Business COVID-19 Relief Applicable to the Delta Variant Surge

On March 11, 2021, President Biden signed PL 117-2 otherwise known as the American Rescue Plan Act of 2021 (ARP bill). President Biden’s $1.9 trillion COVID-19 relief package aimed at stabilizing the economy, providing needed relief to individuals and small businesses, and improving and accelerating the administration of coronavirus vaccines and testing. The relief package, which was Biden’s first major legislative initiative, is one of the largest in U.S. history and follows on the heels of the Trump Administration’s $900 billion COVID relief package enacted in December 2020 (Consolidated Appropriations Act, 2021 (CAA)). 

Measures Affecting Businesses

The ARP bill contained provisions designed to assist small businesses, in particular.  

Small Businesses and Paycheck Protection Program (PPP) 

The program ended on March 31, 2021 (the application period under the PPP was not extended under the ARP bill).

Employee Retention Credit (ERC)

As the Delta variant of the Covid-19 virus increases its penetration into our partially vaccinated society, the likelihood of a partial economic slowdown increases. At least in South Carolina, the likelihood of a government mandated business shutdown is probably off the table, but many non-essential businesses could see a substantial curtailment in economic activity as fear and caution return in at least a portion of our population. Businesses should monitor their level of gross receipts in accordance with the thresholds below to see if they qualify for relief.

The ERC, originally introduced under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and enhanced under the CAA, aims to encourage employers (including tax-exempt entities) to keep employees on their payroll and continue providing health benefits during the COVID-19 pandemic. The ERC is a refundable payroll tax credit for wages paid and health coverage provided by an employer whose operations were either fully or partially suspended due to a COVID-19-related governmental order or that experienced a significant reduction in gross receipts.

The CAA extended the eligibility period of the ERC to June 30, 2021, increased the ERC rate from 50% to 70% of qualified wages, and increased the limit on per-employee wages from $10,000 for the year to $10,000 per quarter ($50,000 per quarter for start-up businesses). The new bill extends the ERC for another six months to December 31, 2021 under the same terms as provided in the CAA.

Broadened Eligibility Requirements

Employers who suffered a 20% decline in 2021 quarterly gross receipts compared to the same calendar quarter in 2019 are now eligible.

A safe harbor is provided allowing employers to use prior quarter gross receipts compared to the same quarter in 2019 to determine eligibility.

Employers not in existence in 2019 may compare 2021 quarterly gross receipts to 2020 quarters to determine eligibility.

The credit is available to some government instrumentalities, including colleges, universities, organizations providing medical or hospital care, and certain organizations chartered by Congress.

Determination of Qualified Wages

Employers with 500 or fewer full-time employees in 2019 may include all wages and health plan expenses as “qualified wages.”

The Relief Act strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).

For more information about the tax relief discussed in this article, please contact Bill West, CPA at Scott and Company, 803-256-6021 or [email protected]

CLICK HERE to read the article in the Columbia Regional Business Report on page 25.