Today, March 11, 2021, the President signed the American Rescue Plan Act of 2021 (ARPA). Provisions include tax benefits for both individuals and businesses. Provided below is a brief summary of the most significant business provisions of ARPA. The tax benefits for individuals was sent in an earlier email, which can be found [here].
Paid Sick and Family Leave Credits
- Families Frist Coronavirus Relief Act paid sick and paid family leave credits are expanded through September 30, 2021.
- The credit is increased by the employer’s share of Social Security tax, Medicare tax, and certain health plan expenses on qualified leave wages.
- The credit may be a refundable payroll tax credit against Medicare tax only beginning after March 31, 2021.
- The maximum wages available increases for the credit from $10,000 to $12,000 per employee .
- The number of days for which self-employed individuals can claim the paid family leave credit is increased to 60 days from 50.
- It expands the credit to employers who provide paid time off for employees to obtain the COVID-19 vaccination or recover from an illness related to the immunization.
Employee retention credit
- The credit is extended through December 31, 2021.
- Special rules apply for a business started after February 15, 2020.
- The credit is applied against Medicare taxes only. Employers with a credit over the Medicare taxes can file Form 7200 (Advance Payment of Employer Credits Due to COVID-19).
- Paycheck Protection Program (PPP) recipients continue to be eligible for the credit if the PPP loan didn’t pay the wages used to take advantage of the credit.
Paycheck Protection Program Modifications
- An additional $7.25 billion has been allocated to PPP funding, however, the application period has not been extended and remains at March 31, 2021.
- Expands entities eligible for PPP loans to certain nonprofit entities.
- COBRA premiums are eligible costs for loan forgiveness.
- A COBRA subsidy of 100% of the COBRA health insurance premiums is available to certain individuals covered by COBRA beginning April 1, 2021 and ending September 30, 2021. Individuals eligible to make the COBRA election by April 1, 2021 can make the election and receive the subsidy. The subsidy ends when the individual is eligible for coverage under another plan, or September 30, 2021, whichever is earlier.
- The employer will receive a quarterly tax credit against the Medicare payroll tax equal to the health insurance premiums not paid by the eligible individuals.
- The subsidy is not taxable to the individual.
- Group health plans must notify eligible employees of the subsidy, of the extended election period and the expiration of the subsidy.
Increase in Exclusion for Employer-Provided Dependent Care Assistance
- The employer provided dependent care assistance is increased from $5,000 to $10,500 for 2021 only. This amount is excluded from the eligible employee’s gross income.
- The employer plan would need to be changed to adopt this provision.
Targeted Economic Injury Disaster Loan Advances
- A targeted economic injury disaster loan (EIDL) advance from the SBA Small businesses is not taxable.
- The targeted EIDL advance is available to those who are in a low-income community, whose revenue declined by 30% or more over an 8 week period after March 2, 2020 and with 300 or fewer employees.
- The maximum targeted EIDL advance is $10,000. If an economic injury disaster loan advance of $10,000 was received, the targeted EIDL advance is not available.
Restaurant Revitalization Grants
- SBA will administer restaurant revitalization grants.
- $28.6 billion has been appropriated to struggling restaurants.
- Businesses eligible include restaurants, food trucks, and similar businesses.
- Grants may be used for payroll, mortgage payments, rent, utilities, maintenance, supplies, food and beverages, covered supplier costs, operational expenses, paid sick leave and any other expense determined to be essential to maintaining the business.
- Businesses not eligible are those with a pending application for, or have received, a grant under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act.
Shuttered venue operators
- An additional $1.25 billion has been appropriated for grants to businesses to include live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, and talent representatives who demonstrate a 25% reduction in revenue.
For more information or questions, please contact us at 401-831-0200.