American Rescue Plan Act – Payroll Provisions and New Legislation

President Biden signed the American Rescue Plan Act which has a number of favorable updates to the existing payroll credits as well as new legislation. Below are the items which will likely impact you as the employer:

  • Extends the Family First Coronavirus Response Act (FFCRA) paid sick time and paid family leave credits from March 31, 2021 through September 30, 2021
    • Increases the amount of wages for which an employer may claim the paid family leave credit in a year from $10,000 to $12,000 per employee
    • Permits the paid sick and family leave credit to be claimed by employers who provide paid time off for employees to obtain the COVID-19 vaccination or recover from an illness related to the immunization.
    • Resets the 10-day limitation on the maximum number of days for which an employer can claim the paid sick leave credit with respect to wages paid to an employee. This also applies to those who are self-employed. The current 10-day limitation runs from the start of the credits in 2020 through March 31, 2021. The reset will take effect April 1, 2021 and the 10-days must be used by September 30, 2021
    • Non-discrimination requirement – No credit shall be allowed under this section to any employer for any calendar quarter if such employer, with respect to the availability of the provision of qualified sick leave wages to which this section otherwise applies for such calendar quarter, discriminates in favor of highly compensated employees (within the meaning of section 414(q)), full-time employees, or employees on the basis of employment tenure with such employer
  • Extends the Employee Retention Credit (ERC) from June 30, 2021 until December 31, 2021 including the $10,000 in qualified wages per any calendar quarter and continues the year-over-year gross receipts decline requirement at 20%. Limitations:
  • Qualified wages paid by an employer taken into account as payroll costs under (1) Second Draw PPP loans; (2) shuttered venues assistance and (3) restaurant revitalization grants are not eligible for the ERC
  • Limits the total ERC to $50,000 per calendar quarter of an eligible employer that is a “recovery startup business” as defined in  Code Sec. 3134(c)(5). A “recovery startup business” is one that: (1) began operations after February 15, 2020 whose average annual gross receipts for a 3-taxable-year period ending with the taxable year which precedes such quarter does not exceed $1,000,000, and (2) experiences a full or partial suspension of operations due to a governmental order or experiences a significant gross receipts decline.
  • Adds “additional covered nonprofit entity” as a nonprofits eligible for First Draw and Second Draw PPP loans. An “additional covered nonprofit entity” is an organization listed in  Code Sec. 501(c) other than those Code Sec. 501(c)(3),  Code Sec. 501(c)(4),  Code Sec. 501(c)(6), or  Code Sec. 501(c)(19) with up to 300 employees.  In addition, eligible entities with up to 500 employees including Code Sec. 501(c)(3) nonprofit and veterans’ organizations; and (2)  Code Sec. 501(c)(6) nonprofit organizations (business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues) are included.
  • Restaurant Revitalization Grants – You must own or operate 20 or few establishments. This is a grant given to any business who fulfills the eligibility and certification requirements is capped at $10,000,000 and limited to $5,000,000 per physical location of the business. The amount an eligible business can receive is equal to their pandemic-related revenue loss. The pandemic-related revenue loss is the difference between their 2020 gross receipts and their 2019 gross receipts. Grants may be used for:  (1) payroll costs; (2) mortgage payments; (3) rent; (4) utilities; (5) maintenance expenses; (6) supplies; (7) food and beverage expenses; (8) covered supplier costs; (9) operational expenses; (10) paid sick leave; and (11) any other expense determined to be essential to maintaining the business.
  • However, this does not include any business that has a pending application for, or has received, and grant under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act

We’ll be happy to assist you and your business navigate these changes. Please let us know if you have any questions.

 

Westbrook CPA