How the American Rescue Plan Act Impacts Small Businesses
March 16, 2021
President Biden recently signed into law the American Rescue Plan Act of 2021 (H.R. 1319), a $1.9 trillion emergency legislative package which seeks to provide the resources needed to address the ongoing COVID-19 public health crisis and spur a strong economic recovery. In this article, we break down the provisions contained within the law that impact small businesses and the insurance agents representing them.
Modifications to the Paycheck Protection Program (PPP)
The American Rescue Plan Act adds an additional $7.25 billion to the PPP and makes the program more accessible to independent business owners. The act does not extend the application deadline for PPP loans, so if you are planning to apply for the program you will need to submit an application by March 31. That said, a bipartisan group of legislators is currently drafting legislation to extend the application deadline through May.
The American Rescue Plan Act makes the following modifications to the PPP, as outlined by the Small Business Administration (SBA):
- Allows sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula for these categories of applicants
- Eliminates an exclusionary restriction on PPP access for small business owners with prior non-fraud felony convictions, consistent with a bipartisan congressional proposal
- Eliminates PPP access restrictions on small business owners who have struggled to make federal student loan payments by eliminating federal student loan debt delinquency and default as disqualifiers to participating in the PPP
- Ensures access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Number (ITIN) to apply for the PPP
COVID-19 Economic Injury Disaster Loan (EIDL) Program
The COVID-19 Target Economic Injury Disaster Loan (EIDL) Advance program provides additional funds for small businesses who suffered significant financial losses due to COVID-19. This program is intended to help small businesses who are either in low income communities or who have suffered a drastic reduction in income. The first round of Initial EIDL Advance funds were exhausted quickly, with many eligible businesses not receiving the much needed aid. The American Rescue Plan Act authorizes supplemental payments to businesses that qualified initially but did not receive the funds they were entitled to. Eligible businesses can now receive up to $10,000, and businesses with 10 or fewer employees, who suffered loss of revenue greater than 50% compared to the same time last year, may be eligible for a direct/supplemental payment of $5,000.
Businesses do not need to re-apply for the Target EIDL Advance Program as the SBA will reach out to those who qualify via email. The SBA will first reach out to EIDL applicants who already received a partial EIDL Advance payment (between $1,000 – $9,000). Businesses who previously applied to the program will be contacted directly by SBA via email in the coming weeks with instructions on how to receive payments.
To qualify for the Target EIDL Advance program, businesses must
- Have their primary place of business located in a low income community
- Can prove a 30% reduction in revenue during an 8-week period beginning on March 2, 2020, or later
- Have 300 or fewer employees
Eligible businesses that did not receive EIDL funds the first time around can expect to receive payments with this new round of funding.
Tax Credit Extensions
The American Rescue Plan Act contains provisions allowing businesses to utilize more qualified wages when claiming their employee retention tax credit. Businesses that formed after February 15th, 2020 and shut down because of mandated COVID-19 orders are now qualified for a $50,000 tax credit per quarter instead of a $10,000 tax credit. The deadline to claim the tax credit has been extended to December 31, 2021.
The eligibility criteria under the Families First Coronavirus Response Act, which allows for employees to be paid qualified sick leave wages, has also expanded. Employers may now claim a tax credit credit for sick leave wages paid for:
- Employees taking leave while they await the results of a diagnostic test for COVID-19 after being exposed to the virus or because their employer requests the test.
- Leave taken for the employee to obtain a COVID-19 vaccine or to recover from any health issues resulting from the vaccine.
Small businesses suffered tremendously due to the pandemic, and the American Rescue Plan Act contains provisions that provides these businesses with additional funding and tax benefits. If you or any of your customers qualify for any of the aforementioned funding or tax credits, be sure to take advantage of this opportunity, as these benefits can help businesses recover from the losses sustained over the past year.