President Signs $1.9 Trillion American Rescue Plan Act
Updated March 30, 2021: The PPP Extension Act, signed in to law by President Biden, extends the deadline to apply for a PPP loan by two months, to May 31, 2021.
With the signing of the American Rescue Plan Act of 2021 by President Biden on March 11, 2021, many provisions from previously enacted stimulus legislation during the COVID-19 pandemic will be impacted. Businesses still struggling financially will have an opportunity to take advantage of additional relief funding.
The $1.9 trillion aid package includes changes involving tax credits on paid leave from the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act — namely the employee retention tax credit (ERTC) — as well as a grant program aimed at restaurants and the food industry, changes to the Paycheck Protection Program (PPP), an extension of unemployment insurance benefits, subsidies for employer-sponsored health insurance continuation coverage (COBRA), temporary changes to the premium tax credit and more.
The Paychex Business Series podcast also features a three-part series on the impact of the American Rescue Plan Act.
Missing from the law is the original proposal from the House of Representatives’ bill to increase the minimum wage to $15 per hour, amended in the Senate version and then left out in a second vote by the House.
Here are some highlights that could impact business and the individuals they employ:
New Program Offers Restaurants Support
A grant program similar to the Shuttered Venue Operator Grant (SVOG) program has been established, enabling an eligible business and affiliated entities to apply for aid in an amount not to exceed $10 million and limited to $5 million per location. Generally, grant amounts would equal revenue losses related to the pandemic.
There are factors that influence calculating pandemic-related revenue loss, including when a business opened, expenses it incurred, gross receipts for a specific period. Plus, if a business received funds from a first or second-draw PPP loan in 2020 and 2021, then pandemic-related revenue loss would be reduced by the amounts of the loans received.
When the program opens and guidance is available from the Small Business Administration (SBA) on its implementation, the first 21 days of the program will give priority for awarding grants to select businesses including those owned or controlled by women and veterans or those socially and economically disadvantaged businesses.
Restaurants is a broad term because eligible businesses also include:
- Food stand, food truck or food cart
- Bars, lounges, saloons, taverns, inns
- Brew pubs, tasting rooms, taprooms,
- Places where people gather for the primary purpose of being served food or drink
There was emphasis given to assistance for smaller businesses in the restaurant/food service industry because businesses ineligible to seek this grant include those who as of March 13, 2020 own or operate more than 20 locations, as well as those who own a publicly traded company. Any business that has received a grant or has one pending under the SVOG program cannot apply for grants under the new program.
Businesses would be required to certify that it is necessary for them to apply for the grant because uncertain economic conditions and that they have not applied for a SVOG.
Similar to other aid (e.g., PPP) available through legislative programs during the pandemic, funds should be used to cover:
- Payroll costs, mortgage/rent, utilities
- Maintenance expenses (construction to accommodate outdoor seating such as a deck)
- Supplies such as cleaning materials and personal protective equipment (PPE)
- Operational expenses (e.g., payments made for business software or cloud-computing services used to process payroll and HR including a portion of your Paychex solution)
- Paid sick leave
The Consolidated Appropriations Act, 2021, enacted in December 2020 under the Trump administration, gave businesses until March 31, 2021 to apply for PPP loans, including second-draw loans if they already had received a PPP loan.
The American Rescue Plan Act appropriates an additional $7.25 billion to the program, while the PPP Extension Act now gives businesses until May 31, 2021 to apply for a PPP loan.
The new law does increase who is eligible to apply, among them more tax-exempt groups and non-profits.
Shuttered Venue Operators who received PPP loans (first or second-draw) after Dec. 27, 2020 originally were not eligible for a grant from this program. Under the new law, these PPP loan recipients are eligible to get funds from both programs, however, the amount of the grant will be reduced by the aggregate amount of the PPP loans issued on or after Dec. 27, 2020.
Note: The SVOG is still not open. For more details, see the SBA’s website.
Targeted Economic Injury Disaster Loan (EIDL) Advance
Initial EIDL Advance funds were exhausted quickly during the pandemic as businesses sought an alternative source of relief rather than PPP loans. This provision provides supplemental payments to businesses that qualified but were unable to receive the full amounts entitled to them.
Additionally, businesses with 10 or fewer employees that suffered a financial loss greater than 50% might be eligible for a direct/supplemental payment of $5,000.
Tax Credit Extensions
The new law provides businesses, especially those hit hardest, with an extension and the ability to use more qualified wages while claiming the employee retention tax credit. The deadline to claim the credit, which had been extended to June 30, 2021 under the previous stimulus package, has been extended to Dec. 31, 2021.
One minor change is the refundable and non-refundable portions of the credit now will be claimed against Medicare taxes instead of against Social Security taxes, but this change only applies to wages paid after June 30, 2021. It will not change the amount of the credit.
For certain startup businesses that started after Feb. 15, 2020 and were forced to shut down due to government order are allowed a credit of $50,000 per quarter instead of $10,000. Colleges, universities and hospitals can now claim the credit, as well.
Under the FFCRA framework, the deadline to claim tax credits for paid sick and family leave is extended to Sept. 30, 2021. Plus, beginning April 1, 2021, the maximum number of days for which qualified sick leave wages can be paid to enable an employer to get credit will be reset to 10 days.
The maximum dollar amount for the family leave credit annually will increase to $12,000, up $2,000 from its original limit and the 10-day waiting period is removed, so the leave may apply immediately upon the event. The eligibility conditions under FFCRA which allow for employees to be paid qualified sick leave wages also expanded. Employers may now claim the credit for sick leave wages paid for:
- Employees taking leave while they await the results of a diagnostic test for COVID-19 after being exposed to the virus or because their employer requests the test.
- Leave taken for the employee to obtain a COVID-19 vaccine or to recover from any health issues resulting from the vaccine.
To claim the credit, updates will have to be made to IRS Form 941 for 2Q 2021, and further guidance is expected on how these credits will be implemented.
Unemployment Insurance Benefits
With businesses still navigating the re-opening process and regulations related to COVID-19, unemployment demands continue to place heavy burden on the system. As of mid-February 2021, U.S. Department of Labor data officially lists 10.1 million Americans as unemployed. However, through Jan. 30, data show 18.3 million people receiving unemployment checks on a weekly basis.
Supplemental UI benefits extended under previous legislation were set to expire March 14, 2021 but have been extended under the American Rescue Plan Act to Sept. 6, 2021. The extra weekly amount remains $300.
The provision of the law on unemployment benefits includes a new one and changes to several other provisions on unemployment assistance implemented during the pandemic.
- Effective beginning for tax year 2020, unemployment benefits up to $10,200 paid to a taxpayer may be excluded from their adjusted gross income. This applies to individuals (or joint return filers) who have collected UI benefits and have an adjusted gross income of less than $150,000.
- Pandemic Unemployment Assistance: The bill increases the number of available weeks to 79 (from 50).
- Federal Pandemic Unemployment Compensation (FPUC): The amount stays at $300 extra per week and benefits extended until Sept. 6, 2021.
- Pandemic Emergency Unemployment Compensation (PEUC): The number of weeks of benefits increases to 53 and extends to Sept. 6, 2021.