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American Rescue Plan Act: Business Tax Impacts Thumbnail

American Rescue Plan Act: Business Tax Impacts

We've read through the 242 pages in the American Rescue Plan Act (ARPA) bill so you don't have to. In this article, we focus on how the legislation impacts American businesses.

Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) has been extended through the end of 2021. The ERTC maximums have increased for 2021 to 70% of qualified wages and health plan expenses paid by the employer, up to a $7,000 credit for each quarter. The Relief Act amended the CARES Act to permit an employer that received a PPP loan to be eligible to claim an ERTC effective retroactive to the effective date of the CARES Act, March 27, 2020.

The ERTC program has many intricacies to it, and we strongly believe that eligible clients would benefit from a proactive conversation with their tax professionals.

If you have questions about the ERTC, please contact Elisa Daras, Lisa Orbaugh or Kristen Hopkins at 317.735.6445.

The ARPA extended the credits for sick and family leave, originally enacted by the FFCRA, through September 30, 2021. The limits also increased to $12,000 and 60 days per employee, an increase of $2,000 and 10 days. While extending the credits, the ARPA does not mandate that employers provide the leave past December 31, 2020.

Self-Employed Qualified Sick Leave

For self-employed individuals, a credit is available for up to 10 days of qualified sick leave.

COBRA Continuation Coverage

The ARPA includes a 100% subsidy for COBRA health insurance premia for employers. Effectively, laid-off employees can maintain health insurance at their former employer's plan for no cost. This subsidy is for the period of April 1, 2021 to September 30, 2021.

Employers claim a credit on their 2021 payroll tax returns to receive a reimbursement for the subsidy's cost.

Payroll Protection Program

The Payroll Protection Program has received additional $7,250,000,000 of funding and the SBA is currently accepting applications until the March 31st deadline. 

Restaurant Revitalization Fund

For restaurant owners, grants are available from the Restaurant Revitalization Fund. Grants are calculated by subtracting 2020 revenue from 2019 revenue. PPP and EIDL funds spent will offset the available grant amount but grants will not be included in gross income.

The Restaurant Revitalization Fund may be used to pay for the following expenses:

  • payroll costs
  • principal and interest expenses on mortgage costs (but not prepayment of mortgage)
  • rent
  • utilities
  • maintenance expenses

During the first 21 days of Restaurant Revitalization Fund grants, the SBA will prioritize applications from restaurants owned and operated by women, veterans and socially and economically disadvantaged individuals.