An initial summary of the American Rescue Plan Act of 2021, which was signed into law on March 11, 2021, provides an early glimpse at some of the measures in the bill that might have an impact on businesses. The summary of key takeaways provided by the Morgan Lewis LLC examines a wide range of the bill's measures. Provided here are highlights with some added explanation of some measures that impact small construction firms, their employees, and clients who may have been impacted by the events of 2020 :
Reauthorization of State Small Business Credit Initiative Act. The American Rescue Plan Act restores the State Small Business Credit Initiative (SSBCI), which expired in 2017. This program is designed to provide federal financing to small businesses across the country. The new iteration of the SSBCI will provide $10 billion in funding to support small businesses responding to and recovering from the economic effects of the COVID–19 pandemic.
Of the amounts appropriated to the SSBCI, the Treasury Dept. will allocate at least $500 million to businesses with fewer than 10 employees, including sole proprietors and independent contractors.
This provision under the new program is designed to ensure business enterprises owned and controlled by socially and economically disadvantaged individuals have access to credit and investments. To help meet that goal, the Plan includes additional funds to states that demonstrate support for companies owned by socially and economically disadvantaged individuals.
Paycheck Protection Plan
The American Rescue Plan Act allocates an additional $7.25 billion to the Paycheck Protection Program (PPP), but it does not extend the program beyond the current expiration date of March 31, 2021.
Homeowner Assistance Fund
In an effort to assist homeowners, Congress created a $9.961 billion Homeowner Assistance Fund administered by the Treasury Dept. This fund goes to states to provide assistance to homeowners for the prevention of mortgage delinquencies, defaults, foreclosures, inability to pay energy bills , or the loss of homes due to financial hardship.
As has been widely reported in the popular press, the Rescue Plan increases the child tax credit. Less well reported is the provision in the new law that makes the first $10,200 in 2020 unemployment insurance benefits received by qualifying taxpayers nontaxable.
The Rescue Plan also provides an expansion of the employee retention credit to new small businesses. The employee retention credit was a measure included in the Cares Act passed in March 2020 that incentivized employers who retained employees, providing a credit worth $5,000 per employee. Only companies with fewer than 100 employees that did not receive benefits under the PPP were eligible. Under the new Rescue Plan, the credit is worth $7,000 per qualifying employee for the first two quarters of 2021 (beginning January, 2021).
Remodelers may also appreciate the tax implications for "sharing" companies that employ gig workers that increasingly compete in local markets with remodeling and handyman services. Allowances under previous tax law may have allowed sharing companies to under report revenues earned by many of the workers. The Rescue Plan of 2021 amends Code Section 6050W and now requires increased reporting by "sharing" companies (with a reporting trigger point of $600 instead of the prior law’s $20,000) on IRS Form 1099-K, Payment Card and Third Party Network Transactions, starting in 2022.
Extension of COBRA Benefits
The American Rescue Plan Act extends 100% of the health insurance benefit for any COBRA qualified beneficiary. A qualified beneficiary is an employee whose hours have been reduced, or who was laid off or otherwise had employment involuntarily terminated.
The legislation includes specific requirements for employers to update COBRA notices that describes the premium subsidy to all Eligible Individuals. Failure to provide such notice will be treated as a failure of the COBRA notice requirements - a failure that comes with steep penalties.
Employers will receive a credit for the COBRA premium subsidy through a payroll tax credit against the employer’s quarterly taxes.
The COBRA law applies to employers with 20 or more employees who offer health care benefits.