The U.S. House of Representatives voted today to approve the amendments made to the $1.9 trillion American Rescue Plan Act of 2021 (H.R. 1319) legislation by the U.S. Senate on March 6. The new stimulus package was introduced by the Biden Administration in January and extends several provisions of the $2.2 trillion CARES Act enacted in March of last year, as well as the $900 billion Consolidated Appropriations Act, 2021, that was just enacted in December. The American Rescue Plan Act of 2021 also creates several new relief initiatives to help Americans recover from the devastating economic and health effects of the COVID-19 pandemic. President Biden will sign the bill into law on Thursday afternoon at the White House.
Key provisions of the 628-page bill include the following:
- A third-round of economic impact payments of $1,400 for each adult and qualifying dependent, the amount of which will be reduced for individuals with an adjusted gross income (AGI) greater than $75,000 for the 2019 or 2020 tax year ($150,000 for married couples). However, payments will now phase out completely for individuals with an AGI greater than $80,000 ($160,000 for married couples).
- The extension of supplemental Federal unemployment payments of $300 per week through September 6, 2021, plus the extension of Pandemic Unemployment Assistance (PUA) benefits for independent contractors, gig workers, and the self-employed; as well as the extension of Pandemic Emergency Unemployment Compensation (PEUC) for individuals who exhausted their regular state benefits for 29 additional weeks, through September 6, 2021. In addition, the first $10,200 in 2020 unemployment benefits will be exempt from federal income tax for households with AGI below $150,000 per year.
- Individuals eligible for COBRA insurance coverage who were laid off or furloughed because of the pandemic will have 100% of their insurance premiums paid by the Federal government through September 30, 2021.
- The expansion of the Child Tax Credit (CTC) for 2021. The CTC will be fully refundable and increases to $3,000 for each child between 6 and 17 years-old and $3,600 for each child under 6 years-old. The CTC increase phases out for individuals with a modified AGI in excess of $75,000 ($150,000 for married couples). The IRS will also start paying advances of up to half of the CTC starting in July, through monthly payments of $250 per child ($300 per child under 6 years-old).
- The expansion of the Child and Dependent Care Tax Credit (CDCTC) for 2021. The CDCTC will also be fully refundable and the maximum credit rate will be increased to 50% and eligible expenses will be increased to $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals. The CDCTC phase-out threshold increases to $125,000.
- The expansion of the Earned Income Tax Credit (EITC) for 2021 for individuals with no qualifying children. The age requirements are adjusted, and the credit percentage and phase-out percentages also increase, resulting in nearly triple the benefit amount. Individuals will also be allowed to use their 2019 income instead of 2021 income to calculate the EITC amount.
- The extension of Families First Coronavirus Response Act paid sick and family leave credits through September 30, 2021, plus additional modifications to the program.
- The extension of the Employee Retention Credit (ERC) through December 31, 2021. Eligibility for the ERC is expanded to include “recovery startup businesses” that began operations after February 14, 2020, while “severely financially distressed employers” experiencing a 90% decline in gross receipts compared to the same quarter in 2019, may treat all wages as qualified wages, regardless of the number of full-time employees.
- The Paycheck Protection Program (PPP) receives an additional $7 billion and expands eligibility for first and second draw loans to “additional covered nonprofit entities” which include all 501(c) organizations, other than 501(c)(4) social welfare organizations. Larger nonprofit organizations will also be able to determine employee headcount for eligibility purposes on a “per physical location” basis. Internet-only news and periodical publishers are also now eligible for PPP if they meet specific size requirements and the loan proceeds are used to support locally focused or emergency information.
- The creation of a new $28.6 billion grant program to be administered by the SBA for restaurants and other food and drinking establishments. Grants will be based on the difference between 2020 and 2019 revenue and are available for up to $10 million per entity ($5 million per physical location). The grants can be used for a wide variety of expenses, including food and beverage expenses and operational expenses.
- Additional $15 billion for Targeted EIDL Advances for qualifying businesses in low-income communities who did not receive the full $10,000 EIDL grant in 2020 due to funding shortfalls. If any funds remain, “severely impacted” small businesses can apply for grants.
- Additional $1.25 billion for Shuttered Venue Operator Grants (SVOG) for live venue operators, theatrical producers, live performing arts organizations, museums, theaters and talent representatives. SVOG applicants can now apply for PPP loans as well, due to delays in setting up the grant program. PPP loan amounts will be subtracted from SVOG amounts.
Click below to view a recording of our PPP & Stimulus Update webinar from March 11, 2021, where we discussed key provisions of the American Rescue Plan Act of 2021.
[su_button url=”https://register.gotowebinar.com/recording/2239410930225036558″ target=”blank”]View Recording[/su_button]
Our COVID-19 Response Team is reviewing the new legislation, and will be sharing the latest information and guidance on PPP, tax credits and other stimulus programs with you on our Firm’s website or by way of emails and webinars. The Team will also be available to assist individuals and businesses with determining whether they are eligible for specific relief measures. If you have any questions, please email the Team at COVID19team@tsacpa.com.