How the New Covid-19 Relief Package Aids Employers

New Federal COVID Relief Package

Last week, the American Rescue Plan Act (ARP), the latest federal COVID-19 relief bill, was signed into law.  The ARP will impact employers several ways, including through expanded relief for small businesses and restaurants, tax credit extensions, and extended federal unemployment benefits.

Small Business and Restaurant Relief

The ARP sets aside an additional $7.25 billion for the Paycheck Protection Program (PPP), the program which went into effect last year and provides qualifying small businesses with loans that can be forgiven entirely if certain conditions are met.

The new law also established the Restaurant Revitalization Grant Program, which earmarks $29 billion in relief for restaurants, bars, caterers, and other businesses in the hospitality and dining industries that have been hit particularly hard by the pandemic.  Like the PPP, the RRGP is administered by the Small Business Administration (SBA).  Unlike the PPP, however, relief under the RRGP is in the form of a true grant, and not a loan with the possibility of forgiveness.

The amount of the grant is equal to a business’s pandemic-related revenue loss, calculated as 2019 gross receipts minus 2020 gross receipts, up to $5 million for a single location and $10 million total.  Businesses are required to reduce their pandemic-related revenue loss by any amounts received under the PPP.

Grant funds can be used for a wider variety of expenses than proceeds from the PPP, including payroll, principal or interest on a mortgage, rent, utilities, maintenance expenses, supplies, and food and beverage expenses, among others.

The restaurant grants are also exempt from gross income for tax purposes.

Tax Credit Extensions

Also included in the law is the extension of tax credits related the Families First Coronavirus Response Act (FFCRA).  The FFCRA created new paid leave obligations for employers related to COVID-19, which expired at the end of the 2020.  However, employers who voluntarily continue to offer this paid leave can receive refundable tax credits.  Originally, these credits were to be offered only through March 31, 2021, but the ARP has extended this to September 30, 2021.

The ARP has also expanded the employee retention credit to December 31, 2021.

Unemployment Benefits

The ARP has extended the federal government’s $300 per week supplement to unemployment benefits through September 6, 2021.  It has also extended Pandemic Unemployment Assistance for self-employed workers and others who do not qualify for state unemployment benefits, as well as Pandemic Emergency Unemployment Compensation for individuals experiencing long-term unemployment.

SBA Extends Deferment for Disaster Loans

Small business receiving a COVID-19 Economic Injury Disaster Loan (EIDL), or any other disaster loan from the SBA, will not be required to begin making payments until 2022.  For all SBA disaster loans made in 2020, the first payment due date has been extended from 12 months to 24 months from the date of the note.  For loans made in 2021, the first payment due date has been extended from 12 months to 18 months from the date of the note.  Borrowers have the option to make payments earlier to avoid additional accrual of interest.

California Small Business Grant Program to Accept New Applications

Last month, California passed a new economic relief package which included $2.1 billion of grant money for small businesses, in a program administered by the Office of the Small Business Advocate (CalOSBA).  CalOSBA has announced that it will begin accepting new applications on Thursday, March 25.

Qualifying businesses can receive grants from $5,000 to $25,000.  To be eligible to receive a grant, a small business must:

– Have no more than $2.5 million, and no less than $1,000, in yearly gross revenue (based on most recently filed tax return)

– Have been in operation since at least June 1, 2019

– Be currently operating or have a plan to re-open when permitted by the state

– Have suffered business interruptions or closures as a result of the pandemic

– Be able to provide 2018 or 2019 tax return and a copy of an official filing with the state or a local municipality (i.e. Articles of Incorporation, fictitious business name, government-issued business license).

More information on the small business grant program can be found here.