You are here

American Rescue Plan Act of 2021 - First Take

March 10, 2021

American Rescue Plan Act of 2021, a resource shared by our Industry Partner, CPA Eats.

On Wednesday, March 10th, the House will likely approve the American Rescue Plan Act of 2021, sending it to President Biden’s desk for signature by the end of this week. You can find a link to the full PDF of the bill's text at the bottom of this email. As this $2 Trillion, 628 page spending bill goes into effect, you are likely to be inundated with emails about its various provisions, so, now that we have the final text, allow me to jump ahead of the email traffic and highlight some of the most pertinent sections of the bill, starting in reverse:

Section 5002 - Targeted EIDL Advances - $10T in additional funding has been provided to fund existing, but unpaid, EIDL Advances. $5T in funding for $5,000 EIDL grants for businesses with less than 10 employees and revenue drops of 50%+

Section 5003 - Support for Restaurants - $28.6T has been authorized for a grant program for restaurants. 

  • The law is written with broad strokes and we expect to wait until mid/late April for actual SBA rules and regulations related to the grants, at which point we will further analyze.
  • Generally speaking, restaurants will be eligible to be granted their decline in sales from 2019 to 2020, less any PPP money they’ve received.
  • There is a 21 day priority application period that will segregate applicants based on race, sex, and veteran status.
  • There is a $5T initial set aside for restaurants that gross less than $500,000 per year.
  • The formulas for calculating how much a restaurant will be eligible for have not been written; the timing for the applications has not been set; the formulas for how to split up the money amongst applicants have not been written.
  • It is our belief that these funds will run out very quickly and one of two things will happen: a) the funds will be substantially expanded (e.g. PPP Round 1), or b) the grant sizes will be curtailed to spread the money further (e.g. EIDL loans, which were constricted to $150,000 after being $500,000 at first)

Section 9013 - Extension of Pandemic Unemployment Compensation - Federal pandemic unemployment insurance has been extended at a $300 per week supplemental rate until September. 

Section 9021 - Extension of FFCRA Unemployment Provisions - The FFCRA Unemployment program is extended until September 6, 2021. 

Section 9601 - 2021 Recovery Rebates to Individuals - The latest round of stimulus payments will be $1,400 for most recipients ($1,400 per adult, child, or other dependent).  The phase out limits are $75,000 for a single person, $112,500 for a head of household, and $150,000 for a married couple filing jointly. We expect these checks to go out relatively quickly, using the same mechanism as in previous rebates. 

Section 9611 - Child Tax Credit Changes - The Child Tax Credit for 2021 is being increased to $3,600 for each child from 0-5 years old and to $3,000 for each child from 6-18 years old (ages are measured on 12/31/2021). The phase out limits are $75,000 for a single person, $112,500 for a head of household, and $150,000 for a married couple filing jointly. 

Unlike in previous years, the credit will become completely refundable and is going to be eligible to be paid in advance via monthly governmental transfers ($250-300 per child) to taxpaying parents, starting in July. This is written as a one year change to the law, but is expected to become one of the most substantial expansions of government social payment policy in years when it is likely extended by future legislation. 

Section 9631 - Refundability and Enhancement of Child and Dependent Care Credit - The child care credit is expanding substantially for 2021. The credit jumps to 50% of your childcare expenses (formerly 35%) with a credit limit of $4,000 per child, up to a maximum of $8,000, and is now fully refundable. This credit formerly phased out starting at $15,000, but is now available for households making up to $400,000 (the phaseout starts at $125,000). This will materially increase refunds to a large number of taxpayers.

Section 9651 - Extension of Employee Retention Credit - The Employee Retention Credit is extended until December 31, 2021. The Employee Retention Credit, in our opinion, remains one of the single most important stimulus programs passed in the last 12 months, as employers are eligible for 70% payroll support if they qualify.

Whether you are an individual taxpayer or a business, this stimulus bill likely contains a provision that applies to you. As noted, many of the most complicated business elements of the bill are written in vague terms, and we expect to communicate in detail as the relevant rules and regulations are written. We look forward to helping guide you through the financial and tax challenges of 2021.

- Matt Hetrick, CPA
Harmony Group

Full PDF of the American Rescue Plan Act of 2021