Congress reaches deal on COVID relief, PPP deductions. 

Multiple media outlets report that Congressional negotiators have agreed on a COVID relief package that includes, among other tax breaks, a provision allowing taxpayers to deduct at least some Paycheck Protection Plan loan-financed expenses. Richard Rubin of the Wall Street Journal reports ($):

The provision, part of the year-end coronavirus relief bill expected to soon clear Congress, would ensure that PPP recipients can deduct the payroll costs and other expenses covered by forgiven loans, even though the loans themselves are tax-free income. The move would reverse a Treasury Department ruling that denied the deductions.

• A restoration of full deductibility of business meal expenses (Update: for 2021 and 2022). 
• A permanent reduction in beer and spirits excise taxes.
• A provision extending the repayment period for deferred employee FICA taxes to 12 months, from four months.
• An extension of the employee retention tax credit
• A five-year extension of the Work Opportunity Tax Credit and the New Markets tax credits.
• Extensions of a number of energy-related tax breaks.

Key non-tax provisions include $600 payments to a smaller set of taxpayers than received the $1,200 payments earlier this year and a $300 weekly supplement to unemployment benefits.

The legislation is still being drafted tonight. Tax News & Views will have updates in the morning.

Morning update, 12/21/2020:

• Earned Income Tax Credits will be allowed for 2020 based on 2019 income.
• Allowance of 2021 charitable deduction for non-itemizers: $600 for joint filers, $300 for others.

The actual legislation is expected to be available later today. Nothing is final until the Senate votes, probably very late today, or early tomorrow.