributors to this near-unprecedented level of growth. The first is that many either owned or were heavily invested in tech companies that thrived during the pandemic. Increased technology demands for remote work, online shopping, streaming entertainment, and socially-distanced socializing created a lucrative COVID-19 economy in some sectors.

Another reason is that the U.S. Treasury and Federal Reserve proactively infused the economy with stimulus capital. That helped mitigate long-term market disruption that might have otherwise occurred.

The short explanation of how to leverage assets for greater wealth during a pandemic is to be well-capitalized and invested in the stock market. To wit, over 88 percent of the equity in corporations and in mutual fund shares is owned by the wealthiest 10 percent of Americans. In other words, they’re not sitting on their cash; it is continually working for them.

In fact, nearly every tragedy has some form of silver lining investment opportunity. For example, hurricanes, floods, tornadoes, and earthquakes are good for the construction and contracting industries. The pandemic is interesting because it has large and almost exclusively benefited technology companies – in as much as they serve other industries.

The obvious pandemic winners are streaming services such as Amazon and Netflix, but also consider the proliferation of video conference technologies, online financial services, and telemedicine. All of these innovations existed before COVID-19, but it took a global pandemic for them to become mainstream services. Moreover, it is unlikely that their popularity will wane once the virus is contained. After all, we love convenience, and few things are more convenient than being able to conduct daily activities – such as work and doctor’s appointments – from the comfort of your own home.

But just as the coronavirus boosted fortunes in many market sectors, it depressed others, such as cruise lines, movie theaters, and airline stocks, as well as oil prices. Unless you have a crystal ball, it’s always a good idea to diversify your portfolio across a variety of asset classes and market sectors. That way losses in some investments are likely to be offset by gains in others.

In recent years, the wealthy also have benefited from generous tax breaks provided by the Tax Cut and Jobs Act. To diversify gains achieved during the pandemic, they may take advantage of provisions from this legislation, such as the conservation easement charitable deduction. This can be claimed when purchasing land with strong development potential and then donating it to a land trust or government agency. This might create a higher tax deduction based on the appraised value. A similar approach can be used with the Opportunity Zone tax break. This eliminates taxes on capital gains earned from long-term investments in businesses or developments in specific low-income areas of the country.

Rest assured, while vaccines will lead the way to recovery from the pandemic, other crises will follow – as will opportunities to make money on them. Some of them are even easy to predict. After all, the exacerbation of climate change is evident in the increase and severity of extreme weather events. This offers two avenues for an investment opportunity. The first is reactive, such as rebuilding what has been damaged or destroyed. The second is preventive, which means investing in renewable energy resources that reduce carbon emissions, such as solar, wind, hydro, tidal, geothermal, and biomass energy solutions.

It is important to recognize, however, that we can’t always predict what type of crisis will happen next. Therefore, it is inadvisable to try to time the market for investments, particularly when saving for a long-term goal such as retirement. Instead, consider aligning your assets with investments that help build a stronger society, such as sustainable energy, technology advances, and healthcare innovation.

The biggest takeaway here is that the key to crisis opportunism is to be well-capitalized with liquid assets that can repositioned quickly. It is no accident that economic declines are often most advantageous to the extremely wealthy. If you were able to save more money during the pandemic due to less opportunity to travel or spend on other indulgences, consider using this windfall to position your investment portfolio for crisis opportunism in the future.

How Firms Can Restore Balance Sheets to Better Health

Covid 19 Restore Balance SheetsAccording to the World Bank Group, for businesses in emerging markets and developing economies, the bottom fourth percentile of the non-financial corporate (NFC) sector saw their balance sheets deteriorate. Looking at these businesses’ Interest Coverage Ratio, the average figure dropped to 0.06 from 0.35 between the fourth quarter of 2019 and in the midst of the coronavirus pandemic’s ongoing effects.

The ICR is a measure of a firm’s ability to repay their debt in accordance to existing obligations, whereby a higher ratio indicates a better ability to do so. This is calculated by dividing earnings before interest and taxes by Interest expense.

With businesses seeing losses of as much as three-quarters of revenue in a three-month timeframe, as McKinsey & Company explains, a “cash war room” needs to be established to address this liquidity crisis. McKinsey & Company wants companies to look at every possible way to improve their financial situation due to their experience with the COVID-19 pandemic.

Cash and Sales Collections

One of the first things McKinsey & Company recommends doing is evaluate current and future cash collections and sales collections. If there’s a large percent of overdue or chronically overdue invoices, shifting employees to collections may provide substantive positive cashflow. However, if a business’s working capital is insufficient, other aspects of the balance need to be addressed to increase business health.

Tackling Debt Obligations

Whether it’s used to maintain operations or for ongoing investments, debt can be a useful tool. However, if a company takes on too much debt and is hit by an unexpected event like the COVID-19 pandemic, severely reducing sales, debt can become a burden for the company. Along with increasing the level of risk for investors, if a company can’t reduce its debt load eventually, it could be forced to declare bankruptcy or default on loans.

However, there are a few things a business can do to tackle its debt. Publicly traded companies can offer more shares for sale. Businesses can contact their lenders to see if interest rates can be lowered, payments can be frozen or spread out over longer timeframes. Reducing staff levels or renegotiating leases on machines or real estate also can free up excess cash burn.

According to the Office of the Comptroller of the Currency, part of the U.S. Department of the Treasury, a March 2020 report titled “Small Business Road Map to Financial Resources” revealed that crowdfunding might be a good alternative to taking on additional loans. Whether a business owner or entrepreneur, they can exchange “token rewards” for donations from individuals without sacrificing any interest in their company’s ownership.

Improve the Balance Sheet’s Current Ratio

Another way to improve one’s balance sheet is to determine the company’s current ratio and make adjustments accordingly.

Looking at the formula, Current Ratio = Current Assets / Current Liabilities, businesses can get an answer quickly.

If the ratio is below 1, then there needs to be some attention paid to figuring out how to better pay debts needed to be paid within 12 months, or short-term liabilities, with current assets or assets convertible to cash within the same timeframe.

Use a sweep account, which is a bank account that transfers money not needed for day-to-day operations into a different, but easily accessible account that earns more interest. Other ways include reducing the need to rent additional space, using machines/cloud services less often, and dialing back labor/marketing.

Taking action, including these for balance sheet health, can increase the chance of business survival during the pandemic and beyond.

Sources

https://blogs.worldbank.org/allaboutfinance/covid-19-and-corporate-balance-sheet-vulnerabilities-emerging-markets

https://www.occ.treas.gov/topics/consumers-and-communities/minority-outreach/small-business-road-map-fin-march-2020.pdf

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-cfos-role-in-helping-companies-navigate-the-coronavirus-crisis

New Year-End Tax Provisions

2020 2021 Tax Law ChangesIn late December, Congress passed the Consolidated Appropriations Act, which in addition to providing COVID-19 relief provisions also included many tax provisions and extenders. The Act contained many COVID-related tax provisions, as well as a slew of extenders ranging from one year to permanent. This article will focus on the miscellaneous tax and disaster relief provisions, which are more applicable to most taxpayers.

Miscellaneous Provisions

Charitable Contributions – For tax years 2020-2022, starting in 2020 non-itemizers can deduct $300 in charitable contributions, and starting in 2021 non-itemizer can deduct $600 for married couples filing jointly.

Full Business Meals Deduction – Typically, business meals are only 50 percent deductible; however, the new tax law provides for a 100 percent deduction for restaurant meal expenses incurred in 2021 and 2022.

Low-Income Housing Tax Credit – Starting in 2021, a 4 percent rate floor is established for calculating credits related to the acquisition of and bond-financed low-income housing developments.

Minimum Interest Rate for Certain Life Insurance Contracts – The bill ties the rates going forward for section 7702 fixed interest rates for life insurance contracts to benchmark interest rates that are periodically updated.

Minimum Age for Distributions – Certain qualified pensions can make distributions to workers who are 59½ or older and still working, with a special allowance for some construction and building trade workers, where the age is lowered to 55.

Modified Charitable Contribution Limits – An extension for one year through 2021 is given for CARES Act increased limits on deductible charitable contributions for corporations and taxpayers who itemize.

Disaster Relief

Disaster tax relief provisions are available for individuals and businesses in presidentially declared disaster areas on or after Jan. 1, 2020, up through 60 days after enactment.

Use of Retirement Funds – Residents of qualified disaster areas can take up to $100k in qualified distributions from retirement plans or IRAs, penalty-free. Taxpayers have up to three years to pay the distributions back without penalty.

Disaster Zone Employee Retention Credit – A tax credit of up to 40 percent of wages (capped at $6,000 per employee) is available to employers who are actively engaged in a trade or business in a qualified disaster zone.

Disaster Relief Contributions – Corporations are allowed qualified disaster relief contributions of up to 100 percent of their taxable income for 2020.

Tax Extenders

Aside from the miscellaneous and disaster relief provisions, the act extended numerous existing tax laws anywhere from one to five years or even permanently. Below is a list of the extended provisions. Due to the number of extender provisions, only a table is provided below.

One-Year Extensions

  • Sec. 25C 10% credit for qualified nonbusiness energy property.
  • Sec. 30B credit for qualified fuel cell motor vehicles.
  • Sec. 30C 30% credit for the cost of alternative (nonhydrogen) fuel vehicle refueling property.
  • Sec. 30D 10% credit for plug-in electric motorcycles and two-wheeled vehicles.
  • Sec. 35 health coverage tax credit.
  • Sec. 40(b)(6) credit for each gallon of qualified second-generation biofuel produced.
  • Sec. 45(e)(10)(A)(i) production credit for Indian coal facilities.
  • Sec. 45(d) credit for electricity produced from certain renewable resources.
  • Sec. 45A Indian employment credit.
  • Sec. 45L energy-efficient homes credit.
  • Sec. 45N mine rescue team training credit.
  • Sec. 163(h) treatment of qualified mortgage insurance premiums as qualified residence interest.
  • Sec. 168(e)(3)(A) three-year recovery period for racehorses two years old or younger.
  • Sec. 168(j)(9) accelerated depreciation for business property on Indian reservations.
  • Sec. 4121 Black Lung Disability Trust Fund increase in excise tax on coal.
  • Sec. 6426(c) excise tax credits for alternative fuels and
  • Sec. 6427(e) outlay payments for alternative fuels.
  • The American Samoa economic development credit (P.L. 109-432, as amended by P.L. 111-312).

Two-Year Extensions

  • Sec. 25D residential energy-efficient property credit (the bill also makes qualified biomass fuel property expenditures eligible for the credit).
  • Sec. 45Q carbon oxide sequestration credit (through 2025).
  • Sec. 48 energy investment tax credit for solar and residential energy-efficient property.

Five-Year Extensions

  • Sec. 45D new markets tax credit.
  • Sec. 45S employer credit for paid family and medical leave.
  • Sec. 51 work opportunity credit.
  • Sec. 108(a)(1)(E) gross income exclusion for discharge of indebtedness on a principal residence.
  • Sec. 127(c)(1)(B) exclusion for certain employer payments of student loans.
  • Sec. 168(e)(3)(C)(ii) seven-year recovery period for motorsports entertainment complexes.
  • Sec. 181 special expensing rules for certain film, television, and live theatrical productions.
  • Sec. 954(c)(6) lookthrough treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations under the foreign personal holding company rules.
  • Sec. 1391(d) empowerment zone designation.
  • Sec. 4611 Oil Spill Liability Trust Fund financing rate.
  • Sec. 1397A increased expensing under Sec. 179 and Sec. 1397B nonrecognition of gain on rollover of empowerment zone investments are both terminated for property placed in service in tax years beginning after Dec. 31, 2020.
  • The Sec. 1394 empowerment zone tax-exempt bonds and Sec. 1396 empowerment zone employment credit, which expire Dec. 31, 2020, were not extended.

Permanent Extensions

  • Sec. 213(f) reduction in medical expense deduction floor, which allows individuals to deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income instead of 10%.
  • Sec. 179D deduction for energy-efficient commercial buildings (the amount will be inflation-adjusted after 2020).
  • Sec. 139B gross income exclusion for certain benefits provided to volunteer firefighters and emergency medical responders.
  • Sec. 45G railroad track maintenance credit; however, the credit rate is reduced from 50% to 40%.

Conclusion

The Consolidated Appropriations Act passed in December 2020 not only extended many existing tax laws and instituted COVID-19 relief, but it also changes many typical tax laws (at least temporarily). Taxpayers should pay attention to these year-end tax law changes as they can significantly impact their tax situations.

Prosecution for Use of Performance Enhancement Drugs, Modernizing Government Technology, and Enhancements for Veterans and Their Caregivers

Prosecution for Use of Performance Enhancement DrugsRodchenkov Anti-Doping Act of 2019 (HR 835) – This bill was introduced by Rep. Sheila Jackson Lee (D-TX) on Jan. 29, 2019. The purpose of this legislation is to give U.S. officials the power to prosecute individual athletes who used performance-enhancing drugs at international sports competitions involving American athletes. The legislation has been criticized by the World Anti-Doping Agency (WADA) as undermining the global anti-doping movement based on international cooperation, and because no other nation has extra-territorial jurisdiction in this field. The bill passed in the House in October, the Senate in November, and was signed into law by the president on Dec. 4.

IoT Cybersecurity Improvement Act of 2020 (HR 1668) – This bill requires the Institute of Standards and Technology (NIST) and the Office of Management and Budget (OMB) to establish minimum security standards for Internet of Things devices owned or controlled by the Federal Government. The legislation was introduced by Rep. Robin Kelly (D-IL) on March 11, 2019, passed in both Houses, and was signed into law on Dec. 4.

Information Technology Modernization Centers of Excellence Program Act (HR 5901) – Introduced by Rep. Ro Khanna (D-CA) on Feb. 13, this bill authorizes the establishment of an Information Technology Modernization Centers of Excellence Program. The purpose of the program is to help executive agencies adopt secure modern technology in coordination with the Department of Homeland Security. The program must provide regular reports to Congress. The legislation passed in the House in September, in the Senate in November, and was signed into law by the president on Dec. 3.

Veterans COMPACT Act of 2020 (HR 8247) – Short for Veterans Comprehensive Prevention, Access to Care and Treatment, this bill authorizes a variety of programs, policies, and reports that fall under the Department of Veterans Affairs (VA). Components of the legislation address transition assistance, suicide care, mental health education and treatment, healthcare, and female veteran care. It includes a program to provide education and training for caregivers and family members of veterans with mental health disorders. The bill also establishes a Task Force on Outdoor Recreation for Veterans to recommend public lands or other outdoor spaces to be used for medical treatment and therapy. The bill was introduced by Rep. Mark Takano (D-CA) on Sept. 14. It passed in the House in September, the Senate in November, and was signed by the president on Dec. 5.

Wounded Veterans Recreation Act (S 327) – This bill offers a free lifetime pass to National Parks and Federal Recreational Lands to any U.S. resident who has been medically determined to be permanently disabled (must furnish adequate proof of disability and citizenship or residency), as well as to any veteran with a service-connected disability. It was introduced by Sen. Jeanne Shaheen (D-NH) on Feb. 4, 2019, passed in the Senate in June, the House in November, and was signed into law by the president on Dec. 3.

Transparency and Effective Accountability Measures (TEAM) for Veteran Caregivers Act (S 2216) – Designed to upgrade VA caregiver programs by identifying and formally recognizing caregivers of veterans, and notify them of assistance available under the Program of Comprehensive Assistance for Family Caregivers. The bill also temporarily extends benefits for veterans who are determined to be ineligible for the family caregiver program, including a monthly personal caregiver stipend. This bill was introduced by Sen. Gary Peters (D-MI) on July 23, 2019. It passed in the Senate in November, the House in December, and is currently waiting for enactment by the president.

Looking Ahead to 2021: Hope is Not Canceled

Looking Ahead to 2021: Hope is Not CanceledDespite the fresh start that a new year promises, our world hasn’t changed much since last March. We’re still living in a new normal. We’re masking up, working (and schooling) from home, and social distancing. Furthermore, scores of community events and activities have been canceled. However, there is something that’s never been canceled: it’s called hope. Here are a few things to embrace that can lift your spirits and help you navigate all the uncertainty.

Be Happy: The COVID-19 Vaccine is Here

This is incredible news. To date, there are two vaccines: Pfizer-BioNTech and Moderna. Those who receive the Pfizer-BioNTech shot will be given two injections, 21 days apart. Those who receive the Moderna shot also will be given two injections, one month (28 days) apart. Both are given in the muscle of the upper arm and can cause mild side effects. However, clinical trials for both have shown a high level of efficacy. Learn more about each one here. The vaccine will be rolled out in phases. Healthcare personnel and residents of long-term care facilities will be offered the first doses. Learn more about who will get it and when here. The fact that we even have a vaccine available might well be the very definition of hope.

Feel Refreshed: Take a News Break

Since most of us are isolated to some degree, it’s only natural to turn to our devices. Games and social media both have the potential to take your mind off of the pain in our world. However, if you tend to veer toward newsfeeds that feature nothing but bad news (which can be addicting), perhaps it’s time to take a break. According to Verywell.com, a constant stream of sensational or disaster reporting, whether you are exposed actively or passively, can elevate stress levels and trigger symptoms like anxiety and sleep troubles, robbing you of your well-being. So, unplug. Step away from your laptop. Give your phone to a family member, partner, or friend. Get outside and soak in some vitamin D. Re-claim that part of yourself that sees the glass half full.

Ditch the Guilt: Plan Your Cheat Meals

If you’ve been looking to food for some much-needed comfort over the past year, you’re not alone. Being at home just a few feet away from a fully stocked kitchen is tempting every minute! Perhaps some of you have banished any guilt about indulging, but for those who just can’t seem to shake it, choose your moments to indulge. Satisfy your cravings a few times a week or just on the weekends. The less you do this, the more you’ll enjoy it. And when you want to splurge, why not support a local restaurant by ordering takeout? You’ll feel better in no time.

Chill Out: Spend Time Doing Nothing

With everything that’s going on and all the responsibilities of living life and crossing things off our lists, stopping to do nothing might seem counter-intuitive; but often, it’s the best remedy for eliminating stress and restoring your sanity. Carving out time to sit with the feelings you’re experiencing – whether that’s irritation, anxiety, or sadness – can help dissipate them. Take some advice from Winnie the Pooh who said, “Doing nothing often leads to the very best of something.” When you give yourself permission to let go and empty your mind, you’ll be rejuvenated and ready to begin again.

Even though the happenings of 2020 were unprecedented, the truth is you do have a new year ahead. One that can be anything you want it to be. Just grab hold of something that has always been there and will never be canceled: hope.

Sources

https://www.cdc.gov/coronavirus/2019-ncov/vaccines/different-vaccines.html

https://stephanieyounger.com/blog/love-hope-kindness-and-community-have-not-been-canceled

https://www.verywellmind.com/is-watching-the-news-bad-for-mental-health-4802320#:~:text=A%20constant%20stream%20of%20sensational,like%20anxiety%20and%20trouble%20sleeping.

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