The American Rescue Plan Act is the latest Covid-19 relief and stimulus measure following the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act – March 2020), and the relevant portions of the Consolidated Appropriations Act of 2021 (the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act – December 2020).
What follows are some of the more salient aspects of the bill as they relate to businesses and business owners:
- The Paycheck Protection Program (PPP)
- The PPP was established under the CARES Act as an expansion to the SBA’s 7(a) loan program, and it was broadened under the Economic Aid Act.
- Many small business and non-profits (501(c)(3) and 501(c)(6)) are already eligible for a (forgivable) PPP loan under the CARES Act.
- The Economic Aid Act made provision for a second-draw PPP loan if the entity has used the first draw PPP loan by the time it receives the second-draw loan, has no more than 300 employees, and experienced a 25% decline in gross receipts for any quarter of 2020 as compared to the same quarter of 2019.
- The American Rescue Plan Act (ARPA) broadens the PPP still further, making it available to most non-profits (other than 501(c)(4) organizations).
- Perhaps most importantly, ARPA injects an additional $7.25 billion into the program.
- Economic Injury Disaster Loans (EIDL)
- EIDL was established under the CARES Act as a (generally non-forgivable) loan to small businesses and non-profits.
- EIDLs are for 30-year terms with low, fixed interest rates (3.75% for businesses, 2.75% for non-profits)
- The EIDL program was modified under the Economic Aid Act so that any advance received would not be deducted by a borrower’s PPP loan forgiveness.
- ARPA injects an additional $15 billion of funding into the EIDL program, with one third of such amount targeted to businesses that suffered a revenue loss of greater than 50 percent, are located in low income census tract areas, and employ 10 or fewer people.
- The expanded Employee Retention Credit (ERC)
- Established under the CARES Act, this credit is designed to encourage businesses to keep employees on their payroll by providing a tax credit of 50% of up to $10,000 worth of wages.
- The credit was set to expire on July 1, but under ARPA will be made available through Dec. 31, 2021, for eligible employers.
- In addition, startup businesses established after Feb. 15, 2020, with annual gross receipts of up to $1 million and that otherwise do not meet the ERC eligibility tests, will now be eligible for the ERC.
- Restaurant Revitalization Fund
- These are grants, to be administered by the SBA, to be provided (tax free) to eligible restaurants in an amount equal to the amount of its pandemic-related revenue loss for the period from February 15, 2020 to December 31, 2020 (which is measured by the difference between 2020 and 2019 gross receipts).
- ARPA has appropriated $25 billion for this fund. $5 billion of this will be allocated to restaurants whose gross receipts in 2019 were less than $500,000, and the first 21 days of the program prioritizes small businesses owned by women, veterans, or socially and economically disadvantaged individuals.
- Grant amounts may be used to cover payroll costs, mortgage payments, rent, utilities, maintenance expenses, operational expenses, paid sick leave, and supplies.
- Shuttered Venue Operators
- Established by the Economic Aid Act, these are grants, to be administered by the SBA, to live venue operators or promoters, theatrical producers or live performing arts organization operators, motion picture theater operators, museum operators, and talent representatives that were in operation on Feb. 29, 2020, and that had a 25 percent or greater drop in gross earned revenue during any quarter of 2020 as compared to the same quarter of 2019.
- The Economic Aid Act appropriated $15 billion for the program, and ARPA adds an additional $1.5 billion.
- ARPA also repeals the previous act’s prohibition on an entity receiving both a PPP loan after December 27, 2020 and this grant. ARPA now provides that the amount of this grant will be reduced by any PPP loan amount received after December 27, 2020.
- State Small Business Credit Initiative
- This program was initially created under the Obama Administration as part of the 2010 Small Business Jobs Act.
- It had since expired, but ARPA restarts it with an injection of $10 billion to encourage state governments to initiate programs which utilize private capital for low-interest loans and other investment to support entrepreneurs.
- Other Opportunities
- There may be additional opportunities for businesses and non-profits in the immediate to near future from local government sources.
- ARPA establishes $360 billion in funding to state, local, and territorial governments for economic relief. Among other things, these state and local recipients may utilize this funding to provide aid to small businesses, non-profits, and industries such as tourism and hospitality, to provide premium pay to essential employees or grants to their employers, and to make investments in water, sewer, and broadband infrastructure.
- In Texas alone, state, municipal and county entities are projected to receive $27.6 billion. For example, ARPA will provide the city of Houston with $615.44 million and Harris County with $914.12 million. Fort Bend County was allocated $157.42 million, and Montgomery County will get $117.8 million.