Late in the day on December 20, 2020, leaders in Congress announced that they had reached an agreement on a new round of relief for the ongoing COVID-19 pandemic and economic stimulus. The Consolidated Appropriations Act, 2021 finally took shape after several days of negotiations between the Democrats and GOP on Capitol Hill. The passage of the bill, as well as the negotiations, were closely tied to passage of an omnibus appropriations bill for the federal government for the 2021 fiscal year. Congress passed several short-term extensions of the appropriations bill to avoid a shutdown as the COVID-19 stimulus package was negotiated. The bill was approved in the House on December 21 by a vote of 327 to 85 and later passed in the Senate by a vote of 92-6. While Congress was finishing business on the omnibus package, it passed another short-term appropriations bill, extending the deadline to avoid a shutdown to December 28.

The White House, on December 21, indicated that President Trump was expected to sign the appropriations bill. However, Trump voiced his displeasure with the bill the following day, indicating he may not sign it into law. Due to the size of the legislation, it took some time to present the bill to the President for signature as required by the Constitution. The President finally received the bill on Christmas Day, and showed no sign he intended to sign the bill. Over the long holiday weekend, members of Congress on both sides of the aisle urged the President to sign the bill. Finally, late on December 27, he relented, and signed the bill into law. It is unclear what prompted the President to change his mind.

The act includes several extensions of popular provisions of earlier COVID relief and stimulus acts passed in 2020. This includes additional loans under the Paycheck Protection Program (PPP) (including the allowance of a second round of loans for certain small businesses), relief for the hard-hit transportation industry, additional funding for programs related to vaccines and virus testing, and further expansion of federal unemployment assistance (providing $300 a week in unemployment payments, half of the amount received under the acts passed in the spring).

Both sides gave up priorities in coming to the agreement, with Democrats withdrawing demands to provide aid to state and local governments struggling due to lost sales tax revenue resulting from a reduction in economic activity and the GOP not including COVID-related liability protection for employers. Senate Majority Leader Mitch McConnell, R-Ky. pointed out in his weekly press conference on December 15th, we can live to fight another day on what we disagree on, but we ought to agree to go forward on what we can agree on.

President-Elect Joe Biden has described the agreement as a down payment on relief and stimulus he will seek after he is inaugurated on January 20, 2021; a sentiment that Democratic lawmakers have echoed. Several GOP leaders in Congress have indicated their disagreement with that outlook.

There are numerous tax provisions in the omnibus act, generally contained within one of four named acts contained within the massive legislation: the COVID-19-Related Tax Relief Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, the No Surprises Act, and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. From a tax standpoint, there are not many new provisions providing new forms of stimulus and relief. However, several small changes are made to provisions of the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, while also extending them beyond their initial expiration date. It does include another round of direct payments to taxpayers, extensions of the charitable contribution provisions and employee retention tax credit, relief for lower-income taxpayers on tax credits, and a clarification of the treatment of business expenses for small businesses with forgiven PPP loans. The act also includes an extension of popular individual and business tax breaks scheduled to expire at the end of 2020.