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Client Alert – New Stimulus Package

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CLIENT UPDATE: On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), a $1.9 trillion relief package aimed at assisting individuals, small businesses, and state and local governments as they combat the unprecedent COVID-19 public health emergency.  Included below are summaries of some key provisions of the ARPA:

Individuals

  • Direct Payments. Direct payments of $1,400 for individuals making up to $75,000 per year (based upon adjusted gross income), $2,800 for joint filers making up to $150,000 per year, and $1,400 for each qualified dependent. Unlike prior stimulus checks, the new direct payments will quickly phase out after the income caps previously noted, with individuals making over $80,000 per year and married couples making over $160,000 per year not eligible to receive any direct payments.  Payment eligibility will be based upon a person’s (or a couple’s) most recent tax filing.
  • Unemployment Benefits.Extension of the $300 per week federal unemployment benefits through September 6, 2021. In addition to the extension of benefits, the ARPA waives federal taxes for the first $10,200 of unemployment benefits received in 2020 (for households earning under $150,000).
  • Child Tax Credit.Temporary expansion of the child tax credit for 2021. Under this expansion, the tax credit could be as much as $3,600 for children ages 5 and under, and as much as $3,000 for children ages 6 to 17. 
  • Student Loans. Although the ARPA does not provide student loan forgiveness, it sets the stage for such by modifying the tax treatment of debt forgiveness by exempting student loan forgiveness from income taxes in 2021 through 2025.

Small Businesses

  • Employee Retention Credit (ERC). The ERC is now available through December 31, 2021, for eligible employers. The ARPA also expands eligibility to include certain start-up businesses established after February 15, 2020, with eligible wages capped at $50,000 per quarter.
  • Restaurant Revitalization Fund for 2021. The ARPA appropriates over $28 billion to establish the Restaurant Revitalization Fund for 2021 which will be administered through the SBA. The Fund will provide grants of up to $10 million dollars per restaurant group or $5 million per individual restaurant location for certain eligible business. Eligible businesses include foodservice and drinking establishments like restaurants, food trucks, bars, caterers, breweries, taprooms, and tasting rooms. However, publicly traded companies, state or local government operated businesses, operations with more than 20 locations, and applicants for the shuttered venue operators grant program are not eligible. The grants can be used for a variety of business-related expenses including payroll, mortgage, rent, utilities, maintenance expenses (including construction to accommodate outdoor seating), supplies (including protective equipment and cleaning materials), and food and beverages.
  • Paycheck Protection Program (PPP). The ARPA provides an additional $7 billion in funding for the PPP and expands eligibility for certain nonprofit entities and certain internet publishing organizations.
  • Economic Injury Disaster Loan (EIDL) advances. The ARPA allocates $15 billion in additional funding for EIDL advances, of which $5 billion is reserved exclusively for businesses that suffered a revenue loss of greater than 50% and which employ no more than 10 employees.
  • Shuttered Venue Operators Grants. The ARPA provides an additional $1.25 billion to the shuttered venue operators grant program and removes the previous requirement that prohibited an eligible entity from receiving both a PPP loan after December 27, 2020 and a shuttered venue operators grant. Under the ARPA, the grant will now be reduced by the amount of the PPP loan the entity received after December 27, 2020.

State/Local Governments and Other Expenditures

  • Education. $130 billion has been allocated to help reopen K-12 schools, which can use the funds toward reducing class sizes, modifying classrooms to accommodate social distancing, installation of ventilation systems, purchasing PPE, and hiring additional staff. Another $40 billion has been allocated for higher education institutions; such will be distributed through direct grants to public and nonprofit colleges.
  • Governmental Assistance. $350 billion to states, local, tribal and territory governments to help respond to the COVID-19 pandemic.
  • Housing Assistance. The ARPA provides over $20 billion in emergency rental assistance and almost $10 billion for mortgage assistance.
  • Vaccine Distribution and Testing. $60 billion to expand COVID-19 testing, vaccination distribution and vaccine administration.

Please note that the within alert only highlights and summarizes some of the more prominent aspects of the ARPA. This alert is not intended to describe in detail all provisions contained in the hundreds of pages of text that the ARPA comprises. The full text of the ARPA can be found here: https://www.congress.gov/bill/117th-congress/house-bill/1319/text

If you have any questions regarding the ARPA, however, please do not hesitate to contact the attorneys at Wadleigh, Starr & Peters.