The Rescue Plan & Small BusinessMarch 10, 2021
With both the House and Senate having passed the massive American Rescue Plan Act (H.R. 1319), there are a number of key provisions that will impact small-business owners. Not a single Republican voted to approve the measure in the Senate, and just one Democrat in the House voted with Republicans to oppose the bill. Democratic leadership had previously set a goal of completing action on a COVID-19 relief package by March 14, however President Joe Biden is expected to sign the approves package on Friday, March 12.
NSBA has provided a general overview of the bill here, and below you can find more details on the small-business-specific provisions of the measure.
The Senate bill includes several changes from the version passed previously by the House in February. The House’s legislation would have increased the minimum wage to $15 an hour by 2025, which the Senate parliamentarian determined violated Senate rules. While Sen. Bernie Sanders (I-Vt.) sought to overrule the parliamentarian and pass the minimum wage increase as an amendment to the package on Friday, eight Senate Democrats joined Republicans in voting against it, a sign that it had no chance of passing.
NSBA remains concerned about a provision included in both the first House version, and the Senate passed bill that would lower the Form 1099-K reporting threshold for Third Party Settlement Organizations (TPSOs) under I.R.C. § 6050W. In a letter to lawmakers, NSBA, along with our colleagues in the business community, expressed our serious reservations about the proposed changes to the reporting requirements which would significantly lower the threshold for Form 1099-K reporting. As mentioned in our letter, this proposal would dramatically expand the scope of those who receive Form 1099-K, sweep in casual participants in the marketplace, and disrupt the gig and shared economy ecosystems during a time when the priority should be enabling greater access to flexible earning opportunities while the country continues to recover from the pandemic.
These changes would also increase compliance costs for TPSOs and small businesses. Additionally, the effective date makes compliance extremely difficult for all companies. Further, this amendment would significantly lower the reporting requirement threshold for TPSOs to file 1099-K forms reporting the gross amount paid in settlement by a TPSO to a payee from the uniform federal standard of $20,000 and 200 transactions to $600 regardless of the number of transactions.
Paycheck Protection Program
The includes another $50 billion in aid for small business through the Paycheck Protection Program (PPP), as well as grants for bars and restaurants and shuttered venues. Unfortunately, the bill did not extend the PPP beyond its current end date of March 31 despite widespread requests by NSBA and others in the business community. NSBA, along with a coalition of other business groups sent a letter to lawmakers, urging them to extend the PPP through year end. The Senate bill does add $7.25 billion to the program, which began again in mid-January with $284.5 billion, and some larger nonprofits will also become eligible.
Under the American Rescue Plan Act, small businesses in low-income communities that have been most affected by the pandemic will be eligible for up to $10,000 each from the Economic Injury Disaster Loan (EIDL) grant program. The program is designed to roll out in a series of exclusive periods, starting with businesses that did not get the full amount they applied for initially–that is, $1,000 per employee, up to $10,000. Eligible businesses must have no more than 300 employees and have suffered a loss of gross receipts of more than 30 percent during an eight-week period between March 2, 2020 and December 31, 2021, compared with an eight-week period prior to March 2. The second window is for those who have endured losses of 50 percent and have fewer than 10 employees. The third period is for those who have had losses of between 30 percent and 50 percent and have fewer than 10 employees. The Small Business Administration (SBA) must provide $5,000 grants to each eligible company, while funds last.
Employee Retention Credit
In the new bill, businesses can claim the refundable Employee Retention Credit (ERC) equal to as much as $7,000 per employee per quarter during the last half of the year. So, including the existing provision, which is similarly apportioned, employers this year would qualify for up to $28,000 per employee—and if they applied for 2020, the total amount available is $33,000 per employee. Eligible employers in 2021 include companies that experienced a full or partial suspension of operations as a result of government mandates, or those that can show at least a 20 percent reduction in quarterly gross receipts, compared with the same quarter in 2019. Companies eligible for the 2020 credit must show a more than 50 percent decline in gross receipts. Recipients cannot take a tax deduction on expenses paid for with PPP funds, a continuation of current law.
Bars, Restaurants & Caterers Grant
The bill includes grants made available to bars, restaurants, and caterers which is equal to the difference between a business’s gross receipts pre-pandemic—that is, in 2019–and gross receipts last year. If the business has fewer than 20 locations, it can get a grant of up to $5 million per location, up to $10 million in total.
Senate Majority Leader Chuck Schumer (D-N.Y.), Senate Finance Chair Ron Wyden (D-Ore.) and Sen. Joe Manchin (D-W.Va.) struck a deal on an amendment from Sen. Manchin that would provide $300 a week in payments for unemployed insurance recipients through Sept. 6, rather than the $400 a week through August the bill originally laid out. The change would also provide up to $10,200 in tax relief for laid off workers for households with incomes under $150,000 a year.
Funding for Cities & Counties
Other changes involved restoring $10 billion in direct aid to cities and counties, which had been cut from the initial Senate substitute amendment to the House-passed aid bill. The restored funds bring the total for local governments to $130.2 billion, while preserving a $10 billion fund for state broadband infrastructure projects that the earlier amendment made room for. In addition, the final amendment would create a new $1 billion annual program, championed by for communities and tribal governments that have historically been harmed by federal government policies.
Please click here for NSBA’s general overview of the bill.