The American Rescue Plan Act of 2021 (H.R. 1319) is nearing the finish line. Earlier today, the U.S. House of Representatives passed the $1.9 trillion dollar package following Senate passage last week. President Biden is expected to sign this legislation into law on Friday.
The Act is designed to address challenges caused by the coronavirus pandemic. The list below details notable provisions that could impact businesses.
Tax Provisions of the American Rescue Plan
$1,400/person Direct Payments
- The bill provides direct $1,400 payments to individuals and families.
- For single taxpayers, this payment will begin to phase-out at an adjusted gross income of $75,000 and the credit will be completely phased out for taxpayers over $80,000.
- For married taxpayers who file jointly, the phase-out will begin at $150,000 and end at $160,000. And for heads of households, the phase-out will begin at $112,500 and end at $120,000.
Child Tax Credit
- Most Americans would be eligible to receive a tax credit equal to $3,000 a year for each child ages 6 to 17, and $3,600 for each child under age 6.
- The bill makes the child tax credit fully refundable for 2021.
- The bill directs the Secretary of the Treasury to issue advance payments of the child tax credit, based on the parents’ 2019 or 2020 tax returns. Under the bill, parents could receive regular periodic monthly advance payment of the tax credit to ensure families have access to assistance throughout the year, rather than just at tax time. The advance payments would begin on July 1, 2021.
- Those receiving the full advance payment of the child tax credit would be single filers earning up to $75,000, head of household filers earning up to $112,500, and joint filers earning up to $150,000. Above these thresholds, the advance payments are phased down.
- Here is a link to an article on this topic.
Employee Retention Tax Credit
- The bill extends through December 31, 2021, the Employee Retention Credit, created by the CARES Act, which expired on December 31, 2020.
- The Senate version expands the Employee Retention Tax Credit for start-up companies and other businesses hit by the pandemic.
IRC Section 162(m) Deduction Limitation
- The bill includes an expansion of IRC Section 162(m) limits on the deduction companies can take for compensation paid to the CEO, CFO, and the three next highest paid employees. The bill expands the limits to apply to the CEO, CFO, and the next eight highest paid employees beginning in 2027.
Business Loss Limitation
- The Senate bill extends IRC section 461(l) limit on business losses for non-corporate taxpayer through 2026.
Child and Dependent Care Tax Credit
- The bill changes the Child and Dependent Care Tax Credit for 2021, to increase the amount of child and dependent care expenses that are eligible for the credit to $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals (such that the maximum credits would now be $4,000 and $8,000). The full credit will be available for taxpayers with AGI of $125,000 or less.
Expansion of Tax Credits for Paid Sick Leave and Paid Family and Medical Leave
- The bill extends, from March 31, 2021 to September 30, 2021, the payroll tax credit for employers created by the Families First Coronavirus Response Act for use to help employers defray the costs of the paid sick leave and paid family and medical leave required for employees impacted by the COVID-19 pandemic under that Act.
- Employees may receive new sick and family leave “pools” for leave between April 1 and September 30 – 10 days of COVID-related sick leave, and 12 weeks of COVID-related family leave.
Exclusion for forgiven student loan indebtedness
- The Senate added a provision to the bill to make any future student loan forgiveness passed between December 2020 and January 2026 not taxable income.
Agriculture Provisions of the American Rescue Plan
- The bill contains $22.7 billion in agriculture and nutrition assistance provisions ◦to “maintain and improve food and agricultural supply chain resiliency.”
- The package extends the temporary 15% increase in Supplemental Nutrition Assistance Program benefits through September, and expand child nutrition assistance.
- The bill includes $4 billion to address major pandemic-related disruptions throughout the food supply chain; invest in new infrastructure for farmers, food processors, and farmers markets to build resiliency; monitor COVID-19 in animals; support small meat and poultry processors; protect food and farm workers on the job; and increase food donations.
- The bill includes more than $5 billion in debt relief and assistance for farmers of color.
Paycheck Protection Program
- The bill includes $7.25 billion in additional funding for PPP and expands eligibility of 501(c) nonprofits of all sizes and types, except for 501(c)4 lobbying organizations.
- The bill does not extend the loan application deadline, currently set to expire on March 31.
Economic Injury Disaster Loan (EIDL)
- The bill includes an additional $15 billion for targeted EIDL Advances to help those who applied for relief in 2020 but did not receive the full $10,000 grant.
Provider Relief Program
- The Senate bill adds $8.5 billion in funds for the Provider Relief Program to assist rural health care providers.
If you have any questions about any of these provisions, please reach out to a K·Coe advisor to assess how they may impact your business.