As the COVID-19 pandemic continues to create economic hardships and safety concerns for individuals and businesses, President Biden signed a $1.9 trillion coronavirus stimulus bill into law on March 11, 2021. The American Rescue Plan Act of 2021 (“ARP”) provides sweeping economic relief to individuals and businesses, increased funding for vaccine distribution efforts, and funding for a variety of other projects.
Funding for Small Businesses
The ARP provides economic assistance to small businesses, particularly hard-hit industries like restaurants and bars. The federal government will provide $25 billion for a Small Business Administration (SBA) program focused on supporting restaurants and other food and drinking establishments. Grants for eligible businesses are available for up to $10 million for expenses, such as payroll, mortgage, rent, utilities and food and beverages.
An additional $7 billion is allocated to the Paycheck Protection Program (PPP), which provides small businesses with the potential for a 100% forgivable loan. PPP eligibility will be expanded from last spring’s program to include certain nonprofit organizations.
Moreover, the ARP provides $15 billion to the Economic Injury Disaster Loan (EIDL) Advance program which is designed to provide economic relief to businesses currently experiencing a temporary loss of revenue due to COVID-19. The Small Business Administration administers both the PPP and EIDL programs for qualifying businesses to meet financial obligations and operating expenses incurred while revenue is down because of the pandemic. Priority funding will be provided to businesses with less than 10 employees.
Finally, the ARP provides funding under the Shuttered Venue Operators Grant (SVOG) program for eligible companies, including live venue operators and promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, and talent representatives. Companies eligible under the SVOG program can also qualify for loans under the PPP.
Considerations: Even if your company is not in a hard-hit industry such as the hospitality sector, you should review the law to determine eligibility for funding. Your company may still be eligible for economic assistance through the various grants and loan programs detailed in the ARP if the COVID-19 pandemic has severely impacted your business.
FFCRA Tax Credit Extension
The emergency paid sick leave and emergency family and medical leave obligations required of eligible employers under the Family First Coronavirus Response Act (FFCRA) expired on December 31, 2020. Prior to the end of 2020, Congress extended the tax credit for employers to voluntarily continue providing paid leave to employees through March 31, 2021, and take a tax credit. Under the ARP, the tax credit for this voluntary provision of paid leave is extended through September 20, 2021. In addition to the six reasons for leave set forth in the FFCRA, the ARP added additional qualifying reasons for leave:
(a) the employee is obtaining a vaccination related to COVID-19;
(b) the employee is recovering from any injury, disability, illness or condition related to such vaccination;
(c) the employee is seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 or their employer has requested such as a test or diagnosis.
The ARP also adds non-discrimination rules that provide no tax credit to employers who make qualifying rules to determine the availability of paid leave that discriminate against highly compensated employees, full-time employees or employees on the basis of seniority with the employer. The Act also re-sets the 10-day limit for the tax credit for paid sick leave under the FFCRA beginning April 1, 2021. Consequently, an employer could voluntarily provide an additional 10 days of FFCRA paid sick leave to employees beginning April 1, 2021, and would be eligible for a tax credit.
Considerations: Employers should review the state and local paid sick leave laws in their state to make sure that no laws require the extension of paid leave beyond the December 31, 2020 paid leave mandate of the FFCRA.
Unemployment Benefits Payments
In an effort to extend unemployment assistance provided under the CARES Act and Stimulus 2.0 that was set to expire in mid-March, the ARP will provide those individuals receiving unemployment benefits with $300 per week until September 6, 2021. Moreover, the maximum duration of weeks provided under the Pandemic Emergency Unemployment Compensation (PEUC) and the Pandemic Unemployment Assistance (PUA) increased. The maximum duration of PEUC benefits, which are paid to those who were initially eligible for state benefits but exhausted them before finding a job, increased from 24 to 53 weeks. The maximum duration of PUA benefits, which are paid to those who are ineligible for state benefits but lost their job due to a specific COVID-related reason, including the self-employed, increased from 50 to 79 weeks. Individuals in high unemployment states could receive up to 86 weeks of benefits.
In addition, the ARP includes a provision making the first $10,200 in unemployment benefits received in 2020 non-taxable for households with incomes under $150,000.
Stimulus Payments for Individuals
The ARP provides $1,400 stimulus checks to individuals earning up to $75,000 per year and couples earning $150,000. These stimulus checks are in addition to the stimulus checks recently approved in the December 2020 stimulus bill.
Tax Credits and Benefits
The ARP enhances three tax credits: the child tax credit, the earned income credit, and the employee retention credit. Under the ARP, the child tax credit will increase from $2,000 per child under age 17 to $3,000 for those age six through 17 and to $3,600 for those under age six. The new bill lowers the thresholds from $200,000 to $75,000 for single return filers, and from $400,000 to $150,000 for joint filers. A new provision makes the credit fully refundable so that individuals who pay little or no taxes may be able to take full advantage of the credit.
The earned income credit for lower income taxpayers has nearly tripled under the ARP. The minimum age to claim the credit has decreased from 25 to 19, and there is no upper age limit. Moreover, the employee retention credit (ERC), which is designed to encourage businesses to retain their employees despite the challenges of the pandemic, has been extended through December 31, 2021. The ERC has also been expanded to include certain start-up businesses with an ERC capped at $50,000.
The ARP also includes a 100% COBRA premium subsidy effective April 1 to September 2021 for eligible individuals who are involuntarily terminated but desire to remain on their employer’s health insurance plan. The Act will also expand the group of consumers who are eligible for help with the cost of their insurance under the Affordable Care Act. Individuals would be able to receive assistance if their premiums exceed 8.5% of their incomes instead of the current income cutoff of $51,000. Furthermore, the Act provides over $24 billion in assistance to childcare facilities that have been impacted by the pandemic. It also provides assistance to childcare workers earning less than $12 per hour.
Increased funding for Vaccine Distribution
The ARP will provide over $15 billion to improve the nationwide distribution and administration of vaccines to fight COVID-19. This includes funds to support increased access of the vaccines in underserved communities.
Considerations: Companies should closely monitor the Center for Disease Control (CDC) guidance as it evolves regarding the pandemic to ensure that appropriate safety precautions are taken in the workplace. As the distribution and administration of the vaccine improves nationwide, the CDC guidance about safety protocols related to mask mandates, physical distancing and related rules may change.
Funding to Department of Labor (DOL) agencies for COVID-19 Related Worker Protection Activities
The Act provides substantial funding to various DOL agencies, including the Wage & Hours Division and OSHA, to execute COVID-19 related worker protection activities through September 2021. This funding will undoubtedly lead to an increased number of audits and inspections.
Our firm will closely monitor legislative proposals to keep you abreast of the latest developments that impact your business. If you have questions regarding the ARP, please contact one of our attorneys at 404-844-4130.