March 10, 2021
The House just passed the Senate-revised American Rescue Plan. President Biden is expected to sign the bill into law before March 14 when enhanced unemployment benefits will expire. The bill allocates money for vaccines, schools, small businesses, and anti-poverty programs. It does not include raising the federal minimum wage to $15.00.
At $1.9 trillion dollars, the American Rescue Plan is the largest aid package to date. The intention of the bill is to provide COVID-19 relief and measures to stimulate the economy. Senator Angus King from Maine told NPR's Rachel Martin that "There are really two pieces to this bill. One is directly-related to the health crisis, but the other, and the larger piece, is related to the economic crisis that the health crisis has created."
Here are the details on the American Rescue Program.
Direct Payments
Individuals earning up to $75,000 and couples earning up to $150,000 would receive the full direct payments (Recovery Rebate) of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns. This includes dependent college students 23 or younger, as well as elderly parents living with their children.
Similar to the two previous stimulus payments, the Recovery Rebate payments are fully refundable credits against 2021 taxes.
The income cutoff at which payments phase out is $80,000 for individuals and $160,000 for couples filing jointly.
Unemployment Benefits
Enhanced federal unemployment insurance payments will remain at $300 per week until September 6, 2021. The first $10,200 in unemployment payments are nontaxable for households with incomes under $150,000.
Expanded Child Tax Credit
The legislation temporarily expands the child tax credit to $3,000 for children ages 6 to 17 and $3,600 for children under age 6. Families eligible for the full credit would get payments of up to $300 per child per month from July through December 31, 2021. The amount is gradually reduced for couples earning over $150,000 and individuals earning over $75,000 per year.
Paycheck Protection Program
The bill includes an additional $7.25 billion to fund the Paycheck Protection Program (PPP). More nonprofits will be eligible to apply, including groups that engage in advocacy and some limited lobbying. It also allows larger nonprofits to be eligible.
Education
More than $128 billion in grants are available for state educational agencies. Ninety percent of the grants are allocated to local educational agencies and $39 billion to higher education institutions. Nearly $15 billion in funds are directed to the Child Care & Development Block Grant program to help support child-care facilities, predominantly in high-need areas.
Student loan forgiveness between December 31, 2020, and January 1, 2026, is tax-free instead of having the forgiven debt treated as taxable income.
The bill includes $4.5 billion for the Low-Income Home Energy Assistance Program (LIHEAP) to help families with home heating and cooling costs.
The agriculture secretary has been given the authority and funding to temporarily increase the value of cash vouchers by $35 per month for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for a four-month period during the pandemic.
There is $1.4 billion in funding allocated to the Older Americans Act to support nutrition programs, community-based support programs and the National Family Caregiver Support Program. The bill also provides $37 million to the Commodity Supplemental Food Program for low-income seniors.
To address hunger, food insecurity, and support humanitarian efforts around the world, the American Rescue Plan Act provides $800 million to the Food for Peace program.
Public Health
The Centers for Disease Control and Prevention (CDC) will receive $7.5 billion to track, administer, and distribute COVID-19 vaccines. Another $46 billion would go toward diagnosing and tracing COVID-19 infections, and $2 billion is for buying and distributing various testing supplies and personal protective equipment (PPE).
Rural Development Grants for Rural Health Care
The act provides $500 million for a variety of rural health care efforts, including but not limited to increasing capacity for vaccine distribution, improving access to medical supplies, increasing telehealth capabilities, supporting staffing needs for vaccine distribution or COVID-19 testing, and providing nutrition assistance to vulnerable communities.
Industry Support
The Small Business Administration (SBA) will get $25 billion for a new grant program for "restaurants and other food and drinking establishments." Up to $10 million per entity and $5 million per physical location, with a maximum of 20 locations, can receive a grant.
The legislation sets aside $5 billion for small businesses with less than $500,000 in revenue in 2019. Another $1.25 billion is for the SBA's Shuttered Venue Operators Grant program.
The bill allocates nearly $30 billion for the transportation sector, including money for payroll and PPE; $8 billion for airports; $3 billion for a temporary payroll support program for the aerospace manufacturing industry; and $1.5 billion to recall and pay Amtrak COVID-19 related furloughed employees. Another $15 billion is allocated to support workers in the airline industry.
Agricultural Provisions
An estimated $10.4 billion for programs designed to strengthen the agricultural and food supply chain, e.g., animal surveillance or COVID-19 mitigation efforts for agricultural workers; additional resources to purchase and distribute agricultural commodities to nonprofits, restaurants, or other food-related entities; increase access to health care in rural communities; and provide debt relief and other support programs for socially disadvantaged farmers and ranchers.
The act appropriates $3.6 billion, approximately 35% of total agricultural expenditures, for USDA to purchase and distribute agricultural commodities and fund COVID-19 mitigation efforts for agricultural and supply chain workers.
Other efforts to protect the food and agricultural supply chain include $300 million for animal monitoring and surveillance efforts for the incidence of COVID-19.
Assistance for Socially Disadvantaged Farmers
The American Rescue Plan Act of 2021 does not appropriate funds directly to socially disadvantaged farmers. Even so, an estimated $4 billion will be used to provide direct payments of up to 120% of a socially disadvantaged (Black, Hispanic, Native American or Asian American) farmer’s or rancher’s outstanding debt as of January 1, 2021. The loans include USDA Farm Service Agency direct farm loans, USDA guaranteed loans and Commodity Credit Corporation farm storage loans, among others. The additional 20% is intended to pay off the taxes associated with the amount of the direct payment related to the outstanding debt.
In addition to the debt forgiveness, the act appropriates $1.01 billion to provide outreach, training, education, technical assistance, grants and loans, and funding to educational institutions to help improve land access for socially disadvantaged farmers and ranchers and address heir’s property issues. More than $5 billion is expected to fund provisions designed to provide assistance for socially disadvantaged farmers or provide debt relief for these farmers and ranchers.
Rental Assistance
There is $25 billion for emergency rental assistance, including $5 billion for emergency housing vouchers for people experiencing homelessness, survivors of domestic violence and victims of human trafficking.
Affordable Care Act
Currently under the ACA, people who earn 400% of the federal poverty level are not eligible for the tax credits (subsidies) that help offset the cost of buying health plans. That means a single person who earns more than about $51,000 is not eligible, nor is a family of three that makes about $87,000.
The legislation would eliminate an income cap that limits who is eligible for ACA tax credits to reduce monthly insurance premiums. It would also limit the amount households pay to only 8.5% of their income on healthcare, and it would boost subsidies to lower-income consumers.
These are some of the main provisions of the American Rescue Plan. We will provide you with more information on the final bill once it is available.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at Richard.Higgins@McCarthy.CPA. I can be reached at Marty.McCarthy@McCarthy.CPA As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
