On March 11th, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law. While the $1.9 trillion bill is primarily focused on direct relief to individuals, it also contains numerous provisions affecting all businesses and taxpayers. Due to the complexity and size of the ARPA, the following only serves as a brief overview of the bill’s provisions.
Stimulus payments of $1,400 per individual, $2,800 for joint filers, and $1,400 for each qualifying dependent are already being delivered. The payments are subject to a fairly steep phase-out for individuals with adjusted gross income (AGI) between $75,000 and $80,000 ($150,000 and $160,000 for married couples). AGI will be based on a taxpayer’s 2020 return if filed; otherwise, AGI will be based on 2019. Any overpayment or underpayment will be reconciled on the taxpayer’s 2021 tax return.
Employee Retention Tax Credit (ERTC)
The ERTC has been extended from June 30th to December 31, 2021 and will remain available to PPP loan recipients. The credit will continue under the more-favorable rules of the Consolidated Appropriations Act (up to $7,000 per employee per quarter if the business had a 20% decline in gross receipts from the same quarter in 2019 or from the preceding quarter compared to its corresponding quarter in 2019).
Paycheck Protection Program (PPP)
While the ARPA provides an additional $7.5 billion in funding to the PPP, the end of the application period remains March 31, 2021. The bill expands eligibility to nonprofits with more than 500 employees that operate at multiple locations as long as no more than 500 employees work at any one location. The bill also removes a rule disqualifying certain nonprofits from PPP loans if they are affiliates of national organizations.
Economic Injury Disaster Loans (EIDL)
The bill allocates $10 billion to make payments to entities that did not receive their full amount under the Consolidated Appropriations Act. It also makes clear that any amounts received in the form of an EIDL advance are not included in gross income (and will be tax-exempt income to partnerships and S corporations) and no deductions or tax attributes will be denied because of that exclusion.
While it does not extend the eviction moratorium, the bill allocates $21.6 billion in emergency rental assistance and $10 billion for homeowner assistance. Rental assistance for up to 15 months will be available to tenants that qualified for underemployment benefits, experienced financial hardship during the pandemic, are at risk of experiencing homelessness, or have a household income below 80% of the area’s median income.
Highlights of Other Provisions
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