Yesterday, Congress passed the latest legislation aimed at providing economic and other relief from the COVID-19 pandemic that has impacted the country for the last year. President Biden is expected to sign the American Rescue Plan Act (ARPA), which includes $1.9 trillion in funding for individuals, businesses, and state and local governments.
The Act extends and expands some of the critical provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act (CAA). It also includes new provisions that may come as welcome news to families and businesses.
Key provisions of American Rescue Plan Act
The following is a broad overview of some of the key provisions.
Businesses and other employers
- SBA restaurant revitalization grants: Pandemic assistance in the form of an SBA grant program will be made to eligible businesses serving food or drinks, including restaurants and food trucks. Grants for the restaurant program are up to $10 million per entity, with a limitation of $5 million per physical location and businesses are limited to 20 locations.
- Paycheck Protection Program (PPP): There will be additional funding for forgivable loans to eligible businesses under the PPP, which is currently scheduled to expire on March 31, 2021. There are efforts underway requesting lawmakers extend the deadline. In addition, larger nonprofit organizations will receive expanded PPP eligibility.
- Economic Injury Disaster Loan (EIDL): New targeted EIDL grants will be available for eligible small businesses in low-income communities.
- Employee Retention Tax Credit: The Employee Retention Tax Credit is extended through the end of 2021 for eligible employers that continue to pay employee wages during COVID-19-related closures or experience reduced revenue through 2021. This includes “recovery startup businesses” (those businesses that launched after February 15, 2020, with average annual gross receipts of $1 million or less).
- Families First Coronavirus Response Act (FFCRA) tax credit: Payroll tax credits for employers created by the FFCRA for paid sick and paid family and medical leave for employees impacted by COVID-19 are expanded and extended from March 31, 2021 to September 30, 2021.
- Excess business loss limitation: The excess business loss limitation that was scheduled to expire at the end of 2025 is extended through the end of 2026.
- Section 162(m) limits: The Section 162(m) limits on the tax deduction that public companies can take for executive compensation is extended to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027.
- Direct payments (recovery rebates): Additional direct payments of $1,400 — plus $1,400 per dependent (including adult dependents) will be made to eligible individuals. To qualify, individuals must have an adjusted gross income (AGI) of up to $75,000 per year ($150,000 for married couples filing jointly and $112,500 for heads of households). The payments phase out and are no longer made when AGI exceeds $80,000 for individuals, $160,000 for married joint filers and $120,000 for heads of household.
- Unemployment benefits: An additional $300 per week in unemployment benefits will be paid through September 6, 2021.
In addition, the first $10,200 in unemployment benefits received beginning in 2020 is not included in gross income for taxpayers with AGIs under $150,000. However, for joint filers below the AGI limit, the $10,200 exclusion applies separately to each spouse.
- Child Tax Credit (CTC): For eligible individuals, the CTC increases to $3,000 for each child aged 6 to 17 and $3,600 per year for children under age 6. To be eligible for the full payment, you must have a modified AGI of under $75,000 for singles, $112,500 for heads-of-households and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold.
Some taxpayers who are not eligible to claim an increased CTC in 2021, because their income is too high, may be able to claim the regular CTC of up to $2,000, subject to the existing phaseout rules.
For 2021, there is an expanded child and dependent care tax credit of up to $4,000 for childcare expenses for one child and up to $8,000 for two or more children for households making up to $125,000.
- COBRA subsidy: The government will subsidize 100 percent of COBRA premiums for laid off workers and covered relatives, allowing them to stay on their company-sponsored health plan through September 2021.
- Student loan debt forgiveness: Any student loan debt forgiven between December 31, 2020 and January 1, 2026 will receive tax-free treatment.
- Affordable Care Act (ACA) subsidies: For 2021 and 2022, there is increased and expanded availability of ACA subsidies for those who obtain insurance in the ACA marketplaces.
- Rental assistance: Federal rental assistance is included for families affected by COVID-19, applicable to past due rent, future rent payments, and utility and energy bills.
With vaccination rates climbing, the Act may be the last of the major legislative relief packages addressing the effects of the pandemic. We are available to answer any questions you may have regarding the benefits available to you, your family or your business.
Please get in touch with your primary AGH contact or one of our professionals using the contact information included below to discuss your situation or employer-related questions.
NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.
Executive Vice President
Shawn serves as one of two primary leaders in the firm’s large tax group. He has extensive public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, wholesale/retail distribution, real estate development and management, construction, and contractor industries. In addition to enhancing business performance to minimize tax consequences, he has experience in mergers and acquisitions and international tax and business structuring.
A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.
Senior Vice President
Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to joining the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned organizations.
Her current clients cross many industry sectors, including manufacturing and distribution, restaurants, retailers, medical and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.