March 17, 2021
On Thursday, March 11, the president signed into law the American Rescue Plan Act of 2021 (the “Act” or “ARPA”). The Act provides funding for education, COVID-19 vaccination and testing, economic injury disaster loans, restaurant grants, expanded paycheck protection program eligibility, and support for struggling live venues. The Act also provides financial assistance for individuals, such as additional direct payments, extended pandemic-related unemployment benefits, and enhancements to refundable tax credits like the Child Tax Credit and the Earned Income Tax Credit designed to help low-income Americans.
Provisions for Small Businesses
Targeted Economic Injury Disaster Loan Advance
The CARES Act, passed in March 2020, included grants of $10,000 to small businesses that were treated as advances on Economic Injury Disaster Loans (“EIDL”) and did not have to be paid back. The Act provides an additional $15 billion for the EIDL grant program to ensure that all eligible businesses can access the $10,000 grants. Businesses are eligible if they are located in low-income communities and previously received an EIDL grant for less than $10,000 or applied but received no funds due to lack of available program funding.
The Small Business Administration will disburse any funds remaining after all eligible businesses have claimed the $10,000 grants as supplemental grants to severely impacted small businesses that have (1) suffered a revenue loss of at least 50 percent; (2) are located in a low-income census tract; and (3) have 10 or fewer employees.
The Act provides $25 billion for a new program at the Small Business Administration that offers assistance to restaurants. Five billion dollars of funding is set aside for businesses with less than $500,000 in 2019 annual revenue.
The grants are available for up to $10 million per entity, with a limitation of $5 million per physical location. Entities are limited to 20 locations. The grants are calculated by subtracting 2020 revenue from 2019 revenue. During the first 21 days, applications from restaurants owned and operated controlled by women, veterans, or socially and economically disadvantaged individuals will receive priority. The grants may be used for a wide variety of expenses, including payroll, mortgage, rent, utilities, supplies, food and beverage expenses, paid sick leave, and operational expenses.
Expanded Paycheck Protection Program Eligibility
The Act expands eligibility for initial and second-draw Paycheck Protection Program loans to additional non-profits listed in Section 501(c) of the Internal Revenue Code, except for 501(c)(4) organizations, as long as the non-profit meets restrictions on lobbying activities. Larger non-profits are eligible for Paycheck Protection Program loans based on employee headcounts per physical location of the organization, rather than a headcount of all employees throughout the entire organization.
In addition, the Act makes internet-only news and periodical publishers eligible for Paycheck Protection Program loans as long as the publisher has more than one physical location, fewer than 500 employees per physical location, and certifies that the loan will support locally-focused or emergency information.
Support for Struggling Live Venues
The Small Business Administration’s Office of Disaster Assistance administers the Shuttered Venue Operations Grant program, that provides grants to struggling live venue operators equal to the lesser of 45 percent of the venue operator’s gross earned revenue or $10 million. The Act provides an additional $1.25 billion for the program, including funding set aside for technical assistance to help entities apply for grants.
Provisions for Individuals
The Act includes a partial exclusion from gross income for unemployment payments received in 2020. Under the Act, taxpayers can exclude up to $10,200 of unemployment payments they received if their adjusted gross income is below $150,000. If the taxpayer’s adjusted gross income is $150,000 or more, then the exclusion does not apply and gross income includes all unemployment payments made to the taxpayer.
Direct Payments to Individuals
In addition, the Act creates a refundable tax credit of $1,400 ($2,800 for joint filers) plus $1,400 per dependent. The credit phases out for taxpayers with adjusted gross income above $75,000 (above $150,000 for joint filers; above $112,500 for head of household filers). Advance payments of the credit will be made as rapidly as possible.
Mike Sorice is an associate in the Columbus, Ohio office of Walter | Haverfield. He assists closely-held businesses with business succession planning, mergers and acquisitions, and tax planning. Mike can be reached at 614-246-2262 or firstname.lastname@example.org.
Tim Jochim is a partner in the Columbus, Ohio office of Walter | Haverfield and a national authority on business succession and employee stock ownership plans (ESOPs). Tim can be reached at email@example.com or at 614-246-2152.