March 10, 2021
On Saturday, March 6, 2021, the U.S. Senate passed the American Rescue Plan Act of 2021, (the Act) the latest in a series of COVID-19 relief legislation. The package, which includes $1.9 trillion in aid, is set to be signed into law by President Biden within days. While much of the Plan is focused on relief for individuals and families as well as vaccine distribution, a substantial portion is aimed at supporting Atlanta businesses still impacted by the ongoing pandemic. The amount of relief varies by industry but specifically addresses the needs of healthcare organizations, schools, and educational institutions, and restaurants. There were also changes to several tax credits and incentives including the Employee Retention Tax Credit. To help clients, prospects, and others, Wilson Lewis has provided a summary of the funding and tax provisions below.
The education industry is set to receive the most amount of money in the American Rescue Plan, with general allocations being:
One of the bigger items for healthcare providers in the American Rescue Plan is the additional $8.5 billion in Provider Relief Funds (PRFs). The extra money is set aside for rural hospitals and facilities that lost revenue due to COVID-19.
Among other healthcare initiatives aimed at individual taxpayers, certain hospitals will receive increases in Medicare reimbursements as of October 1, 2021, and Medicare reimbursements to certain ambulance operators.
The Act also provides $30.5 billion to public transit agencies and $1.5 billion to rehire furloughed Amtrak employees and to restore some daily routes. Funding is available through 2024.
Additionally, $10 billion has been set aside to fund state and local infrastructure projects. It is expected this allocation will help to spur demand for construction projects, a boon for struggling construction companies and contractors.
Airports and airline industry workers are allocated $8 billion and $15 billion, respectively, and $12 billion in grants to airlines and contractors is meant to freeze layoffs until September. while aerospace manufacturing is set to receive $3 billion in additional funding.
The Small Business Association (SBA) will administer the $25 billion Restaurant Revitalization Fund. Eligible businesses include restaurants, food trucks, bars, caterers, taprooms, and other similar food and beverage establishments. Grants of up to $10 million per entity ($5 million per physical location) are available to offset pandemic-related revenue losses including payroll, mortgage or rent, utilities, maintenance, operations, paid sick leave, and supplies.
The grant program, once opened, will last until December 31, 2021. Only women-, veteran-, or economically disadvantaged owners may apply during the program’s first 21 days. $5 billion is set aside for establishments with less than $500,000 in 2019 gross receipts.
Publicly traded establishments, state- or local government-operated businesses, restaurants with more than 20 locations, and businesses that apply for a Shuttered Venue Operators grant are ineligible.
$7.25 billion in additional money has been allocated to the Paycheck Protection Program (PPP). Notably, more non-profits will soon be eligible for PPP funds, including larger non-profits with up to 500 employees per physical location, compared to a max of 300 employees for second-draw PPP loans.
The American Rescue Plan also eliminates the requirement in the Consolidated Appropriations Act prohibiting a business in the entertainment industry from receiving both PPP funds and a Shuttered Venue Operators grant. After December 27, 2020, these entities can apply for a PPP loan and a grant, but the grant total must be reduced by the amount of the approved PPP loan.
Another $15 billion is set aside for Economic Injury Disaster Loans (EIDL), with $5 billion specifically for businesses that lost at least 50 percent of revenue with fewer than ten employees. EIDL funding will roll out in phases, starting with businesses that did not get the full amount requested in the previous application(s). EIDL funds are limited to $10,000 per entity and applicable to businesses that experienced at least a 30 percent reduction in gross receipts during an eight-week period between March 2, 2020, and December 31, 2021. Businesses with more than 300 employees do not qualify.
Though more money has been added to PPP coffers, as of this writing, the deadline to apply for a first- or second-draw loan remains March 31, 2021.
The Employee Retention Tax Credit (ERC) was expanded for 2021 and with increased access for more businesses. Still, ERC was set to expire on June 30, 2021.
The Act extends ERC until December 31, 2021. It further expands eligibility to new startup businesses established after February 15, 2020, with annual gross receipts of up to $1 million. For these businesses, the credit is limited to $50,000 per quarter, per employer.
Businesses that experienced more than a 20 percent reduction in gross receipts due to COVID-19 (compared to the same period in 2019) can count all wages paid to employees as eligible wages. The number of full-time employees is irrelevant in this scenario.
Under the Families First Coronavirus Response Act (FFCRA), businesses could receive tax credits against wages paid to employees who had to take time off work due to COVID-19. These were also extended until September 30, 2021.
The American Rescue Plan increases eligible wages per employee from $10,000 to $12,000, expands the type of eligible leave (time off for vaccination is now covered, as an example), and covers up to 60 days of paid leave for the self-employed, compared to the previous 50. These changes are effective for wages paid between April 1, 2021, and September 30, 2021, and are not retroactive.
Given the various tax credit extensions and expanded eligibility requirements, plus new funding for critical industries and programs, taxpayers will want to work with their advisor to ensure they are taking advantage of all incentives – and maintaining appropriate documentation. Additional PPP funds could make a measurable difference for some, they will need to act quickly as the March 31, 2021 deadline is fast approaching.
Contact Us
The latest COVID-19 relief bill provides Atlanta businesses with additional relief needed to navigate through the persistent pandemic. It is expected the House will approve the modified Senate bill and send it to President Biden to sign by the end of the week. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.