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Payroll Changes Under the American Rescue Plan Act

Tim O’Neill

March 15, 2021

General

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA) to address the continuing effect COVID-19 is having on the American economy.  The Act includes many new provisions, but also extends and expands provisions found in the Families First Coronavirus Relief Act (FFCRA), Coronavirus Aid, Relief and Economic Security (CARES) Act, and the Consolidated Appropriations Act, 2021 (CAA, 2021).

Below are a few highlights, many payroll-related, that could have a significant impact on your business:

Paid Sick and Family Leave Credits

The Act extends the FFCRA paid sick time and paid family leave credits through September 31, 2021 and increases the amount of wages an employer may claim from $10,000 to $12,000.  Additionally, the Act permits the Treasury Secretary to waive any failure to deposit penalties on the employer’s share of Medicare tax if failure is due to an anticipated credit.

Employee Retention Credit

The Employee Retention Credit (ERC), which was massively enhanced under the Consolidated Appropriations Act, has been extended from June 30, 2021 to December 31, 2021. The newly issued legislation now provides a maximum employee retention credit of $50,000 per calendar quarter to an eligible employer that is a “recovery startup business” as defined in Code Sec. 3134(c)(5). A “recovery startup business” is one that:

  1. Began operations after February 15, 2020 whose average annual gross receipts for a three-taxable-year period does not exceed $1,000,000, and
  2. Experiences a full or partial suspension of operations due to a governmental order, or experiences a significant gross receipts decline.

Other Relief-Related Provisions

The Act provided additional relief for some industries that were hit the hardest, specifically restaurant and event venues.  $28.6 Billion was appropriated to provide “restaurant revitalization grants” to struggling restaurants. This money, which is available until expended in full, will be granted to eligible entities including restaurants, other specified food businesses, and businesses operating in an airport terminal. Businesses that operate over 20 locations, whether they do business under the same name, do not qualify for the grant. Additionally, any businesses that have claimed, or have applications pending, for the Economic Aid to Hard-Hit Small Businesses, nonprofits, and Venues Act do not qualify. Eligible entities are limited to a maximum grant of $10,000,000 and $5,000,000 per physical location. Grant funds can be used for payroll costs, principal and interest on mortgage obligations, rent, utilities, maintenance, and any other expenses determined essential to maintain the business.

Shuttered venue operators were also authorized $1.25 billion in grants under ARPA. Venues qualifying include live venue operators and promoters, theatrical producers, performing arts organization operators, museums, movie theatres, and talent representatives that can show a decline in revenues of 25% or more.

Please contact our team or your Mueller Prost specialist for any support.

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