The U.S. House of Representatives passed, by a vote of 219–212, a $1.9 trillion COVID-19 relief package early Saturday morning that includes $1,400 stimulus checks to individuals, an extension of unemployment benefits, and tens of billions in aid for small businesses and not-for-profits.
The bill, titled the American Rescue Plan Act of 2021, H.R. 1319, also includes phased increases in the minimum wage that would bring it to $15 an hour by 2025. That part of the bill likely will not be considered in the bill's next stop, the Senate. That's because the Senate parliamentarian ruled Thursday that the minimum wage hike could not be part of the bill because it is being considered using budget-reconciliation rules, which clears the way for the Senate to pass the legislation by a simple majority.
Vice President Kamala Harris could overrule the Senate parliamentarian but was not expected to do so. This would guarantee that any bill passed by the Senate would be different from the House version, requiring changes and likely follow-up votes by both chambers in March.
Proponents of the bill have been pushing to have it passed and signed into law by March 14, which is when a $300-per-week federal supplement to unemployment checks is scheduled to expire. The American Rescue Plan Act moves the expiration date to Aug. 29 and increases the total number of weeks eligible for the supplement to 73 weeks per individual from 50 weeks (basically dating back to when the COVID-19 pandemic disrupted the U.S. economy). The act also boosts the federal supplement to $400 per week.
The American Rescue Plan Act includes numerous tax provisions, including a $1,400 recovery rebate credit ($2,800 for married taxpayers filing jointly) plus $1,400 for each dependent for 2021. Advance payments of the credit will be sent to individuals as economic impact payment checks. For more details, see the JofA article "Tax Provisions in the American Rescue Plan Act."
The bill also includes:
- $350 billion for state, local, and Tribal governments, many of which have experienced a reduction in tax revenue as a result of the pandemic.
- About $130 billion for K-12 schools and $40 billion for colleges and universities.
- More than $75 billion for COVID-19 testing and support of the vaccine rollout, including funds for hospitals, public health agencies, and biomedical research.
Small business items
The American Rescue Plan Act also contains a number of provisions for small businesses. It allocates an additional $7.25 billion for Paycheck Protection Program (PPP) forgivable loans but otherwise relies more on targeted grants to small businesses in sectors of the economy hardest hit by pandemic-related economic slowdowns. Specifically, the bill provides:
- $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments.
- $25 billion for restaurants, bars, and other eligible providers of food and drink.
- $1.25 billion for shuttered venue operators.
- $175 million to create a "community navigator" pilot program to increase awareness of and participation in COVID-19 relief programs for business owners currently lacking access, with priority for businesses owned by socially and economically disadvantaged individuals, women, and veterans.
The bill also allocates $15 billion in grant money to the airline industry, with $14 billion for eligible air carries and $1 billion for eligible contractors. An additional $8 billion is provided for airports.
Following is a high-level look at key small business items in the bill.
After being the centerpiece of the small business support in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act, or EAA), P.L. 116-260, the PPP plays a much smaller role in the American Rescue Plan Act. The program has disbursed more than $662 billion in forgivable loans in three iterations over the past 11 months. But with about half of the $284 billion in current funding available, the American Rescue Plan Act appropriates just $7.25 billion in additional funding and does not extend the PPP's current application period, which is scheduled to close March 31.
The plan does make more not-for-profits eligible for the PPP by creating a new category called "additional covered nonprofit entity," which are those not-for-profits listed in Sec. 501(c) of the Internal Revenue Code other than 501(c)(3), 501(c)(4), 501(c)(6), or 501(c)(19) organizations, that can receive an initial PPP loan, provided that:
- The organization does not receive more than 15% of receipts from lobbying activities;
- The lobbying activities do not comprise more than 15% of activities;
- The cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year that ended prior to Feb. 15, 2020; and
- The organization employs not more than 300 employees.
Also made eligible for the PPP are some larger not-for-profits:
- Larger 501(c)(3) organizations and veterans organizations that employ not more than 500 employees per physical location.
- Larger 501(c)(6) organizations, domestic marketing organizations, and additional covered not-for-profit entities that employ not more than 300 employees per physical location.
The plan also expands PPP eligibility to internet-only news and periodical publishers with more than one
physical location, as long as the business has no more than 500 employees per physical location or the applicable U.S. Small Business Administration (SBA) size standard, provided that the organization certifies it is an internet-only news or periodical publisher and that the loan will support locally focused or emergency information.
Support for restaurants
Restaurants and bars have been among the businesses most hurt by the stay-at-home and social-distancing restrictions imposed to slow the spread of COVID-19. The $25 billion Restaurant Revitalization Fund (RRF) is intended to help businesses in the food services sector.
In addition to restaurants and bars, other entities eligible for support from the RRF include food stands, food trucks, food carts, caterers, saloons, inns, taverns, lounges, brewpubs, tasting rooms, taprooms, and any licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.
The act allows for grants equal to the pandemic-related revenue loss of the eligible entity, up to $10 million per entity, or $5 million per physical location. The grants are calculated by subtracting 2020 revenue from 2019 revenue. Entities are limited to 20 locations.
The grant funds may be used to pay for the following eligible expenses:
- Payroll costs;
- Principal and interest payments on a mortgage, not including any prepayments on principal.
- Rent payments, not including prepayments;
- Maintenance expenses including construction to accommodate outdoor seating and walls, floods, deck surfaces, furniture, fixtures, and equipment;
- Supplies including personal protective equipment and cleaning materials;
- Food and beverage expenses within the eligible entity's scope of normal business practice before the covered period, which runs from Feb. 15, 2020, through Dec. 31, 2021, or another date as determined by the SBA;
- Covered supplier costs;
- Operational expenses;
- Paid sick leave; and
- Any other expenses the SBA determines to be essential to maintaining the eligible entity.
The plan requires applicants to make a good-faith certification that the uncertainty of current economic conditions makes the grant request necessary to support the applicant's ongoing operations and that the applicant has not also applied for or received a Shuttered Venue Operator grant.
The plan sets aside $5 billion for eligible applicants with 2019 gross receipts of $500,000 or less. The bill also charges the SBA with awarding the other $20 billion in grants in "an equitable manner to eligible entities of different sizes based on annual gross receipts."
During the first 21 days of the grants, the SBA will prioritize applications from restaurants owned and operated or controlled by women, veterans, or socially and economically disadvantaged individuals.
Targeted EIDL Advances
The act provides $15 billion for Targeted EIDL Advance grants, which provide funds to businesses located in low-income communities that have no more than 300 employees and that have suffered an economic loss of more than 30%, as determined by the amount that the entity's gross receipts declined during an eight-week period between March 2, 2020, and Dec. 31, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020.
Targeted EIDL Advance grants were created by the Economic Aid Act (EAA). The American Rescue Plan Act extends and expands the program in a series of steps, each one starting no more than 14 days after the previous step. To begin, no later than 14 days after the American Rescue Plan Act is enacted, the SBA must initiate a two-week period of accepting applications from any applicants that applied for Targeted EIDL Advances under the EAA and, because of lack of funds, did not receive the amount to which they were entitled ($1,000 per employee up to $10,000). The first 28 days after the plan enactment are reserved to addressing these potential funding shortfalls from the EAA.
Beginning 28 days after enactment is a 14-day period in which the SBA can also make grants of $5,000 to "severely impacted" small businesses, which are eligible entities that have suffered an economic loss of more than 50% and have no more than 10 employees. After 14 more days, the SBA can make $5,000 grants to "substantially impacted" businesses, which are those with no more than 10 employees that can demonstrate a loss of between 30% and 50%.
The plan states that funds from RRF grants and Targeted EIDL Advances shall not be included in the gross income of the person who receives the grant and that no tax deductions will be denied, no tax attribute reduced, and no basis increase denied due to the exclusion of the grant funds from gross income.
AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register.
The AICPA's Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA's coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.