President Biden has signed the American Rescue Plan Act (ARPA), which includes $1.9 trillion in funding for individuals, businesses and state and local governments.
The ARPA does not include any changes to the Federal minimum wage. Here is a broad overview of some of the provisions that may affect you:
Businesses and other employers
- The ARPA includes $28 billion of grants for restaurants and other eateries. 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.
- There will be additional funding for forgivable loans to eligible businesses under the Paycheck Protection Program (PPP), which is currently scheduled to expire on March 31, 2021.
- Not-for-profit organizations and online news services will receive expanded PPP eligibility.
- New targeted Economic Injury Disaster Loan grants will be available for eligible small businesses in low-income communities.
- 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.
- Tax credits for paid sick and family leave are modified and extended to September 30, 2021.
- 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.
- 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.)
- 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.
- 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.
- Any student loan debt forgiven between December 31, 2020, and January 1, 2026, will receive tax-free treatment.
- There’s expanded eligibility for low-income individuals with no qualifying children to claim the Earned Income Tax Credit.
If you have questions or concerns regarding this Client Alert, please contact Frank Washelesky at [email protected] or your ORBA advisor.