The American Rescue Plan Act of 2021 (ARP) was enacted on March 11, 2021. The bill includes relief and assistance for businesses still facing challenges due to the pandemic.
Paycheck Protection Program (PPP)
The ARP breathes new life into the PPP to the tune of $7.25 billion in new funding. The ARP also expands eligibility for larger 501(c)(3), (6), and (19) nonprofit organizations and includes certain 501(c)(5), (7), and (8) organizations.
While the PPP is currently set to expire at the end of March, the House recently passed legislation that, if enacted, will extend the application deadline to May 31, 2021. We will continue to monitor the situation for updates from the Senate.
Employee Retention Credit (ERC)
The ARP extends the ERC through December 31, 2021. Under the Consolidated Appropriations Act, 2021 (CAA), the ERC was extended only for the first two quarters of 2021; the ARP extension covers the entire year.. Employers may use the ERC against their 1.45% share of Medicare hospital insurance (HI) tax under Code § 3111(b) paid after June 30, 2021.
The ARP establishes that, if an entity employs more than 500 employees and has gross receipts in a 2020 calendar quarter that are less than 10% of gross receipts for the same calendar quarter in 2019, the entity qualifies as a “severely financially distressed employer.” Severely financially distressed employers may include all wages paid to employees as qualifying wages, even if the employees are not providing services.
Economic Injury Disaster Loans (EIDLs)
The ARP adds $10 billion to the EIDL program to provide grants for businesses with fewer than 300 employees and an economic loss of more than 30% during a specified period that did not receive their full advance payments under the CAA.
The ARP also adds $5 billion to the EIDL program to provide businesses with no more than ten employees and a decline in gross receipts of at least 50% during a specified period with new supplemental advances of up to $5,000. Businesses will not have to repay advances, even if they are ultimately denied for the EIDL.
FFCRA Family and Sick Leave Credits
The ARP extends the refundable payroll tax credits for employers voluntarily paying sick and family leave after the end of 2020 through September 30, 2021. The ARP increases the limit on the credit for paid family leave per employee from $10,000 to $12,000, effective March 31, 2021, and resets the 10-day per employee limitation. In addition to applying to old-age, survivors, and disability insurance (OASDI) taxes, the credits are also applicable to hospital insurance (HI) tax.
Paid leave credits may be used for leave due to COVID-19 vaccination, recovery from a COVID-19 vaccine-related illness or injury, or when seeking or awaiting a COVID-19 diagnosis or the results of a COVID-19 diagnostic test.
Shuttered Venue Operators Grant (SVOG) Program
The ARP provides additional funding of $1.25 billion for the SVOG program. Under the ARP, entities that received a first or second draw PPP loan after December 27, 2020, may still be eligible to receive a SVOG, provided the grant is reduced by the amount of the PPP loan. The SBA will begin accepting applications on April 8th.
Restaurant Revitalization Fund
The ARP establishes a new Restaurant Revitalization Fund, which allots $28.6 billion for grants for qualifying restaurants, food trucks, bars and brewpubs, among other establishments, to cover pandemic-related revenue losses from February 15, 2020, through December 31, 2021. Eligible businesses with fewer than 20 locations may receive grants of up to $5 million for each location, not to exceed $10 million in aggregate. Targeted grants will also be available for qualifying businesses with 2019 revenues of less than $500,000.
The grants can be used to cover qualifying expenses, such as payroll, rent, utilities, personal protective equipment (PPE), and cleaning supplies. The application process is still in the works. Businesses are not eligible if they have a pending application or have received an SVOG.
COBRA Continuation Coverage Premium Assistance
The ARP provides 100% premium assistance to individuals who, due to involuntary termination or reduction in hours, became eligible for or already have effective COBRA continuation coverage beginning on April 1, 2021, and ending on September 30, 2021.
The ARP creates premium assistance refundable tax credits for employers to use to offset premiums and wages paid after April 1, 2021, and through September 30, 2021. The tax credits may be used against the Sec. 3111(b) Medicare tax. The IRS may make advance credit amount payments to taxpayers. Employers do not include premium assistance amounts in recipients’ gross income.
LGA’s business tax and nonprofit teams can help businesses and organizations determine the tax implications of updated and new legislation, including the ARP provisions, based on their specific circumstances. Contact Steven Gallant or Larry Andler with your questions and tax service needs today.
Steve Gallant is a Partner at LGA and has over 40 years of experience in public accounting. He is well-versed in all areas of taxation, including individual, trust & estate, corporate, and partnership taxation. Steve specializes in providing individual income tax and personal financial planning services and advises individuals and entities on foreign entity tax, dual citizenship, and expatriate issues.
Larry Andler is a Principal at LGA and has over 25 years of experience working with individuals and companies of all sizes in a variety of industries. He focuses on high net worth individuals with complex reporting challenges and their related businesses and trusts, startups, and C corporations. Larry works with individuals and entities in navigating the US tax system’s inbound and outbound foreign reporting requirements.