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Many Chicago businesses have been struggling for months to overcome the economic challenges created by the COVID-19 pandemic. The combination of modified operating rules and customer safety regulations has left many with limited revenue potential. As the months have passed, it has led to additional layoffs, terminations, and expense reductions. The good news is on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARP), into law providing over $1.9 trillion of relief. For businesses, it means an extension of the Employee Retention Credit, expanded grant and loan opportunities, and multi-employer pension plan relief. To help clients, prospects, and others, Selden Fox has provided a summary of the key changes below.

Key Business Provisions for ARP

Expanded PPP Eligibility – While the Act did not extend the March 31 Paycheck Protection Program (PPP) application deadline, there were important changes made to expand eligibility. Under prior regulations, only certain nonprofits could receive a PPP loan. This has been expanded to include “additional covered nonprofit entities” which now includes most nonprofit types. Certain exclusions apply to organizations involved in lending, selling life insurance, or private clubs. In addition, the Act also creates access for larger 501(c)(3), 501(c)(19), and 501(c)(6) entities assuming they have no more than 500 employees per physical location. Finally, there are restrictions on eligibility based on whether certain lobbying activities are undertaken by the organization.

Shuttered Venue Operators Grant – The Act permits eligible PPP loan borrowers received after December 27, 2020, to receive a Shuttered Venue Operators Grant. However, the amount of the grant will be reduced by the amount of approved PPP funds.

Restaurant Revitalization Fund – The Act creates a new $28.6B fund designed to provide immediate financial assistance to restaurants and other foodservice companies. The amount of the grant is determined by the amount of the pandemic-related losses incurred. Only those with less than 20 separate locations may apply and publicly held entities are excluded. Proceeds may be used to cover a number of expenses including payroll, rent, mortgage principal or interest, utilities, and food and beverage costs.

Employee Retention Tax Credit (ERC) – This popular payroll-based tax credit was extended by the Consolidated Appropriations Act, 2021, and was scheduled to expire on June 30, 2021. However, it has been extended to December 31, 2021. The credit was also changed to be applied against an employer’s share of Medicare rather than Social Security taxes. There were two other important changes, including:

  • Expanded Credit – Severely financially distressed employers are permitted to treat all wages paid as qualifying wages rather than only wages paid to employees not providing services. A distressed employer is an eligible employer whose gross receipts for the first quarter of 2021 are less than 10% for the same period in 2019.
  • Start-Up Businesses – The credit is expanded to include “recovery startup businesses”. This is an employer that started operations after February 15, 2020. While additional guidance for these businesses is expected, the maximum credit amount per calendar quarter is $50,000.

Multi-Employer Pension Plans (MEPPs) – A new financial assistance program was created to provide support to MEPPs facing solvency issues. The $85 billion fund will be administered by the Pension Benefit Guaranty Corporation (PBGC) and provide troubled plans with a means of covering benefit payments and plans expenses. While the application details have not yet been developed there is eligibility criteria that must be met in order to participate, including:

  • A plan must be in critical and declining status.
  • For plan years between 2020 and 2022, the plan is certified to be in critical status, has a modified funding percentage of less than 40% and has a ratio of active to inactive participants less than two to three.
  • Finally, any MEPP which was insolvent after December 16, 2014, but did not terminate the plan prior to the Act’s enactment.

Family & Sick Leave Credits – While the Act did not renew the requirement for companies to provide paid family and sick leave benefits originally required under the CARES Act, there was an extension of available tax credits for qualifying wages and benefits paid for those who voluntarily participate. Credit availability was originally scheduled to expire on March 31, 2021 but has been extended to September 30, 2021. The Act also makes other modifications, including:

  • The Act expands qualifying situations to include leave provided to employees obtaining an immunization or recovery from a condition related to immunization and those awaiting the results of a COVID-19 test after exposure or at the employer’s request.
  • Expands employer eligibility to include 501(c)(1) governmental organizations.
  • Increases the total number of eligible paid family leave from 10 weeks to 12 weeks.
  • Resets the date for counting paid sick leave to March 31, 2021. This means that employees that previously took ten days of emergency paid sick leave can receive an additional 10 days in 2021.

Contact Us

The relief offered through the American Rescue Plan Act of 2021 is welcome news for Chicago businesses that continue to struggle against the pandemic. Given the number of changes, it is important to consult with a qualified tax advisor to determine the best savings options for you. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Selden Fox can help. For additional information call us at 630-954-1400 or click here to contact us. We look forward to speaking with you soon.

Paul Rozek

Paul Rozek provides tax research, consulting and compliance services to closely held businesses, tax-exempt organizations, individuals and fiduciaries. His clients include family offices, private foundations, trade associations, charitable organizations, schools, credit unions and other nonprofit entities.