On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, providing $1.9 trillion in Covid relief to hard-hit businesses and individuals. Here are the top 10 provisions in this package.
1. The Employee Retention Credit (ERC) is available for all of 2021
The American Rescue Plan extends the Employee Retention Credit from June 30, 2021, to Dec. 31, 2021. If your business fully or partially suspends business operations for any period between June 30, 2021, and Dec. 31, 2021, due to COVID-19 or experiences a significant decline in gross receipts in either the third or fourth calendar quarter of 2021, you’re eligible for this credit.
Don’t miss this! The ERC is fully refundable, and for 2021, it’s 70% of all qualified wages paid to employees – up to $10,000 per employee per quarter. Updates to the ERC also include:
- Recovery startup businesses – those that began operations after Feb. 15, 2020, with average annual gross receipts under $1 million – can claim up to $50,000 per quarter for the third and fourth quarters of 2021.
- The wages you use to receive a restaurant revitalization grant can’t be used to claim the ERC.
- Severely financially distressed employers may treat all wages paid during the third and fourth quarters of 2021 as qualified wages, regardless of whether they’re considered a large employer. A severely financially distressed employer is an eligible employer that experiences a decline in gross receipts of more than 90% compared to the same 2019 calendar quarter.
Learn more about the Employee Retention Credit here.
2. Paid sick leave and paid family leave credits are good through Sept. 30, 2021
The 100% refundable tax credit for employers who pay qualified sick leave and qualified family leave wages is extended. The credit is available for qualified wages paid between April 1, 2021, and Sept. 30, 2021. Also, employees can receive paid sick leave for the following reasons:
- They’re seeking or awaiting the results of a diagnostic test for or a medical diagnosis of COVID-19 after being exposed to COVID-19
- Their employer is requesting the test or diagnosis
- They’re obtaining immunizations related to COVID-19 or recovering from injury, disability, or illness related to such immunization
The limitation on the number of days taken into account for paid sick leave will reset on April 1, 2021. Paid family leave is capped at $12,000 per employee beginning April 2021.
If you’re self-employed, you can claim the credit for paid sick leave and family leave too. You can have up to 60 days of qualified family leave. Learn more.
3. Paycheck Protection Program gets a boost in funding; large nonprofits can apply
The American Rescue Plan adds $7.25 billion to the Paycheck Protection Program (PPP). Also new – the following organizations can apply for a PPP loan:
- Nonprofits that employ 300 or fewer employees and adhere to lobbying activity limitations
- Large nonprofits and veterans’ organizations with 500 or fewer employees per physical location
- 501(c)(6) organizations and domestic marketing organizations with less than 300 employees per physical location
- Internet publishing organizations – those who use NAICS code 519130 – with no more than 500 employees per location
The deadline to apply for a PPP loan is May 31, 2021. Learn how to apply for a PPP loan here.
4. A portion of unemployment compensation is tax-free
If your modified adjusted gross income is less than $150,000, the first $10,200 in unemployment compensation is tax-free in 2020. If you filed your 2020 tax return before this benefit became law, the IRS will automatically process and distribute your refund. You don’t have to take any additional steps to reclaim the taxes you paid, but no longer owe. Don’t file an amended return.
If you haven’t filed your 2020 tax return, you have until May 17, 2021, to do so. Please refer to the updated Schedule 1 instructions to calculate your unemployment exclusion.
5. There’s dedicated support for restaurants via the Restaurant Revitalization Fund
The American Rescue Plan creates a $28.6 billion grant program for restaurants through the SBA. Generally, eligible businesses are food and drinking places, including restaurants, brewpubs, caterers, food trucks, and more. Grant amounts will equal each company’s pandemic-related revenue loss but can’t exceed $10 million.
Similar to PPP loans, the funds must be used for payroll costs, rent payments, utilities, construction to accommodate outdoor seating, etc. These grants aren’t loans; therefore, there’s no forgiveness component.
The SBA is currently developing this grant program and corresponding application materials. Read our blog post to learn more.
6. Americans will receive another stimulus check
This relief package includes a third round of stimulus checks – $1,400 for individuals and $2,800 for joint filers. Add another $1,400 per dependent. Check amounts are based on your 2019 and 2020 tax return information – whichever you filed most recently.
You’re eligible for the full amount if your income is less than $75,000 (individual) or less than $150,000 (joint filers). Officially called recovery rebates, these stimulus payments aren’t taxable and may start depositing into bank accounts the weekend of March 13, 2021.
7. New grants are available for child care providers; open or closed
Each state will receive child care stabilization grants and will administer subgrants to qualified child care providers. In Michigan, the Education Department’s Office of Great Start will announce, publicize, receive, and administer these subgrants to child care providers.
To qualify, on the date of your application, you must be either:
- Open and available to provide child care services
- Closed due to public health, financial hardship, or other reason relating to the COVID-19 public health emergency.
Your grant amount will be based on your current operating expenses, including those associated with providing or preparing to provide child care services during the Covid pandemic, and cover sufficient operating expenses to ensure continuous operations for the intended period of the grant.
If you receive funds, you should use them on personnel costs, rent, PPE, purchases of or updates to equipment and supplies to respond to Covid, goods and services needed to maintain or resume child care services, or mental health supports for children and employees. You’re eligible for a grant even if you received previous federal assistance.
The legislation mandates that lead agencies (again, the Office of Great Start in Michigan) must make an application available on its website for child care providers to apply. We’ll update this post with a link to the grant application page when it’s published.
8. The Child Tax Credit increases to $3,000+
For 2021, the child tax credit increases to $3,000 for kids between six and 17 years old. The credit is $3,600 for kids under six. You’re eligible for the full amount if your income is under the following thresholds:
- $150,000 – joint filers/surviving spouses
- $112,500 – heads of households
- $75,000 – all other filing statuses
The Treasury will establish an online portal where you can update any personal information that may affect your credit amount (marital status, income changes, birth of a child, etc.). Payments will begin in July 2021 and will be based on your 2019 or 2020 tax return information – whichever is the most recent.
9. $15 billion available in targeted EIDL advance
The American Rescue Plan designates $15 billion for the SBA to distribute as targeted EIDL advances. Ten billion is earmarked for businesses that didn’t receive the full amount they were entitled to receive. The SBA will distribute the outstanding amounts. The remaining $5 billion is targeted to entities that suffered an economic loss greater than 50% and employ less than 10 employees.
Remember, the maximum amount you can receive is $5,000. These grants aren’t taxable income.
10. New grants and funding for the food and agriculture industry
This bill also provides funding for food and agriculture businesses. The bill appropriates funds to the Department of Agriculture to make grants and loans for small and midsized food processors or distributors, seafood processing facilities, farmers markets, producers, or other organizations to respond to Covid and protect their workers, to make loans and grants to maintain supply chain resiliency.
In addition, there will be grants provided for vaccine distribution and increasing health capacity in rural areas. The USDA will pay up to 120% of outstanding indebtedness for socially disadvantaged farmers or ranchers. Plus, additional assistance will be made available to socially disadvantaged farmers, ranchers, forest landowners, and operators in the form of financial training, technical assistance, as well as grants and loans to improve access to land.
We’ll continue to update this blog with important provisions in the American Rescue Plan Act of 2021 and add links to resources with additional information. If you have questions about how any of these policies affect you, let’s talk!
Originally published 3/15/2021. Updated 3/31/2021.