The American Rescue Plan Act of 2021 (ARPA or the Act) was signed into law on Thursday March 11, 2021. The Congressional Research Service (CRS) notes that the $1.9 trillion dollar “bill provides additional relief to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses.”
As noted by the CRS, the bill provides funding for numerous necessities identified by Congress and the President.
Programs benefiting from the American Rescue Plan Act funding include:
- agriculture and nutrition programs, including the Supplemental Nutrition Assistance Program (SNAP, formerly known as the food stamp program);
- schools and institutions of higher education;
- programs for child-care and for older Americans and their families;
- COVID-19 vaccinations, testing, treatment, and prevention;
- mental health and substance use disorder services;
- emergency rental assistance, homeowner assistance, and other housing programs;
- state, local, tribal, and territorial governments with payments for economic relief;
- multi-employer pension plans;
- small business assistance, including specific programs for restaurants and live venues;
- programs for health care workers, transportation workers, federal employees, veterans, and other targeted populations;
- international and humanitarian responses;
- tribal government services;
- scientific research and development;
- state, territorial, and tribal capital projects that enable work, education, and health monitoring in response to COVID-19; and
- health care providers in rural areas.
The bill also includes provisions that:
- extend unemployment benefits;
- extend the employee retention credit through December 31, 2021;
- extend and expand the emergency sick pay and family medical leave credits for eligible employers voluntarily providing these types of benefits;
- clarify that EIDL advances and restaurant revitalization grants are tax-exempt income and that expenses paid for from the proceeds of these funds are deductible;
- treat up to $10,200 of 2020 unemployment compensation as exempt from taxable income;
- treat student loan forgiveness through 2025 as exempt from taxable income;
- provide a maximum recovery rebate of $1,400 per eligible individual (including dependents) though the benefits phase-out at much lower adjusted gross income levels than the two previous rebate programs. Individual taxpayers with 2021 adjusted gross income exceeding $80,000 and married filing joint taxpayers with 2021 adjusted gross income exceeding $160,000 will not qualify;
- substantially expand and modify certain tax credits, including the child tax credit and the earned income tax credit;
- provide premium assistance for certain health insurance coverage;
- require coverage, without cost-sharing, of COVID-19 vaccines and treatment under Medicaid and the Children’s Health Insurance Program (CHIP); and
ARPA contains some additional tax law changes also. These include provisions that:
- extend by one year to 2026 the sunset of the excess business loss limitation enacted under the Tax Cuts and Jobs Act;
- expand the limitation on the deduction for executive compensation to the CEO, CFO and the next five highest-paid employees (increased from the next three highest-paid employees) after December 31, 2026; and
- repeal the election to allocate interest expense on a worldwide basis by members of a multi-national affiliated group beginning after December 31, 2020.
The above is an executive summary of the contents of the Act. Additional detailed guidance will be forthcoming on the various provisions contained in the Act. For additional information, please check our American Rescue Plan Act resource page for additional information. In the meantime, if you have questions, please contact your Schneider Downs tax advisor.
