American Rescue Plan Act of 2021

At-a-Glance, the Act includes

• Extension of leave benefits and tax credits from Families First Coronavirus Response Act (FFCRA)
• Earned Income and Child Tax Credit Improvements for 2021
• Expanded unemployment insurance (UI) benefits
• Direct stimulus payments
• Worker safety
• Grants to impacted industries
• Modifications to Paycheck Protection Program (PPP)
• Extension of Employee Retention Credit
• COBRA subsidy credits

Extension of Tax Credits on FFCRA Sick and Family Leave

The Act extends the tax credits on leave benefits offered under the FFCRA.

• Offering leave is optional for the employer but must meet the requirements under FFCRA.
• Extends credits on employer-provided emergency sick and family leave Through September 30, 2021
• Extends credit eligibility to certain government employers previously excluded
• Resets limits on emergency paid sick time for any sick time granted after March 31, 2021
• Limit on credit for paid family leave increased from $10,000 to $12,000 allowing full 12 weeks of EFMLA to be paid at a maximum rate of $200 per day
• Credits also changed to apply to employer’s Medicare instead of Social Security tax but remain refundable and qualified for advancement
• Leave no longer exempt from Employer Social Security Tax, instead the tax is added to the amount of the credit resulting in no net change to the employer’s cost to provide the leave
• Qualified leave for family medical leave expanded to include reasons covered under Emergency Paid Sick Leave such as care for family members
• Qualified emergency sick leave and family leave expanded to allow leave to receive and recover from COVID-19 vaccination
• Adds non-discrimination rules for employer eligibly for claiming credits

See PCTY-84561 for additional information on FFCRA leave and credits.

Earned Income Credit and Child Tax Credit Improvements for 2021

• Directs Secretary of the Treasury to create a program to provide monthly advance payments for 2021
• The Act expands the Child Tax Credit (CTC) by increasing the credit in three ways:
  • For children under 6, the new max would be $3,600
  • For children ages 6 to 17, the new max would be $3,000
  • For 2021 only, children aged 18 are eligible for treatment as qualifying children (considered 17-year-olds for purposes of this Act)
• The full amount of the credit would be refundable and will be reduced by $50 for every $1,000 the taxpayer’s at adjusted gross income exceeds the below applicable threshold:
  • $75,000 (single filer)
  • $112,500 (head of household)
  • $150,000 (joint filer)
• The Act expands the Earned Income Tax Credit (EITC) for 2021 only. It would raise the maximum credit for adults without children to nearly $1,500 and raise the income limit for the credit to about $21,000.
  • For 2021 only, the applicable minimum age for credit reduced to 19 years old
  • Eliminates the maximum age of 65 years
• The Child and Dependent Care Tax Credit (CDCTC) would be expanded for 2021 to cover up to 50% of qualifying childcare expenses up to:
  • $4,000 for one child
  • $8,000 for two or more children
• The credit would be refundable and fully available to families:
  • Making less than $125,000
  • Partially available for those earning between $125,000 and $400,000
• Increase in exclusion for employer-provided dependent care assistance.
  • Increases limit for income exclusion for employee provided dependent care assistance for periods after December 31, 2020, and before January 1, 2022, from $5,000 to $10,500

Expansion of Unemployment Insurance Benefits

• Continues Federal supplemental UI benefits of $300 per week beginning March 15, after the current one expires, through September 6, 2021.
• Exempts first $10,200 in unemployment benefits paid in 2020 from Federal income tax
• Increases total UI compensation time to 74 weeks from 50 weeks
• Extends all other provisions for Pandemic Unemployment under CARES through August 29, 2021

Direct Payments (Recovery Rebates)

• Direct payments of $1,400 per individually filed tax return ($2,800 if married) plus $1,400 per each qualifying dependent. Benefit amount begins to phase out at adjusted gross income of:
  • $75,000 (single filer)
  • $112,500 (head of household)
  • $150,000 (joint filer)
• Direct payments will be phased out as follows.
  • $80,000 (single filers)
  • $120,000 (head of household)
  • $160,000 (joint filers)

Worker Safety

• Provides funds for enforcement activities relative to COVID-19
• Federal employees carrying out duties Jan 2020 through Jan 2023 and diagnosed with COVID-19 are eligible to make a workers’ compensation claim

Modifications to Paycheck Protection Program

• Removes SBA affiliation rules for nonprofits
• Allows charities with 500 or fewer employees per physical location to be eligible for PPP
• Creates a new category of eligibility for additional covered nonprofit entity
  • Includes any nonprofits not included in Section 501(c)(3), 501(c)(4), 501(c)(6) or 501(c)(19), and exempt from tax under 501(a) and
    • Does not receive more than 15% of its receipts from lobbyist activities and did not exceed $1 million in the most recent tax year
    • Has 300 or fewer employees
  • Provides additional $7.5 billion for PPP loans
  • Excludes COBRA subsidy credits from forgiveness

Employee Retention Credit

• Expanded the ERC through December 31, 2021
• Creates a $50,000 quarterly credit cap for businesses defined as a “Recovery Startup Business”; defined as a business which started operations after February 15, 2020, with annual gross receipts not exceeding $1 million applying to credits for periods after June 30, 2021

COBRA Subsidy Credits

• Provides 100% subsidy for employee COBRA benefits
• Credit allowed against employee Medicare tax
• Advancement of credit is available via Form 7200
• Employees who voluntarily separate are not eligible
• Effective from April 1, 2021, through September 30, 2021

Grants to Impacted Small Business

• Payroll support grants for the airline Industry
• Creates restaurant revitalization fund
  • Impacted businesses meeting certain criteria can apply for grants directly from the Small Business Administration
  • Grants are based on the calculated Pandemic Related Revenue loss of the eligible entity
  • Grants are limited to $5 million per location not to exceed $10 million per eligible entity
  • Businesses who received grants previously are not eligible
  • Grants are reduced by Employee Retention Credit and PPP loan forgiveness previously granted
  • Priority given to grant applications for businesses owned by certain protected classes of business owners
• Directs the Small Business Administration to develop resources for support of applicants who wish to apply for grants under the Economic Aid to Hard-Hit Businesses, nonprofits, and Venues Act under the Consolidated Appropriations Act (CAA)