NSA outlines tax provisions of latest pandemic-relief bill
Director of Public Policy, NSA
President Biden on March 11 signed into law the American Rescue Plan Act (ARPA), a nearly $1.9 trillion COVID-19 relief package containing several tax provisions.
The House approved the Senate-amended ARPA (HR 1319) by a 220-to-211 vote on March 10; the Senate passed it on March 6 by a 50-to-49 vote. Senate Democrats used a procedure known as budget reconciliation, which requires only a simple majority for approval instead of the 60-vote threshold required under regular order. No Republicans in either chamber voted for the measure.
The ARPA expands and extends many provisions originally enacted under the Families First Coronavirus Relief Act (FFCRA) (P.L. 116-127), Coronavirus Aid, Relief and Economic Security (CARES) Act (P.L. 116-136), and the Consolidated Appropriations Act, 2021 (CAA) (P.L. 116-260).
For members’ convenience, correlating section numbers under the ARPA are provided below along with NSA’s summary of the most noteworthy tax provisions.
Let’s jump in.
Section 9601. 2021 Recovery Rebates to Individuals
The ARPA provides for a $1,400 so-called stimulus payment to qualifying individuals and children. Similar to prior economic impact payments, individuals can receive the full $1,400 ($2,800 for a married couple) “recovery rebate” if their adjusted gross income (AGI) is no more than $75,000 ($150,000 for married couples filing jointly), with the amounts phased out above those levels. Under the ARPA, however, the phaseout occurs sooner so that an individual with an AGI of $80,000 (or $160,000 for married filing jointly) would receive no payment.
Notably, the legislation states that taxpayers who receive a larger payment than for which they are eligible would not be required to repay the difference; those who receive less than they are eligible may claim the difference on their 2021 tax returns.
White House Press Secretary Jen Psaki said on March 11 that individuals will begin seeing payments deposited into their accounts as early as this weekend.
Section 5001. Modifications to Paycheck Protection Program
The ARPA provides an additional $7.25 billion for forgivable PPP loans and expands eligibility to include additional nonprofit entities and small internet publishing organizations.
The new law did not extend the PPP, however, which is set to expire on March 31. House lawmakers on March 11 introduced the bipartisan PPP Extension Act; it would extend the March 31 deadline two months. Senate support of the measure is unclear at this time.
Section 2901. Unemployment Insurance
The ARPA extends through September 6 the weekly $300 federal supplemental unemployment benefit (FPUC). Additionally, it extends through Sept. 6 the $100 per week supplement established for workers whose income was largely non-wage earnings and thus qualified for little in traditional unemployment aid.
Most notably, however, is the retroactive change in tax treatment of the unemployment benefits for 2020: the first $10,200 of unemployment compensation received by the taxpayer is now nontaxable income so long as the individual’s adjusted gross income (AGI) is less than $150,000.
Section 9621. Earned Income Tax Credit (EITC)
For tax year 2021, the ARPA greatly enhances the EITC by expanding eligibility for the childless EITC and increasing the amount of the credit. For 2021, the legislation:
- makes individuals as young as 19 years of age generally eligible for the credit and eliminates the upper age limit;
- doubles the credit percentage and phaseout percentage.
- includes special rules regarding the credit for former foster youth and homeless youth.
Additionally, the ARPA provides for several permanent changes in EITC eligibility, including by making individuals who have children without Social Security Numbers eligible for the childless EITC and by allowing married but separated individuals to be treated as unmarried for EITC purposes if filing separately.
Further, it increases the amount an individual can earn from investments that is not counted toward income for purposes of EITC eligibility from $3,650 to $10,000, as indexed for inflation.
Section 9611. Child Tax Credit
For tax year 2021, the ARPA:
- increases the child tax credit to $3,000 per eligible child ($3,600 for each eligible child under the age of 6);
- allows children to remain eligible so long as they are under the age of 18; and
- makes the credit fully refundable for the 2021 tax year.
However, the additional $1,000 (or $1,600) on top of the ordinarily $2,000 tax credit would begin to phase out earlier than the usual, beginning at $75,000 for individuals ($150,000 for joint filers). *The phaseout for the usual $2,000 tax credit remains at its existing thresholds.
Continue reading at nsacct.org.
Contact Us for Help
If you have questions about provisions of the American Rescue Plan Act, contact the tax experts at Kleshinski, Morrison & Morris CPAs. Call us at (419) 756-3211, send an email to kmm@kmmcpas.com, or complete the Contact Us form at kmmcpas.com/contact.
Jessica L. Jeane, J.D.
Director of Public Policy, National Society of Accountants