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March, 2021

How the American Rescue Plan Act Affects Businesses

President Biden signed the American Rescue Plan Act (ARPA) on Thursday, March 11, 2021. This $1.9 trillion relief bill provides additional funding to federal unemployment benefits, the Paycheck Protection Program (PPP), businesses, and state and local governments. It also gives other tax credits to companies and individuals. In this article, we’ll discuss how the American Rescue Plan Act affects businesses so employers can prepare for any changes.

A Boost For The Paycheck Protection Program (PPP)

The ARPA gives the Paycheck Protection Program (PPP) $47.45 billion in funding. While it does not extend the March 31, 2021, application deadline, the American Rescue Plan Act does provide an additional $7.25 billion for PPP loans. A $5 billion portion of the total funds offers financial aid to businesses with less than $500,000 in revenue in 2019.

How Does the PPP Loan Work?

The Restaurant Revitalization Fund (RRF) gives $25 billion to the SBA for this new grant program for “restaurants and other food and drinking establishments.” Restaurants can use grants of up to $10 million per company to cover expenses such as payroll, rent, utilities, and other operating expenses. There are a few restrictions to the grant:

  • There is a $5 million limit per location.
  • A restaurant or group of restaurants can have no more than 20 locations.
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Restaurant Revitalization Fund

Yes, PPP loans are forgivable; however, loan forgiveness is tied to an eight-week time-period that starts when the loan is initially dispersed. The following loan costs are eligible for forgiveness:

  • Payroll costs (75% of your forgiveness amount must relate to payroll)
  • Health insurance for paid sick, medical, or family leave
  • Mortgage interest payments
  • Rent; and utility payments

To calculate your loan forgiveness, click here.

Need COVID-19 Compliance Help?

We understand. Check out our COVID-19 Resources Hub for additional resources.

Additional Aid and Support for Other Industries

The ARPA allows larger nonprofit organizations to apply for forgivable loans to cover their operating expenses and payroll costs. These types of nonprofits include limited lobbying groups and some groups that engage in advocacy.

The bill allocates an additional $1.25 billion to the Small Business Association’s (SBA) Shuttered Venue Operators Grant program. Another $30 billion covers transit industry costs, which includes payroll and personal protective equipment. The American Rescue Plan Act is also giving $16 billion to help fund vaccine distributions and supply chains.

Federal Unemployment Aid and Benefits

The ARPA provides federal unemployment assistance with an additional $242 billion in aid. Unemployment benefits decrease from $400 to $300 per week but now extend through September 6, 2021, instead of the March 14, 2021, deadline. Unemployment insurance benefits for households whose incomes are at or below $150,000 are allowed to have the first $10,200 of benefits non-taxable. The Pandemic Unemployment Assistance (PUA) program has also increased eligibility from 50 to 79 weeks.

Economic Injury Disaster Loan (EIDL) Grants

Economic Injury Disaster Loan (EIDL) grants receive $15 billion to provide grants to eligible small businesses in low-income communities. They are eligible to receive up to $10,000 in grants from the SBA. Specific EIDL grants are not included in a business’s gross income. Additionally, excluding these grants within a company’s gross income does not result in a denial of basis increase, a denial of deductions, or a reduction in tax attributes.

The grants will roll out in the following phases:

  1. Small businesses with 300 or fewer employees that experienced a loss gross of 30% or more during an eight-week period between March 2, 2020, and December 31, 2021. This time period will be compared against an eight-week period prior to March 2, 2020. 
  2. Businesses with less than ten employees that have experienced a 50 percent loss of gross receipts.  
  3. Businesses with fewer than ten employees that have experienced a 30 to 50 percent loss in gross receipts.  

Relief For States, Cities, and Local Governments

The American Rescue Plan Act allocates a total of $350 billion to help state, local, tribal, and territorial governments respond to the effects of the COVID-19 pandemic. Additionally, the bill provides $46 billion to expand federal and local COVID-19 testing centers and enhance the contact-tracing process. The American Rescue Plan Act allocates another $14 billion is to help expedite the administration and distribution of COVID-19 vaccines.

Employer Tax Credits

Here are employer-specific tax credits that are either included or updated in the American Rescue Plan Act:

Payroll

COBRA Premiums

The ARPA includes a 100 percent subsidy of COBRA health insurance premiums for laid-off workers. These workers will receive COBRA benefits at no extra cost from April 1, 2021, through September 20, 2021.

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Employee Retention Credit

The Employee Retention Credit, initially established in the CARES Act, is extended through the end of 2021. Eligible employers may claim this credit for paying qualified wages to employees

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Family and Sick Leave Credits

The ARPA has extended these credits through September 30, 2021. The American Rescue Plan Act also increases the limit on the credit for paid family leave and the number of leave days a self-employed person can take. Leave taken for a COVID-19 vaccination will qualify. The Act also creates a reset date of March 31, 2021, for counting paid sick leave and allows 502(c)(1) organizations to participate.

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Premium Tax Credit

The act expands the premium tax credit for 2021 and 2022. Applicable taxpayers now include those who received or were approved to receive unemployment compensation in 2021.

How APS Can Help

We are keeping a close eye on the ever-changing landscape of PPP loans and the CARES Act. Here’s how APS has responded so far and how we’re helping businesses during this challenging time:

  • We have created a PPP export that makes it easy for businesses to calculate their qualified PPP loan amount.
  • We have developed and released CARES Act tracking and management offerings that eliminate the need for employers to manually track Social Security payment deferrals.
  • We have created a COVID-19 Response Team to assist in processing payroll, as well as making it easier for our clients to utilize the credits and deferrals the IRS has created.
  • We are currently developing additional system functionality to make it easier for employers to manage all the requirements under the CARES Act.

If you are considering loan options, you can visit the Small Business Administration’s website, or consult with your business advisor or attorney. As we become aware of new policies and procedures, we are frequently updating our Help Center and COVID-19 Resources Hub.

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