American Rescue Plan Act: Stimulus Plan Expands Business Assistance

The $1.9 Trillion American Rescue Plan Act (ARPA) that President Biden signed into law on March 11 contains a number of provisions intended to help small businesses and other organizations hurt by the pandemic. Foremost, it includes additional Paycheck Protection Program (PPP) loans to struggling businesses, and a number of special grants to companies in industries that have been especially hard hit, including restaurants, movie theaters, concert spaces and museums.

The measure also includes provisions extending a number of tax credits to employers affected by the pandemic, in order to make it easier for people laid off during the health emergency to access COBRA coverage after they lose their jobs and their health coverage. ARPA opens up a new opportunity for businesses that have been hurt by the pandemic to access financial aid to keep their doors open and stay viable. Many of the programs build on ones introduced earlier in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and extended by the Consolidated Appropriations Act of 2021 (CAA).

PPP Extended

The law authorizes another $7.25 billion for the Paycheck Protection Program, which offers forgivable loans to small firms and other organizations that have been hit by the pandemic. These loans are forgivable if 60% of the funds are used on payroll and the rest pays for mortgage interest, rent, utilities, personal protective equipment or certain other business expenses. While the legislation set the deadline to apply for March 31, it was extended until June 30 after Congress passed supplemental legislation.

Other Assistance

There are a number of other provisions of the new law aimed at providing financial aid:

• $10 billion for state governments to help leverage private capital and make low-interest loans and other investments to help their small businesses recover.
• $15 billion to the Economic Injury Disaster Loan grants program to be given to small businesses in underserved areas, especially minority-owned enterprises.
• $29 billion for financial relief grants to restaurants. The maximum grant size will be $5 million for restaurants and $10 million for restaurant groups. The Small Business Administration will administer these grants.
• $15 billion will be added to the Shuttered Venue Operators Grants program, which was launched by the CARES Act. More funds will be made available to museums, theaters, concert and other venues that had to shut down due to COVID-19-induced restrictions. This program has not yet launched.

Tax Credits

Originally enacted under the CARES Act and CAA, the Employee Retention Credit (ERC) lets certain employers take advantage of a tax credit for qualified wages paid to employees. The CARES Act capped the ERC at $5,000 per employee for 2020. The CAA, passed in late 2020, expanded the ERC to apply to qualified wages made between Jan. 1 and June 30 this year. It also increased the maximum amount of the credit to $7,000 per employee per quarter. The new stimulus law extends the ERC through the end of this year. That means that eligible small firms can take a tax credit of up to $28,000 per employee for 2021.

Who is Eligible: Businesses that were either fully or partially suspended as a result of COVID-19-related government orders that restricted their ability to operate and generate sales. Also, any business that has gross receipts that are less than 80% of gross receipts for the same calendar quarter in 2019.

ARPA also makes eligible for the tax credit any start-up businesses that also suffered revenue losses as a result of the pandemic. In addition, ARPA extends through September the availability of paid leave credits to small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine or caregiving due to the pandemic and any closure orders. Employers that offer paid leave to workers who are sick or in quarantine can take dollar-for-dollar tax credits equal to wages of up to $5,000.