On March 11, President Biden signed into law the American Rescue Plan Act (ARPA), which expands and extends many of the economic aid programs enacted in 2020. Note: the following summaries are not intended to be exhaustive and only focus on key business issues addressed in the ARPA.
Families First Coronavirus Response Act (FFCRA)
The emergency paid leave mandate established by the FFCRA expired on December 31, 2020. Thus, covered employers no longer have an obligation to provide emergency paid sick or family and medical leave. Importantly, the Economic Aid Act (EAA) of December 2020 extended the fully refundable credit against payroll taxes for employers who voluntarily provide such paid leave through March 31, 2021.
The ARPA re-extends the tax credit for voluntarily provided emergency leave through September 30, 2021. In addition to all pre-existing FFCRA leave justifications, the ARPA states that the refundable tax credits are available for emergency leave voluntarily provided for (1) employees obtaining COVID-19 immunization (vaccination); (2) employees recovering from any injury, disability, illness or condition related to such vaccination; or (3) employees seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 (or their employer has requested such a test or diagnosis).
The ARPA also increased the wages covered by the leave credit from $10,000 to $12,000 per worker and increased the value of the credits to match an employer’s share of contributions to defined benefit plans and registered apprenticeship programs. New non-discrimination rules make the tax credit unavailable to employers that, in determining the availability of paid leave, discriminate in favor of highly compensated employees, full-time employees or employees based on tenure. Lastly, on April 1, 2021, the 80-hour limit for emergency paid sick leave and 10-week limit for the emergency paid family leave will re-set, enabling employers to voluntarily provide an additional emergency leave to employees who reached those limits prior to that date.
Paycheck Protection Program (PPP)
The ARPA increased PPP lending authority to $813.7 billion and expanded the scope of PPP loan forgiveness to include payments for COBRA premiums for individuals who qualify for health insurance continuation coverage, but only for loan forgiveness applications received following enactment.
The ARPA provides $15 billion for additional advance payments to eligible entities under the Small Business Administration’s Economic Injury Disaster Loan (EIDL) program. Of that, $10 billion is for covered entities that did not receive full eligible advance payments under the EAA. Those entities include recipients with 300 or fewer employees and economic losses of at least 30% over eight weeks compared with a similar period pre-pandemic. The remaining $5 billion is for new supplemental payments of $5,000 to covered entities with 10 or fewer employees that had economic losses of more than 50% during the covered period. The ARPA clarifies that EIDL program advance funds are excluded from gross income for income tax purposes.
Employee Retention Tax Credit (ERTC)
The ARPA extends the ERTC through December 31, 2021 (it was previously expanded and extended to July 1, 2021, by EEA). Eligibility for the credit is expanded to businesses that had gross receipts reductions of more than 90% compared to the same calendar quarter of 2019. This applies regardless of the number of full-time employees.
Other Business-Related Provisions
Among other things, the ARPA:
- Extends limitations on “excess business losses” for noncorporate taxpayers for one additional year (through 2026).
- Subsidizes 100% of COBRA premiums for individuals who involuntarily lose their jobs or have their hours reduced between March 11, 2021, and September 30, 2021. An employer or health plan can claim a refundable tax credit against its Medicare payroll tax liability for the cost of these premiums. COBRA premium assistance ceases once an individual becomes eligible for coverage under another group health plan or Medicare. Individuals who fail to notify their plans when they are no longer assistance-eligible are subject to penalties.
- Establishes a fund for the Pension Benefit Guaranty Corporation to use for financial assistance for certain qualifying multiemployer pension plans. The financial assistance, which would not have to be repaid, may cover all pension benefits due through plan years ending in 2051, with generally no reduction to accrued benefits. The ARPA makes no substantive changes to how multiemployer employer pension plans are administered. Dealerships participating in multiemployer pension plans should contact their plan’s administrators for more information.
- Increases the dependent care flexible spending account (DCFSA) limit from $5,000 to $10,500 for the 2021 tax year only. An employer is not required to incorporate this temporary increased limit, but if it wishes to do so, it must amend its DCFSA plan by no later than the last day of the plan year (e.g., December 31, 2021, for calendar-year plans), and the amendment can have retroactive effect back to the beginning of the plan year.
- Provides $200 million to the U.S. Department of Labor to carry out worker protection activities related to the COVIS-19 pandemic, with at least $100 million allocated to the Occupational Safety and Health Administration to support enforcement, education and training.
As always, dealers should review the above changes in conjunction with their tax advisors and attorneys. More information on COVID-19 related matters can be found on NADA’s Coronavirus Hub. Contact NADA Regulatory Affairs with any questions at [email protected].