On March 11, 2021, the much-awaited American Rescue Plan (ARP) bill was passed by Congress and signed by President Biden into law.
For those who don’t know what ARP is, here is a brief explanation. ARP is a $1.9 trillion economic stimulus program to help businesses and individuals that were affected by COVID-19. It aims to aid in the economic recovery of the country.
Recently, the ARP saw some enhancements to make it more useful for its recipients.
If you are curious about the latest ARP updates and how they are relevant to small business owners, read on.
1. Paycheck Protection Program:
The PPP receives an additional $7.25 billion raising the total funding under this program to $813.7 billion. The Small Business Administration (SBA) will disburse the loans to eligible businesses.
The eligibility criteria have been expanded to include tax-exempt entities like labor organizations, fraternal benefit societies, and recreation clubs.
To be eligible, these tax-exempt groups should not employ more than 300 people per location. Also, they cannot spend more than $1 million per annum on lobbying. Lobbying activities cannot be more than 15% of total activities.
Now, even large nonprofits with around 500 employees per location can avail the PPP. Internet-only news publishers who have 500 or fewer employees per location have also been brought within the purview of PPP.
Premiums paid on behalf of eligible employees for COBRA health insurance continuation coverage are forgivable.
If you are a Schedule C owner, i.e., self-employed or an independent contractor, and applied for PPP based on your net income, you can now use your gross income as a base to avail the PPP.
ARP provides an additional $15 billion for disbursement of Targeted EIDL Advance payments to eligible businesses.
$10 billion is earmarked for businesses that haven’t received the full amount of advance under the year-end relief package. It includes small businesses with 300 or fewer employees or 30% economic losses in the covered period compared to the same period before the pandemic.
$5 billion is for payments to new eligible entities with 10 or lesser employees and economic losses of more than 50%. The total amount of the advance is $5000.
These benefits are for businesses owned by low-income communities.
3. Restaurant Grants:
Under this grant, $28.6 billion is allotted for the Restaurant Revitalization fund, which the SBA will manage. Eligible businesses include food trucks, bars, restaurants, caterers, and tribally-owned entities.
$5 billion will go to eligible entities with less than $500,000 gross income in 2019. The total amount of grant is not to exceed $10 million and is limited to $5 million per location of an eligible entity.
Businesses having more than 20 locations or those run by state or local governments are disqualified from this grant. Even live venues requesting loans under the COVID-19 year-end relief package and public traded companies cannot get this grant.
4. Shuttered Venue Operators Grant:
The ARP adds an extra $1.25 billion to this grant program. Now eligible operators can apply for both the SVOG and PPP, but the SVOG grant will be reduced by the amount of the PPP loan.
SVOG currently offers grants equal to 45% of the gross income of an eligible venue earned in 2019, with the maximum amount for a single operator set at $10 million. Also, these entities must demonstrate a 25% reduction in revenues in 2020 compared to 2019.
5. State Small Business Credit Initiative:
Under this program, an amount of $10 billion is allocated to the different states:
- To help businesses affected by COVID-19 recover.
- Provide funds to businesses owned and operated by socially and economically disadvantaged individuals.
- Aid businesses in accessing technical assistance, legal, accounting, and financial services.
Every state has been allotted funds under this program, and the states will decide how to disburse this amount.
6. Paid Sick and Family Leave Credits:
The ARP has extended the FFCRA tax credits till September 30, 2021. This is to encourage employers to give time off to employees for FFCRA or COVID reasons. The new provisions:
- Increase the number of wages an employer can claim for the paid family credit from $10,000 to $12,000 per employee per year.
- Increases the number of paid leave a self-employed worker can claim as credit from 50 to 60 days.
- Expands the paid family leave credit so that employers can get credit for leave provided for reasons included under the previous employer document for paid sick time.
- Expands the paid sick time and the paid family leave credits to include leave taken for a COVID vaccine or recover from any issues due to the COVID vaccination.
- Changes the ten-day limitation for the maximum number of days for which an employer can claim the paid sick leave credit regarding the wages paid to employees. Now it applies to sick days after March 31, 2021.
- Prevents employers from claiming credits if they make leaves available in a discriminatory manner, favoring highly compensated employees, full-time employees, or based on employee tenure with the employer
7. Employee Retention Tax Credit:
ARP extended the credit to the third and fourth quarters of 2021. Eligible businesses can now get a tax credit for 2020 of up to $5000 per employee.
For 2021, you can get $7000 in credit per employee per quarter. So this credit can be to the tune of $28,000 per employee for the entire year.
Another change is that businesses that started after February 15, 2020, are also eligible for tax credits. However, the eligibility is only extended to businesses that made less than $1,000,000 average gross receipts in the three years preceding the calendar quarter for which credit is claimed.
Also, this credit cannot be more than $50K per year.
The ARP has made several impactful changes in the existing relief programs to help businesses affected by COVID-19.
As a business owner, take advantage of the loans, grants, and credits to keep your business sustainable.
We have given a brief outline of the changes introduced by ARP and how entrepreneurs can avail these benefits in the above paragraphs.
However, if you need assistance in finding out your business eligibility and applying for these various loans and grants, you can contact our team at FinAccurate.
If you would like to watch the video of this article, click on the link below:- What Did The American Rescue Plan Latest Updates Offer Small Businesses?Other Accounting Related Information