Loans and Grants
Paycheck Protection Program (PPP): The ARP provides an additional $7.25 billion to the SBA. The ARP bill expanded the types of not for profits that qualify for PPP, and included internet publishing organizations. Although more funding was allocated towards PPP, the deadline to apply remains March 31, 2021.
The Economic Injury Disaster Loan (EIDL): A total of $15 billion was allocated to the Small Business Administration (SBA) to provide additional $10,000 EIDL advances for qualifying businesses that have not yet received an EIDL grant beginning on the date that the law is enacted.
The SBA will process additional $5,000 EIDL grants to certain businesses that are severely impacted by the pandemic. The bill clarifies that EIDL grants are not included in taxable income and do not reduce tax basis, result in the denial of any tax deduction, or decrease any tax attributes.
Shuttered Venue Operators Grant Program: The ARP adds $1.25 billion to the programs and provides that recipients are now eligible for PPP with restrictions on double dipping.
Restaurants & Other Food and Drinking Establishments: The restaurant industry was a major focus of the ARP. $28.6 billion was allocated to create a Restaurant Revitalization Fund, which will aid qualifying businesses to continue operations. There is a $10 million per entity and $5 million per location cap. These grants are not taxable, and do not reduce tax attributes, basis, or cause the denial of deductions. This program is set to end on December 31, 2021.
Tax Credits
Employee Retention Credit (ERC): The ARP made some changes to the Employee Retention Credit. Amendments included in the ARP apply to tax quarters after June 30, 2021. The more significant changes are as follows.
The ARP extends the Employee Retention Credit, set to expire as of June 30th, through the end of 2021, thereby permitting the credit for two added calendar quarters.
Expansion of Qualified Businesses for the Employee Retention Credit:
1.Recovery Start-up Businesses
The ARP expands the Employee Retention Credit to “recovery start-up businesses,” businesses that began carrying on a trade or business after February 15, 2020 and that have annual gross receipts of $1 million or less, subject to rules similar to other employers. The maximum Credit that can be claimed by such a recovery start-up business may not exceed $50,000 during any calendar quarter.
2.Severely Financially Distressed Employer
Another change to the Employee Retention Credit also includes changes for Qualified employers who are considered “severely financially distressed employers,” which is defined as employers that have a gross receipts reduction of more than 90 percent as compared to the same calendar quarter in 2019. If an employer satisfies this test, all wages paid to employees are qualified wages, regardless of the size of the employer and number of employees.
Families First Coronavirus Response Act (FFCRA):The ARP extended and enhanced the sick and family leave credits available under FFCRA, expanding the definition of someone experiencing symptoms of COVID-19 to include those individuals who received the vaccine and/or experienced symptoms from getting the vaccine. It also restarts the 10-day limit so that after March 31, 2021, the employer can receive the same credit for another 10 days. After March 31st, the credits can also be utilized against the Medicare portion of the employment taxes. The family leave credit under ARP, increases the overall wage limitation to take care of a COVID-19 affected relative or a child due to no daycare from $10,000 to $12,000. Both the sick leave and the family leave credit are extended until September 30th, 2021. The sick and family credits for self-employed was also extended and enhanced to 60 days from 50 days. Advance payments of these credits are also allowed.
Other Significant Items Included in The ARP
Pensions: Funds were allocated towards multiemployer union pensions, particularly favoring those plans that are currently in the most danger of failing. Minimum contributions are decreased for single employer pension plans and various other changes are enacted which ease certain restrictions.
The following tax increases were included to offset the cost of the bill.
Excess Business Loss Limitation: Although the limitation on excess business losses for non-corporate taxpayers has been deferred from beginning until the 2021 tax year, it is scheduled to continue, and sunset through 2027 rather than in 2026.
Interest Allocation: The ARP states that affiliated groups can no longer elect to allocate interest on a worldwide basis.
Highly-Compensated Employees of Publicly Held Corporations: For tax years after 2026, the restriction on the ability of a public company to deduct the excess of salary of certain highly-compensated employees on over $1 million is expanded to include the next 5 highest compensated employees.