Note: This article was updated on March 31, 2021 to reflect new information on the Paycheck Protection Program.
On Wednesday, March 10, 2021, Congress passed the $1.9 trillion American Rescue Plan Act of 2021, providing more relief to businesses and individuals affected by the pandemic. The bill is expected to be sent to President Biden for his signature as soon as Thursday. The president has said he will sign the bill into law on Friday afternoon.
The information below highlights the contents of the Act that will affect small businesses and individuals. Please note that it is recommended you consult your tax advisor before taking any action.
Economic Injury Disaster Loan (EIDL) program
$15 billion will be given to the EIDL program, which provides long-term, low-interest loans from the Small Business Administration. Among the terms of the program:
- $10 billion will be used to make payments to covered entities that did not receive the full amount to which they were entitled under the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act
- $5 billion will go towards severely impacted small businesses that have suffered an economic loss of more than 50% and have no more than 10 employees.
Employee Retention Credit (ERC)
The 2021 Employee Retention Credit will be extended until December 31, 2021 instead of expiring July 1, 2021. For more information about the expanded ERC and to learn if your business qualifies for the tax credit, please read this article.
Restaurant Revitalization Fund
$28.6 billion will be put towards a new grant program specifically for bars and restaurants affected by the pandemic. $5 billion of this will be made available to eligible businesses with gross receipts that did not exceed $500,000 in 2019. The remainder will be awarded to businesses of different sizes based on annual gross receipts (amount not yet specified).
Paycheck Protection Program
The Paycheck Protection Program, which is currently taking applications for second-round loans, will get an additional $7.25 billion in funding. Nonprofit organizations will now be eligible if they employ no more than 500 employees per physical location. However, the March 31, 2021 closing date for applications has not yet been extended.
Update: On March 30, 2021, President Biden signed the PPP Extension Act into law. This extends the Paycheck Protection Program to May 31, 2021 and gives the SBA until June 30, 2021 to to process pending applications that are submitted on or before May 31, 2021.
Shuttered Venue Operators Grants
$1.25 billion of additional funding will be made available for the SBA’s Shuttered Venue Operators Grant (SVOG) Program, including $500,000 set aside for technical assistance to help entities apply for grants, though applications are not yet available. The Act also now permits applicants to utilize both Shuttered Venue Operator Grants as well as second draw Paycheck Protection Program loans in a change of previous restrictions.
Paid Leave Benefits
Employers with fewer than 500 employees who choose to offer paid leave benefits (up to $1,400 a week) will be given tax credits as reimbursement of that cost, in an extension of the program first introduced by the Families First Coronavirus Response Act. The period for which the credits apply was set to expire on March 31, 2021 and is now extended until September 30, 2021.
Schools and institutions of higher education will receive almost $170 billion to help them reopen safely. Of this, $125 billion will be allocated to public K-12 schools and $2.75 billion will go to private schools. Nearly $40 billion will go to colleges and universities. Schools that receive the funds will have to show within 30 days their plans for reopening safely.
The Act benefits taxpayers in several ways:
- There will be a third round of stimulus payments through the Act: $1,400 for single taxpayers (earning up to $75,000) and heads of households (earning up to $112,500) or $2,800 for married couples who file jointly (with income up to $150,000).
- Unemployment benefits of $300 per week will be available until September 6, 2021, with the first $10,200 in unemployment benefits being tax-free for households with a total income of up to $150,000.
- The child tax credit for 2021 will be refundable and will increase to $3,000 for eligible children aged six to 17 and $3,600 for eligible children under the age of five, subject to income phase-outs. Advance payments for those who qualify for the 2021 enhanced child tax credit are scheduled to begin on July 1, 2021.
As with each piece of stimulus legislation that has been passed over the last year, much remains unclear and we are working to understand the nuances and details of the legislation. Look for more information from us in the coming weeks. Meanwhile, if you have any questions about how the American Rescue Plan Act of 2021 can help you or your business, please call your Smith & Howard tax advisor at 404-874-6244. We are here to help you understand how the Act benefits you.