Congress has passed a third COVID-19 pandemic related stimulus bill, providing extended and renewed business funding and tax benefits.
The biggest business benefit is likely the extension of the popular Employee Retention Tax Credit. The third stimulus bill, formally known as the American Rescue Plan, extends the credit through the end of 2021.
The $1.9 trillion bill also includes $28.6 billion in relief for the restaurant industry, limited to restaurant groups with 20 or fewer locations.
Among the most significant individual benefits are a third round of direct stimulus payments and expanded unemployment benefits and child-related tax credits. Read on to learn about the most significant business and individual benefits.
Employee Retention Tax Credit
The American Rescue Plan extends the Employee Retention Tax Credit through Dec. 31, 2021.
The tax credit has become increasingly beneficial to businesses after new rules enacted for January 2021 allowed businesses with PPP loans to also seek Employee Retention Tax Credits.
Businesses who have experienced a full or partial suspension of operations due to a COVID government order or have experienced a significant decline in gross receipts of 20% or more are eligible for a tax credit. The available credit is 70% of wages paid to each employee (on maximum wages of $10,000 per quarter per employee) in 2021.
Restaurant Revitalization Fund
Restaurants with 20 or fewer locations can apply for grants from the $28.6 billion Restaurant Revitalization Fund through the U.S. Small Business Administration.
The bill allows for grants equal to the pandemic-related revenue loss of the eligible entity, up to $10 million per entity, or $5 million per physical location. The grants are calculated by subtracting 2020 revenue from 2019 revenue.
The grants can be used for many operational expenses, including payroll, mortgage and rent payments, utilities and supplies.
FFRCA Tax Credit
The American Rescue Plan extends the Families First Coronavirus Response Act tax credit to employers who voluntarily offer paid leave under the act’s related emergency sick-leave and family-leave provisions.
Certain employers had to offer paid leave from April 1, 2020 through December 31, 2020, but it became voluntary as of January 2021. The American Rescue Plan extends the tax credit for the voluntary provision of leave through September 30, 2021.
The wages covered by the paid family leave credit is up to $12,000 from $10,000 and covers up to $200 per day, up to 60 days from 50 days, and the 10 day limit on the emergency paid sick leave resets. An employer would be able to claim an additional family leave credit up to $2,000 of qualified family leave wages plus emergency paid sick leave up to an additional 10 days (from April 1, 2021 to Sept. 30, 2021).
Eligible employers can claim a federal payroll tax credit for 100% of qualified leave payments. The credit offsets the employer's 6.2% Social Security tax component of the federal payroll (FICA) tax.
Paycheck Protection Program Loans
The bill allocates another $7.25 billion in PPP loans and allows more nonprofits to apply including:
- Nonprofits with no more than 500 employees per location.
- Nonprofits that receive and spend less than 15% of its receipts and expenses on lobbying, spends less than $1 million on lobbying, and employ no more than 300 employees.
Individuals earning up to $75,000 in adjusted gross income will get direct payments of $1,400 and married couples earning up to $150,000 in AGI will get $2,800. Eligible recipients also will receive $1,400 for each of their dependents, including college students and other dependents this time around.
Under this bill, there is a lower phase out for partial payments than the previous two COVID-19 pandemic related direct payments. Partial payments are available only to individuals making up to $80,000 AGI and couples earning $160,000 AGI. Payments are based on 2019 or 2020 tax returns.
Child Tax Credit
The bill increases the child tax credit to $3,000 per child and $3,600 per child under 6 for individuals earning up to $75,000 AGI and married couples earning $150,000 in AGI.
Taxpayers who earn more will still be able to qualify for the current $2,000 child tax credit, which phases out at $200,000 AGI for individuals and $400,000 AGI for married couples.
The bill also makes the credit fully refundable for 2021 and half of the credit is expected to be advanced in possible monthly payments over the next six months.
Child and Dependent Tax Credit
The bill increases tax credits to help cover the cost of childcare to as much as half of spending for children under age 13, or a total of up to $8,000 for one child or $16,000 for two or more children, which would be refundable and available in full to families making less than $125,000 a year and partially up to $400,000 per year. Or for 2021, parents can set aside up to $10,500 in a dependent care account instead of the normal $5,000. But employers would have to allow the change.
The bill extends the $300 unemployment weekly supplemental benefit through Sept. 6, 2021. It also makes the first $10,200 of unemployment benefits tax-free for people with incomes of less than $150,000 for 2020 only.
Student Loan Forgiveness
The bill exempts all student loan forgiveness from taxation through January 1, 2026. The bill does not forgive student loans but proponents say this change will help taxpayers if student loans are forgiven through future government action.
The final version of the act did not include any increase to the federal minimum wage.
Your Concannon Miller team is ready to guide you through this latest legislation and its impact on you and your business. Please contact us with all your needs.