Greg and John dig into the latest updates for businesses and individuals with the American Rescue Plan Act, as well as the new options and programs available.
As businesses continue to struggle through the pandemic, Congresses continues to push for relief. As such, the American Rescue Plan Act (ARPA) was signed into law on March 11, 2021. This bill injects an additional $1.9 trillion into our economy to support unemployed workers, businesses, local governments, and our country’s effort to combat the virus. Businesses are supported through such provisions as extending the Employee Retention Tax Credit (ERTC/ERC) and the Families First Coronavirus Response Act (FFCRA), as well as adding a new grant designed to support businesses that serve food or alcohol to the public, one of the hardest hit industries in our nation. Here are the key aspects of the American Rescue Plan Act:
What Has Changed?
Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC/ERC) has been extended through December 31, 2021. This provision allows businesses to continue to retain 941 liabilities and request an advance of the tax credits that exceed those liabilities by filing Form 7200 directly with the IRS on a per quarter bases. Criteria for eligibility, qualifying wages, and credit amounts remain the same, details of which can be found here. Additionally, the ARPA added a third eligibility factor for wages paid in quarters 3 and 4 2021 and a more generous application of qualified wages for large employers that have suffered a severe financial decline.
Recovery Startup Business
Third eligibility criteria for wages paid Q3 and Q4 2021
- Began carrying on a trade or business after 02/15/2020
- Average annual gross receipts do not exceed $1 million
- Must have been partially or completely shut down due to a government order or meet the gross receipt reduction test
- Tax credit is limited to $50,000
- Tax credit is limited to $50,000
Severely Financially Distressed Large Employers
- ARPA added an option for severely financially distressed large employers (>500 FTEs in 2019)
- Defined as an employer whose gross receipts declined more than 90% when compared to the same quarter of 201
- May use the more generous definition for qualified wages reserved for employers of 500 or less FTEs
- Applicable to wages paid Q3 and Q4 2021
Paycheck Protection Program
The Paycheck Protection Program (PPP) received an additional $7.2 billion under the ARPA and has been extended through May 31, 2021 under the PPP Extension Act of 2021. Now, businesses have an additional 2-months to apply and the Small Business Administration (SBA) has until June 30, 2021 to approve those applications. According to news sources this extension allowed an additional 190,000 businesses with pending applications to obtain their respective loans, not to mention the countless others that have not yet applied.
The CARES Act provided additional unemployment benefits to support workers during the pandemic. Pandemic Unemployment Assistance (PUA) provides unemployment benefits to self-employed, independent contractors, GIG workers, part-time workers, workers lacking sufficient work history, and workers who do not otherwise qualify for regular unemployment compensation. Federal Pandemic Unemployment Compensation (FPUC) provides an additional $300 per week in addition to the respective state’s weekly benefit. Pandemic Emergency Unemployment Compensation (PEUC) provides additional unemployment benefits to individuals who previously collected unemployment which have been exhausted. ARPA has extended these benefits through September 06, 2021 and added a new tax benefit to provide relief to those who collected unemployment in 2020.
Unemployment Tax Benefit
- Federal taxes waived on the first $10,200 in unemployment benefits received in 2020 for those earning under $150,000 in adjusted gross income
- Federal taxes waived on the first $20,400 in unemployment benefits received for a married couple filing jointly where both received unemployment benefits, and both earned under a combined $150,000 in adjusted gross income
- Unemployment benefits exceeding the $10,200 or $20,400 will have normal tax treatment
- Taxpayers with an adjusted gross income of $150,000 or more will be subject to full taxation on all unemployment benefits received in 2020
Families First Coronavirus Response Act
The mandate to provide Emergency Paid Sick Leave (ePSL) and Emergency Family Medical Leave Act (eFMLA) ended December 31, 2020 but was extended, as a choice, through March 31, 2021. ARPA extended this valuable benefit once again through September 30, 2021 remaining as a choice, not a mandated benefit, providing tax credits to those employers who use it. ARPA also expanded the qualifying reasons, reset the 10-days for ePSL, modified eFMLA, and added a non-discrimination rule.
Provides tax credits for ePSL and eFMLA for all previous 6 reasons PLUS the following:
- To obtain a COVID-19 vaccination;
- To recover from any injury, disability, illness, or condition related to such vaccination; or
- To seek or await results of a test or diagnosis, or at the employer’s request for such test, for COVID-19 after exposure
- Resets with 10-days of paid sick leave effective April 01, 2021 through September 30, 2021
- Does not add to nor increase previous 10-days ending March 31, 2021
- Allows eFMLA to be taken for all qualifying FFCRA reasons, not just to care for a child whose school or place of care has been closed or unavailable
- 2-week waiting period for paid eFMLA was removed allowing an aggregate cap of $12,000 in tax credits
- Prevents eligibility for the tax credit if the employer does not apply utilization of the plan uniformly for all categories of workers (cannot favor based on highly compensated, employment status, tenure, etc.)
Restaurant Revitalization Fund
Undoubtedly the food and beverage industry has been decimated during this pandemic. From state and local mandated closures or partial closures, to articles indicating restaurants and bars as a likely source of virus contraction, it’s no wonder they’re struggling. As a result, the Restaurant Revitalization Fund (RRF) was established under the ARPA providing grants to our favorite eateries and watering holes.
- $28.6 billion available
- $5 billion earmarked specifically for businesses with $500,000 or less in gross revenue for 2019
- Administered directly through the Small Business Administration (SBA)
- Priority access for the first 21-days will be provided for women and veteran owned business, as well as businesses in socially and economically disadvantaged areas
- Businesses can obtain this grant and a PPP loan
- PPP closes 05/31/2021.
- At present there is no start date set for this program
- Even though this grant is not yet available, take the steps to be ready as it is first come first served, process:
- First, obtain a D-U-N-S number through Dun & Bradstreet, this is a free service
- Takes about 2-days
- Second, obtain a SAM account through System for Award Management (SAM), this is a free service
- Takes about 2-weeks
- As of 03/31/2021 U.S. Chamber of Commerce indicated that a SAM number will not be required, however, you may want to obtain one for any future grant requests
- Finally, calculate your loss in revenue (2019 – 2020)
- First, obtain a D-U-N-S number through Dun & Bradstreet, this is a free service
- Resource to keep informed, the Restaurants Act
- If the entity provides a place where the public can consume food or alcohol, they qualify. This includes food trucks, brewpubs, caterers, tasting rooms, bars, beverage alcohol producers where the public may sample, taste, or purchase products, etc.
- Suppliers for these establishments do not qualify
- Establishments with a club or membership access are undefined
- Franchisees of a publicly traded franchisor are eligible
- Publicly traded companies are not eligible
- Owners of more than 20 establishments as of 03/13/2020 are not eligible
- Businesses with a pending application or who have received a grant under the Economic Aid Hard-Hit Small Businesses, Nonprofits, and Venues Act are not eligible
Losing a job or having one’s hours cut is stressful enough, but trying to maintain health insurance under COBRA is downright painful. The option to continue coverage is certainly welcomed, but often cost prohibitive since an employee must pay the full monthly premium PLUS a COBRA administration fee, often about 2%, above the monthly premium cost. Insurance costs often top the list of an employee’s largest monthly expense and trying to pay those costs when one is unemployed or underemployed often forces them to decline the continuation of coverage. Since the high infection rate of COVID makes maintaining health coverage even more important, ARPA has provided a solution for assistance eligible individuals (AEI) that employers must understand.
What is an Assistance Eligible Individual (AEI)?
An AEI is defined as an individual who is eligible for Federal COBRA or comparable state continuation program from 04/01/2021 – 09/30/2021 due to an involuntary termination of employment, other than gross misconduct, or reduction in hours
How does the subsidy work?
Provides a 100% tax credit (including the COBRA admin fee) against the employer’s Medicare for those AEIs who were involuntarily terminated, other than gross misconduct, or who had a reduction in hours
- Effective 04/01/2021 through 09/30/2021
- Eligibility for Medicare or other group health plan coverage will end the subsidy, they do not have to enroll in the other coverage
- Subsidies will end when the 18-months of coverage eligibility ends
- E.g. employee’s 18-months of coverage ends 06/30/2021, so does the subsidy
- Subsidies are allowed under state continuation coverage such as New York and California
What if the employee declined coverage?
Extension of election period:
- An assistance eligible individual who does not have an election of COBRA in effect or discontinued such coverage as of 04/01/2021 has an additional 60-days to elect COBRA starting the day they receive the new COBRA election notice
- Notice of extension needs to be provided to employees who were previously qualified for COBRA back to November 2019 because the 18-month COBRA period would extend past April 2021
What disclosures do employers need to provide?
ARPA added additional disclosure requirements with respect to COBRA as it pertains to assistance eligible individuals:
- Must provide a notice detailing the eligibility for the COBRA subsidy
- Must provide a notice of the new election period for those that qualify for COBRA but declined or stopped coverage prior to 04/01/2021 (deadline for this notice is May 31, 2021)
- The DOL is required to provide model notices by April 10, 2021
- Must provide notice of premium subsidy end between 15-45 days prior to end of the subsidy (subsidy ends 09/30/2021)
- The DOL is required to provide a model notice
- This notice is not required if the COBRA ends due to other coverage or the maximum COBRA coverage period is ending
Federal tax treatments of loans and grants may not be applicable at your state level. Consult with a tax professional for state specific taxation.
If you are applying for any government grant, consider obtaining a D-U-N-S and SAM number prior to doing so, even if it does not explicitly indicate to do so. Both numbers are designed to obtain government contracts AND grants.
Local Business Support
Many states and municipalities are providing grants and/or loans to support small business needs during the pandemic. Consult with your local Small Business Development Center (SBDC) for local support in your area.