Consolidated Appropriations Act 2021: Stimulus, Relief, and Tax Changes

The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020 as Public Law 116-260, packaged about $1.4 trillion in annual federal funding with roughly $900 billion in pandemic relief into a single $2.3 trillion law. It sent $600 stimulus checks to most Americans, extended pandemic unemployment programs, reopened the Paycheck Protection Program, banned most surprise medical bills, funded rental assistance and schools, and tucked in a long-term phasedown of a class of greenhouse gases. The pieces that matter most to individuals, workers, businesses, and patients are below.

The $600 Stimulus Payments

The law created a second round of direct payments, structured as a refundable tax credit under 26 U.S.C. § 6428A. Eligible individuals received $600, married couples filing jointly received $1,200, and an additional $600 went to each qualifying child under age 17. Payments phased out at $5 for every $100 of adjusted gross income above $75,000 for single filers, $112,500 for heads of household, and $150,000 for joint filers.¹ A single filer with income above $87,000, or a joint filer above $174,000, received nothing.

Mixed-status households became eligible this round. Under the earlier CARES Act, a married couple was disqualified if one spouse filed with an Individual Taxpayer Identification Number rather than a Social Security Number. The 2021 law removed that block, so the spouse with a valid SSN and any qualifying children with SSNs could receive payments.

The payments were shielded from federal debt offsets and private garnishment, with banks required to code the deposits so they would be protected automatically. Anyone who did not receive the full amount could claim the difference as the Recovery Rebate Credit on their 2020 federal tax return.¹

Extended Unemployment Benefits

Three federal unemployment programs set to expire at the end of 2020 were renewed. The Federal Pandemic Unemployment Compensation program added $300 per week on top of whatever state or federal benefit a worker was already receiving. That supplement ran for about eleven weeks, from late December 2020 through March 14, 2021.² It was half the $600 weekly supplement the CARES Act had provided.³

Pandemic Unemployment Assistance, which covered freelancers, independent contractors, and gig workers who don’t normally qualify for state unemployment, was extended through the same March 14 deadline. Pandemic Emergency Unemployment Compensation, which provides extra weeks for workers who have exhausted their regular state allotments, was also continued.

Small Business Relief

The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act reopened the Paycheck Protection Program with a “second draw” option for businesses that had already used their first PPP loan. A qualifying business needed 300 or fewer employees and had to show at least a 25% drop in gross receipts when comparing any quarter of 2020 to the same quarter of 2019.⁴

Second draw loans were capped at $2 million, calculated as 2.5 times average monthly payroll. Accommodation and food services businesses could use a 3.5 times multiplier. To earn full forgiveness, borrowers had to spend at least 60% of the funds on payroll, with the rest available for rent, mortgage interest, utilities, and certain operational costs.⁴

Shuttered Venue Operators Grants

Live venues, theaters, museums, and talent representatives received a dedicated $15 billion grant pool.⁵ Grants equaled 45% of 2019 gross earned revenue, up to $10 million per entity, with a modified formula for venues that opened after January 1, 2019.⁶ Priority went to applicants with the steepest revenue losses.

Targeted EIDL Advances

Small businesses in low-income communities could receive Economic Injury Disaster Loan Advances of up to $10,000 that did not require repayment. Applicants needed to be in a low-income area, show more than a 30% revenue drop during an eight-week period beginning on or after March 2, 2020, and have 300 or fewer employees.⁷

Tax Changes

PPP Deductibility

Section 276 settled a fight with the IRS. The agency had said that while forgiven PPP loans would not count as income, businesses could not deduct the expenses they paid with the loan proceeds. Congress overruled that. The law provided that forgiven PPP loans are excluded from gross income and that no deduction is denied by reason of that exclusion.⁸ A restaurant that used its PPP loan for payroll could both exclude the forgiven amount from income and still deduct those payroll costs. A separate 2022 law extended the PPP fraud statute of limitations to ten years, so borrowers should keep their documentation well into the 2030s.

Business Meals

The deduction for business meals bought from restaurants was temporarily raised to 100%, up from 50%, for meals purchased after December 31, 2020 and before January 1, 2023. It has since reverted to 50%.

Flexible Spending Accounts

Employers were allowed to let workers carry over unused health care and dependent care FSA balances across plan years, bypassing “use it or lose it.” Unused amounts from 2020 plan years could roll into 2021, and 2021 balances into 2022. The grace period for incurring expenses could be extended to a full twelve months after the plan year. The dependent care FSA age limit was temporarily raised from 13 to 14, and participants could change elections mid-year without a qualifying life event.

Charitable Deduction for Non-Itemizers

For 2021, people taking the standard deduction could reduce taxable income by up to $300 in cash donations to qualifying charities, or $600 for married couples filing jointly.

Employer Student Loan Repayment

The act extended the rule allowing employers to contribute up to $5,250 per year toward an employee’s student loan repayment on a tax-free basis, under Section 127 educational assistance programs, through December 31, 2025.⁹ That deadline has now passed; check current law before relying on the exclusion for 2026.

The No Surprises Act

Division BB created the No Surprises Act, which took effect January 1, 2022 and remains in force. The core rule: patients cannot be balance billed by out-of-network providers in situations where they had no meaningful choice.¹⁰

Two situations are covered. In emergencies, you cannot be billed at out-of-network rates regardless of which hospital or physician treats you. For non-emergency care at an in-network facility, if an out-of-network anesthesiologist, radiologist, or similar provider ends up involved, your cost-sharing is limited to what you would have owed in-network. Your deductible and co-insurance are calculated as if every provider were in-network.

Providers and insurers who disagree over payment must first negotiate for 30 business days. If that fails, either side can start an independent dispute resolution process, where a neutral arbitrator picks one of the two sides’ final offers.¹¹ The patient is not part of that dispute and owes nothing beyond normal cost-sharing. Insurers also have to provide advance explanations of benefits for scheduled services, and facilities have to keep provider directories current.

One important gap: the No Surprises Act does not cover ground ambulance services. A patient transported by an out-of-network ground ambulance can still receive a surprise bill. Congress created an Advisory Committee on Ground Ambulance and Patient Billing under Section 117 to study the problem.¹² Air ambulance services are covered.

Rental Assistance and Eviction Moratorium

The Emergency Rental Assistance Program received $25 billion, distributed to states and local governments to help households pay rent and utilities.¹³ To qualify, a household needed income at or below 80% of the area median, at least one member who had experienced pandemic-related income loss or hardship, and a demonstrated risk of housing instability.¹⁴ Priority went to households with a member unemployed for at least 90 days and to those with incomes below 50% of area median income. Payments generally went directly to landlords or utility providers.

Section 502 of Division N extended the CDC’s eviction moratorium through January 31, 2021.¹⁵ The CDC later extended it further on its own, and the Supreme Court struck that extension down in August 2021.

Education Funding

The Education Stabilization Fund received $81.9 billion, split primarily between K-12 and higher education.¹⁶

K-12 schools received $54.3 billion through the Elementary and Secondary School Emergency Relief Fund (ESSER II), used for ventilation, protective equipment, additional staff, and learning loss. Colleges and universities received $22.7 billion through the Higher Education Emergency Relief Fund (HEERF II), with a required portion going to direct financial aid grants to students for tuition, food, and housing.¹⁶

Transportation

Airlines received $15 billion dedicated to employee payroll, plus $1 billion for airline contractors, in exchange for no involuntary furloughs and continued service to smaller communities.¹⁷ Public transit systems received $14 billion for operating costs like payroll and sanitation.¹⁸ Additional funds went to state highway departments and to the motorcoach and private ferry industries.

Emergency Broadband Benefit

Section 904 created the Emergency Broadband Benefit, providing eligible households a discount of up to $50 per month on broadband service, or up to $75 per month on qualifying Tribal lands, plus a one-time discount of up to $100 toward a laptop, desktop, or tablet purchased through a participating provider. A household qualified with income at or below 135% of the federal poverty guidelines, participation in programs like SNAP or Medicaid, a Federal Pell Grant, or substantial income loss since February 2020 with household income below $99,000 for single filers or $198,000 for joint filers.¹⁹ The program was later replaced by the Affordable Connectivity Program under the Infrastructure Investment and Jobs Act of 2021, which itself ran out of funding in mid-2024.

The AIM Act and the HFC Phasedown

Tucked into the bill was a major environmental measure with no pandemic connection. The American Innovation and Manufacturing Act directs the EPA to phase down production and consumption of hydrofluorocarbons, the greenhouse gases used in refrigeration, air conditioning, and aerosols, by 85% from historic baseline levels by 2036.²⁰ The mechanism is an allowance allocation and trading program, with supply tightening in 2024, 2029, 2034, and 2036. HFCs are not banned; supply shrinks over time, and the effect on refrigerant pricing and HVAC equipment costs will intensify through 2036.

1
Office of the Law Revision Counsel. 26 USC 6428A – Additional 2020 Recovery Rebates for Individuals
2
U.S. Department of Labor. U.S. Department of Labor Issues Guidance on Federal Pandemic Unemployment Compensation and Mixed Earner Unemployment Compensation
3
U.S. Bureau of Economic Analysis. How Will the Expansion of Unemployment Benefits in Response to the COVID-19 Pandemic Be Recorded in the NIPAs?
4
U.S. Small Business Administration. Second Draw PPP Loan
5
Small Business Administration. Shuttered Venue Operators Grant
6
U.S. Small Business Administration. About the Shuttered Venue Operators Grant
7
U.S. Small Business Administration. About Targeted EIDL Advance and Supplemental Targeted Advance
8
Internal Revenue Service. Rev. Proc. 2021-48
9
Internal Revenue Service. Educational Assistance Programs Can Help Pay Employee Student Loans Through 2025
10
Federal Trade Commission. No Surprises Act of the 2021 Consolidated Appropriations Act
11
Centers for Medicare & Medicaid Services. Federal Independent Dispute Resolution Guidance for Disputing Parties
12
Centers for Medicare & Medicaid Services. Ground Ambulance and Patient Billing Advisory Committee Report
13
U.S. Department of the Treasury. Emergency Rental Assistance Program
14
U.S. Department of the Treasury. Treasury Launches $25 Billion Emergency Rental Assistance Program
15
Federal Register. Temporary Halt in Residential Evictions To Prevent the Further Spread of COVID-19
16
Congress.gov. Education Stabilization Fund Programs Funded by the CARES Act, CRRSAA, and ARP Act
17
eCFR. 15 USC 9092 – Pandemic Relief for Aviation Workers
18
U.S. Department of Transportation. U.S. Transportation Secretary Elaine L. Chao Announces $14 Billion to Support Nation’s Public Transit
19
Federal Communications Commission. Emergency Broadband Benefit
20
U.S. Environmental Protection Agency. Frequent Questions on the Phasedown of Hydrofluorocarbons