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President Biden signed the American Rescue Plan Act of 2021 (ARP). ARP provides $1.9 trillion in additional relief for the COVID-19 pandemic. This law adds to the nearly $4 trillion in relief enacted in 2020. In total, the government’s relief measures are almost $6 trillion, during 2020 and 2021.

ARP will expand unemployment relief, increase funding for the COVID-19 testing and vaccination programs, help financially support state and local governments, provide additional funding for the Paycheck Protection Program (PPP) and assist schools to help get students back in classrooms. The ARP also includes several tax provisions, the third round of direct stimulus payments, enhancements of many personal tax credits meant to benefit people with lower incomes and children, and extensions of payroll tax credits for employers. This summary will address some of the key features of ARP for individuals and businesses.

Relief to Individuals

Individual Recovery Rebate: For individuals, the package includes an additional $1,400 in recovery rebates – also known as stimulus payments. This payment will supplement the $600 provided in December and fulfill the government’s promise to provide $2,000 in economic impact payments for taxpayers. The individual will receive $1,400 – plus an additional $1,400 for each dependent. The credit is completely phased out for joint returns over $160,000 and $80,000 for individual returns. If individuals did not receive a stimulus check, they can claim the credit on their 2021 tax return. As a reminder, the first round of stimulus under the CARES Act in March of 2020 provided $1,200 per individual, and the Consolidated Appropriations Act in December of 2020 provided $600. Under the three programs, the maximum amount received by an individual is $3,200.
Child Tax Credit: The measure includes an expansion of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), nearly tripling the maximum EITC for childless workers. The package increases the amount of the CTC, from $2,000 to $3,000, with a higher $3,600 credit for children under the age of 6, also allowing the CTC to be fully refundable. This increase in the credit only applies to 2021.
Unemployment Relief: The law also includes an extension of enhanced unemployment benefits of $300 per week. This enhanced benefit was set to run out at the end of March, the program will now run through the end of September. A notable tax change related to the unemployment benefit is that the first $10,200 of unemployment relief received in 2020 is exempt from tax for households that have up to $150,000 of income.

Relief to Businesses

Paid Sick and Family Leave Credits: One of the first relief measures provided by Congress under the CARES Act was the payroll tax credit for employers providing paid sick and family leave. Under the Consolidated Appropriations Act, the credit was extended until March 31, 2021. However, under ARP the credit has been extended until September 30, 2021. Also, the new law increases the applicable wages from $10,000 to $12,000.
Employee Retention Tax Credit: The ARP also extends the Employee Retention Tax credit to December 31, 2021. The Consolidated Appropriations Act enacted in December had the credit expiring on June 30, 2021. As a reminder, under this credit, the employer can claim the credit on 70% of the employee’s wages up to $10,000 per quarter. Therefore, the employer can take a $7,000 credit per quarter for each eligible employee. The credit is taken against federal withholding taxes.
Restaurant Revitalization Fund: The ARP includes an additional $28.6 billion for the SBA to administer grants through the Restaurant Revitalization Fund. This relief is for small and mid-sized restaurants. The restaurant must certify that the uncertainty of the economic conditions makes the grant necessary to support the ongoing operations of the restaurant. The ARP also added $1.25 billion in funding for the $15 billion Shuttered Venue Operator Grant to provide relief to independent live music venues, performing arts centers, movie theaters, and museums.
Paycheck Protection Program: The ARP provides an additional $7.25 billion available for PPP loans. The additional funding does not extend the current application period – which is scheduled to close on March 31, 2021. However, the ARP makes more non-for-profit businesses eligible for the PPP loan program. Our Team is in the process of reviewing the new bill in greater detail. We are hosting a Zoom Webinar on April 22, 2021, to discuss the impacts the American Rescue Plan will have on individuals and businesses, and to answer your questions live! Space is limited, so register for our Webinar today, to Learn how this COVID Relief bill may affect you. CLICK HERE TO REGISTER