The Consolidated Appropriations Act, 2021 (the Act) did more than offer much-needed COVID-19 stimulus to individuals and businesses. It also revived five business tax provisions that had been left to expire. What follows is a recap of the changes to the so-called Extenders.
Tax Provision | Previous Guidance | Consolidated Appropriations Act Update | Qualifications |
| Deductions for business meals and beverages | The 2017 tax reform law known as the Tax Cuts and Jobs Act (TCJA) had limited business expense deductions under Section 274 for qualified food and beverages to 50%. | The Act permits a 100% deduction for qualified business food and beverage purchases paid or incurred in 2021 and 2022. This covers meals such as employee overtime meals, breakroom snacks, and client business meals, among others. | Carry-out and delivery meals furnished by a restaurant, and in-restaurant expenses |
| Energy-Efficient Buildings Deduction | The Section 179D deduction had been set to expire on Dec. 31, 2020. | The Section 179D deduction is now permanent, with the $1.80-per-square-foot limitation indexed for inflation. | Energy-efficient improvements to building envelope, lighting, heating, cooling, ventilation, and hot water systems for commercial buildings |
| Work Opportunity Tax Credit | The elective general business credit for employers hiring individuals had been set to expire at the end of 2020. | The Act extends the credit through 2025, but it did not alter the WOTC’s exclusion from recent COVID-19 business tax credits. | Wages paid to members in one or more of 10 targeted groups under the WOTC program; unavailable if taxpayer claims the Employee Retention Tax Credit (ERTC) or the refundable payroll tax for family leave created by the Families First Coronavirus Response Act (FFCRA) |
| Solar Energy Credit | Businesses could take a 30% tax credit for solar energy property for construction that began prior to Jan. 1, 2020. For construction that took place in 2020, the solar investment credit was only 26%. It had been set to drop further to 22% in 2021, and 10% in years beginning 2022 and later. | Under the Act’s changes, the 26% solar energy investment credit is available through 2022, and a 22% credit is available in 2023. Thereafter, the credit drops to 10%. | Qualifying property includes: solar energy equipment, fiber optic solar equipment, fuel cell property, and small wind energy property |
| Alternative Energy Investment Credit | The alternative energy investment credit was set to expire at the end of 2020. | The Act also extends the 10% investment credit through 2023 | Qualifying property includes microturbine property, geothermal heat pumps, and combined heat and power property. |
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