American Rescue Plan Act of 2021 Provides Additional Pandemic Relief for Struggling Individuals, Businesses and Governments
The American Rescue Plan Act of 2021 (the “Act”), which was enacted in March 2021, provides for a federal stimulus package aimed at assisting those who continue to struggle financially as a result of the COVID-19 pandemic and providing further health care and government infrastructure support as the fight against the pandemic continues with the distribution of vaccines and gradual reopening of the economy. The Act, which represents the first major COVID-19 relief under the Biden Administration, creates new federal relief programs, and extends some existing relief programs, into calendar year 2021 and beyond. Set forth below is an overview of some of the provisions of the Act which may be of interest to you, including some important details, conditions and dates to be aware of with respect to each. To review the provisions of the Act, click here.
Business and Individual Tax Relief and Pandemic Unemployment Assistance
- The Act extends the Employee Retention Credit through December 2021 and allows eligible employers to offset their current payroll tax liabilities by up to $7,000 per employee per quarter. This extended credit is available to employers who (i) were carrying on a trade or business during the applicable calendar quarter, and (ii) (A) during the quarter, had operations fully or partially suspended due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID–19, (B) had gross receipts during the quarter of less than 80% of the gross receipts for the same quarter in calendar year 2019, or (C) the employer is a recovery startup business, defined as any employer which began carrying on any trade or business after February 15, 2020, for which the average annual gross receipts for the 3-taxable-year period ending with the taxable year which precedes the quarter for which the credit is determined does not exceed $1 million.
- The Act extends the availability of qualifying paid sick leave credits against employment taxes that were previously provided under the Families First Coronavirus Response Act for small and midsize businesses that offer paid leave to employees who are sick or quarantining, for up to $5,000 of qualifying amounts paid during the period from April 1, 2021 to September 30, 2021.
- The Act expands the Child Tax Credit under the Internal Revenue Code of 1986 by (i) increasing the credit amount from $2,000 to $3,600 for children under 6 years of age, and to $3,000 for children under 18 years of age for qualifying taxpayers, (ii) expanding the credit’s scope to all children aged 17 and younger (up from 16), (iii) providing for advance payments of the credit for qualifying taxpayers for 2021, which the Internal Revenue Service will make periodically from July 1, 2021 through December 31, 2021, (iv) making the credit fully refundable, meaning the entire credit could be provided as a refund if it exceeds an individual’s income tax liability, instead of partially refundable as is currently provided, and (v) extending the credit’s reach to Puerto Rico and the U.S. territories.
- The Act provides for stimulus checks of up to $1,400 for individuals or up to $2,800 for married couples, plus $1,400 for each dependent. Generally, a taxpayer is eligible if (s)he had an adjusted gross income of up to $75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household, and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are subject to reduction for filers with incomes above those levels.
- The Act extends the Pandemic Unemployment Assistance program and other unemployment assistance created by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to September 6, 2021. The Act also increases the number of weeks of unemployment benefits available under the Pandemic Unemployment Assistance program from 50 weeks to 79 weeks.
Real Estate Homeowner and Rental Relief and Assistance
- The Act creates a homeowner assistance fund under which nearly $10 billion are allocated for states, territories and tribes to provide homeowner relief for delinquent mortgage payments, utilities and internet costs, homeowner’s flood and mortgage insurance, and homeowner’s association or condominium fees or charges. The Act requires that at least 60 percent of amounts made to each eligible government entity be used to assist homeowners having incomes of 100% or less than the area median income for their household size or 100% or less than the median income for the United States, whichever is greater, and that use of the remaining funds prioritize “socially disadvantaged individuals,” defined under section 637 of the Small Business Act as “those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”
- The Act allocates a $21.6 billion fund among states, territories and local governments for emergency rental assistance to provide aid to eligible households that are unable to pay rent and utilities due to the COVID-19 pandemic. In addition, this rental assistance fund may be used for “other expenses related to housing.” Eligible households include those with one or more individuals who are obligated to pay rent on a residential dwelling and with respect to which the applicable government entity administering the fund determines that: (i) one or more individuals within the household has (A) qualified for unemployment benefits; or (B) experienced a reduction in household income, incurred significant costs, or experienced other financial hardship during or due to the COVID-19 pandemic; (ii) one or more individuals within the household can demonstrate a risk of experiencing homelessness or housing instability; and (iii) the household is a low-income family (as that term is defined in section 3(b) of the United States Housing Act of 1937.
Additional Business Relief
- Restaurant Industry. The Act establishes a $28.6 billion Restaurant Revitalization Fund, which is being administered by the U.S. Small Business Administration (the “SBA”). Eligible entities for grants through this fund include restaurants, bars, lounges, caterers, food trucks, and similar places of business where the public may taste, sample, or purchase products, or in which the public or patrons assemble for the primary purpose of being served food or drink, if such business has no more than 20 locations and is not a publicly traded company. Money received under the program may be used for the following if incurred during the covered period, beginning February 15, 2020 and ending on December 31, 2021: payroll costs, rent and mortgage payments, utilities, maintenance expenses (including construction to accommodate outdoor seating), supplies (including protective equipment and cleaning materials), food and beverage expenses, operational expenses, paid sick leave, and other expenses that the SBA may determine to be essential. The total amount that may be granted may not exceed $10 million per eligible entity, and $5 million per physical location of the eligible entity. If the recipient of a grant under the Restaurant Revitalization Fund fails to use all of its grant or permanently ceases operations on or before the end of the covered period, the recipient must return the unused funds to the Treasury.
- Economic Injury Disaster Loans. The Act allocates an additional $15 billion into the Economic Injury Disaster Loan program administered by the SBA, $5 billion of which is earmarked for covered entities that have suffered an economic loss of greater than 50% and employ 10 employees or fewer.
- Multi-employer Pension Plans. The Act allows for certain financially troubled multi-employer pension plans to receive special financial assistance if a plan meets any of the following criteria: (i) the plan is in critical and declining status (as defined in section 305(b)(6) of the Employee Retirement Income Security Act of 1974) in any plan year beginning in 2020 through 2022; (ii) a suspension of benefits has been approved with respect to the plan; (iii) in any plan year beginning in 2020 through 2022, the plan is certified by the plan actuary to be in critical status, has a modified funded percentage of less than 40 percent, and has a ratio of active to inactive participants which is less than 2:3; or (iv) the plan became insolvent for purposes of section 418E of the Internal Revenue Code of 1986 after December 16, 2014, and has remained so insolvent and has not been terminated as of the date of enactment of this section.
- Airport Sponsors. The Act appropriates $8 billion for fiscal year 2021 for assistance to airport sponsors, to remain available until September 30, 2024 to prevent, prepare for, and respond to COVID-19. These amounts may not be used for any purpose not directly related to the airport and may not be provided to any airport that was allocated in excess of four years of operating funds to prevent, prepare for, and respond to COVID-19 in fiscal year 2020.
Government Funding: Infrastructure, Capital Projects and Education Relief
- The Act provides for $350 billion in relief funding for state, local and territorial governments, consisting of $219.8 billion for states, territories and tribal governments and $130.2 billion for metropolitan cities, non-entitlement units of local government, and counties. This funding may be used for costs incurred by December 31, 2024 (i) to respond to the COVID-19 public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality; (ii) to provide premium pay to workers performing essential work during the COVID–19 public health emergency, or to make grants to their employers; (iii) for the provision of government services to the extent of the reduction in revenue due to COVID–19; or (iv) to make necessary investments in water, sewer, or broadband infrastructure.
- The Act allocates $10 billion for states, territories and tribal governments to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to COVID–19.
- The Act allocates an additional $122.7 billion for the existing Elementary and Secondary School Emergency Relief Fund, a program created under the CARES Act. The additional funding will remain available through September 30, 2023. State education agencies must distribute at least 90% of these funds to local education agencies, of which at least 20% must be reserved for learning loss, with the remaining funds available for a variety of authorized uses, including uses aimed at social distancing protocols and improving air ventilation systems in response to COVID-19.
- The Act also adds approximately $40 billion to the Higher Education Relief Fund, an existing program created by the CARES Act for institutions of higher education. These funds will remain available through September 30, 2023, and at least 50% of funding received by an institution must be used to provide emergency financial aid to students.
Health Care Industry Assistance and Relief
- The Act allocates a total of approximately $92 billion to fund the public health sector, including the Centers for Disease Control and Prevention and efforts to “strengthen vaccine confidence” and improve rates of vaccination in the U.S., and to support state and local health care workforces and health centers.
- The Act amends Title XI of the Social Security Act to allocate $8.5 billion for payments to eligible rural health care providers for health care related expenses and lost revenues that are attributable to COVID–19 that were not refunded and are not refundable from another source. An applicant is eligible for proceeds under this fund if it is a healthcare provider or supplier that (i)(A) is enrolled in the Medicare program, (B) provides diagnoses, testing, or care for individuals with possible or actual cases of COVID–19; and (C) is a rural provider or supplier; or (ii)(A) is enrolled with a State Medicaid plan or a State child health plan; (B) provides diagnoses, testing, or care for individuals with possible or actual cases of COVID–19; and (C) is a rural provider or supplier.
The information contained in this alert is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this alert without seeking legal or other professional advice. This alert is not intended to create, and receipt or review of it does not constitute, an attorney-client relationship. If you have specific questions regarding your particular circumstances, we urge you to consult competent legal counsel.