CONGRESS PASSES AMERICAN RESCUE PLAN
March 10, 2021
Since Hand Law (www.hand.law) helps clients with government challenges and opportunities, the firm has been providing updates on how policymakers are responding to COVID-19 – and what those responses mean for you. This Hand Law update focuses on the latest relief legislation: The $2 trillion American Rescue Plan.
Almost exactly one year after COVID-19 officially became a national emergency, Congress has passed new relief legislation to help Americans address the challenges of the deadly pandemic. In addition to nearly $100 billion devoted to public health-related activities, taxpayers, businesses, and governments will see a variety of economic and fiscal benefits once President Biden signs the American Rescue Plan into law. These include:
1. Additional Direct Payments. Each American whose last filed tax return reflected an adjusted gross income (AGI) of less than $75,000 for a single filer, or who filed jointly with a total AGI of less than $150,000, will be provided with $1,400. Payments will be reduced above that AGI and end entirely at $80,000/$160,000.
2. Enhanced Unemployment Benefits. State governments manage unemployment assistance. In Florida, the maximum unemployment benefit is only $275 per week. The American Rescue Plan will enhance state unemployment payments by $300 per week through September 6, 2021. Additionally, the bill makes the first $10,000 in unemployment benefits non-taxable for taxpayers with annual incomes under $150,000.
3. Child Tax Credit. Under current law, taxpayers can take a $2,000 tax credit for every child 16 and under on their annual returns. The American Rescue Plan will increase the credit to $3,600 for children under six years old and $3,000 for children between the ages of six and 17. Additionally, the increased child tax credit will be paid periodically through direct deposit. The National Association of Counties estimates that this policy provision and others in the legislation “taken together would result in an estimated 5 million children rising above the supplemental poverty measure in 2021—reducing the child poverty rate by 51 percent.”
4. Housing Assistance. The American Rescue Plan provides nearly $30 billion in emergency rental assistance.
5. Extended Employee Retention Tax Credit. The March 2020 CARES Act established this tax credit to encourage businesses to retain workers. The credit is equal to “50% of qualified wages paid, including qualified health plan expenses, up to $10,000 per employee…meaning the maximum credit available for each employee is $5,000.” Congress has now extended the credit through December 31, 2021.
6. Aid to States, Counties, Cities, Schools and Transit Agencies. The plan provides $350 billion to fiscally challenged state and local governments. According to the National Conference of State Legislatures (NCSL), states will receive nearly $200 billion -- $26 billion divided equally (for a minimum of $500 million each) and another $170 billion which will “be allocated based on the states’ share of unemployed workers over a three-month period, from October-December 2020.” Local governments will also gain funding, with NCSL reporting “$65.1 billion for counties, $45.6 billion for metropolitan cities, and $19.5 billion for towns with fewer than 50,000 people.” The plan provides nearly $175 billion to K-12 schools and colleges/universities. Public transit agencies will receive almost $31 billion, with the plan directing nearly $10 billion to airports and Amtrak.
7. Direct Business Support. Congress has appropriated an additional $7.25 billion to the Paycheck Protection Program to assist small businesses and non-profits. The American Rescue Plan also offers payroll support to industries most impacted by COVID-19 – such as $25 billion to restaurants and $18 billion to aviation.
www.naco.org/blog/biden-american-rescue-plan-would-cut-child-poverty-half www.journalofaccountancy.com/news/2021/mar/employee-retention-credit-irs-guidance.html www.ncsl.org/ncsl-in-dc/publications-and-resources/american-rescue-plan-act-of-2021.aspx