ARPA 2021: An Overview

On Thursday afternoon, President Biden signed into law the American Rescue Plan Act 2021 (ARPA), the latest legislation aimed at providing economic and other relief from the COVID-19 pandemic that has haunted the country for the last year. The massive 628-page bill includes $1.9 trillion in funding for individuals, businesses, and state and local governments.

Following is a broad overview of some of the bill’s key provisions that are likely to affect you and your business.

For Businesses and Other Organizations

More PPP Lending – The legislation provides additional funding for forgivable loans to eligible businesses under the Paycheck Protection Program (PPP), which is currently scheduled to expire on March 31, 2021.

ERTC Extension – The Employee Retention Tax Credit is extended for eligible employers that continue to pay employee wages during COVID-19-related closures or experience reduced revenue through December 31, 2021 (including “recovery start-up businesses” that launched after February 15, 2020 with average annual gross receipts of $1 million or less).

Grants for Restaurants – The ARPA includes $28 billion of grants for restaurants, bars, lounges and food trucks. The program provides up to $5 million per restaurant or $10 million per restaurant group with some funding reserved for restaurants with under $500,000 of gross receipts in 2019. The grants will be administered by the SBA. We will keep our restaurant and hospitality clients informed as the application process is made clear.

Assistance for Non-Profits – Not-for-profit organizations and online news services will receive expanded PPP eligibility.

Grants for Businesses in Low-Income Areas – New targeted Economic Injury Disaster Loan grants will be available for eligible small businesses in low-income communities.

Paid Sick and Family Leave Extension – Tax credits for paid sick and family leave are modified and extended to September 30, 2021.

EBLL Extension – The Excess Business Loss Limitation has been extended through December 31, 2026.

For Individuals and Families

$1,400 Direct Payments – Additional direct payments (or recovery rebates) of $1,400 — plus $1,400 per dependent (including adult dependents) will be made to eligible individuals. The amount phases out for single taxpayers with adjusted income between $75,000 and $80,000 ($150,000 and $160,000 for married couples filing jointly). The advance payment will be based on the taxpayer’s 2019 income tax return or 2020 income tax return if it has been processed.

$300/week Unemployment – An additional $300 per week in unemployment benefits will be paid through September 6, 2021. In addition, the first $10,200 in unemployment benefits received beginning in 2020 is not included in gross income for taxpayers with AGIs under $150,000. (However, for joint filers below the AGI limit, the $10,200 exclusion applies separately to each spouse.)

Child Tax Credit Increase – For eligible individuals, the Child Tax Credit (CTC) increases to $3,000 for each child age six to 17 and $3,600 per year for children under age six. To be eligible for the full payment, you must have a modified AGI of under $75,000 for singles, $112,500 for heads-of-households and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold. Parents should begin receiving advance payments of part of the CTC later this year. Under the ARPA, the IRS must establish a program to make monthly payments (generally by direct deposits) equal to 50% of eligible taxpayers’ 2021 CTCs, from July 2021 through December 2021.

Expanded Childcare Tax Credit – For 2021 only, there is an expanded child and dependent care tax credit of up to $4,000 for childcare expenses for one child and up to $8,000 for two or more children for households making up to $125,000.

Tax-Free Student Loan Debt Forgiveness – Any student loan debt forgiven between December 31, 2020, and January 1, 2026, will receive tax-free treatment.

Earned Income Tax Credit Expansion – There is expanded eligibility for low-income individuals with no qualifying children to claim the Earned Income Tax Credit.

Again, that’s just an overview; obviously, there is much, much more to this historic legislation that deserves our attention and will be analyzed in the days and weeks to come. As always, Weiss & Company is committed to keeping you fully informed on matters that impact the economic well-being of our clients, their families and businesses. If you have questions or need assistance, please do not hesitate to reach out to us.  That’s why we’re here.