President Biden has signed into law The American Rescue Plan Act 2021 (ARPA), which includes $1.9 trillion in funding for individuals, businesses, and state and local governments. The latest stimulus package contains benefits for businesses and nonprofits. 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 ARPA 2021 provides:
- $7.25 billion in new money for the small-business loan program known as PPP and would allow more nonprofits to apply, including those groups that engage in advocacy and some limited lobbying. It also allows larger nonprofits to participate.
- $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 business and nonprofit items in the bill.
Paycheck Protection Program
PPP Deadline
While the ARPA does not extend the PPP’s current application period, which is scheduled to close March 31, the House is set to vote on the extension next week. The House will act swiftly to pass the measure, and aides are hopeful that the Senate will take up the bill by unanimous consent to avoid any time-consuming debate ahead of the planned spring work period.
The need for the legislation became clear after concerns over delays in loan approvals, and also due to the Biden administration’s recent changes to the program rules. The Small Business Administration (SBA) has instituted lengthy fraud reviews into the loan application process, causing some banks to stop accepting new applications due to the backlog in reviews. Banks have also expressed concern that they cannot implement revised loan amount information before the current expiration date. Under the agreement, the application deadline would be extended to May 31 and the SBA would be able to process applications for 30 days after the deadline.
Nonprofit Eligibility
The American Rescue Plan Act of 2021 makes 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 Act 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.
Employee retention credit
The ARPA extends the employee retention credit through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees.
Under the Act, the employee retention credit would be allowed against the Sec. 3111(b) Medicare tax. Recipients of PPP loans are eligible for the credit, but the same payroll costs cannot be used for claiming PPP loan forgiveness.
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;
- Utilities;
- 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 ARPA also includes another $1.25 billion for the Small Business Administration’s Shuttered Venue Operators Grant program.
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.
Other Industries
To support the transportation sector, the bill allocates nearly $30 billion for transit costs, including payroll and personal protective equipment; $8 billion for airports; $3 billion for a temporary payroll support program to help support the aerospace manufacturing industry; and $1.5 billion to recall and pay Amtrak employees who were furloughed because of the pandemic and to restore various daily routes. Another $15 billion would also be allocated to support workers in the airline industry.
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 phases, each one starting no more than 14 days after the previous step.
Phase 1. 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.
Phase 2. 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.
Phase 3. 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.
Education
There are over $128 billion in grants to state educational agencies, with 90% allocated to local educational agencies, plus $39 billion in grants to higher education institutions. Nearly $15 billion in funds are directed to the Child Care & Development Block Grant program to help support child care facilities, particularly in high-need areas.
Public health
The Centers for Disease Control and Prevention is set to receive $7.5 billion to track, administer and distribute COVID-19 vaccines. Another $46 billion would go toward diagnosing and tracing coronavirus infections, and $2 billion would go toward buying and distributing various testing supplies and personal protective equipment.
Questions
In a series of upcoming e-Alerts and webinar(s), we will provide you with more information on how you can make the most of the benefits available to you, your family and/or your business. Please contact your Warady & Davis LLP advisor with your questions at 847-267-9600; info@waradydavis.com.
You can also visit the Warady & Davis LLP COVID-19 Resource Center for a wealth of information on stimulus assistance, new legislation and much more. This information is updated regularly.