American Rescue Plan: More Aid; Large Company Tax Hikes

The American Rescue Plan (ARP) of 2021 is now a reality. Signed by President Joe Biden (D) on March 11, the $1.9-trillion bill is mostly known for payments to individuals. But of critical concern to the owners, managers and shareholders of linen, uniform and facility services businesses, are provisions that include the Paycheck Protection Program (PPP), Emergency Injury Disaster Loan (EIDL) Program, Employee Retention Tax Credit (ERTC) and more.

The provisions of the bill include:

• Small Business Financing Program. Creators of the ARP hope to leverage $35 billion in government funds into $175 billion in additional small business lending and investment with an investment in successful state, local, tribal and nonprofit small business financing programs.  The goal is to provide low-interest loans and venture capital to help entrepreneurs – including those in the clean energy sector – innovate, create and maintain jobs and provide the essential goods and services on which communities depend.
• The Paycheck Protection Program (PPP). Already taking applications for second-round loans, the PPP gets an additional $7.25 billion for a third round. Although just a small fraction of the amounts allocated in previous legislation, new rules allow more nonprofits to apply for loans designed to help borrowers meet their payroll and operating costs and can, potentially be forgiven.
• The Emergency Injury Disaster Loan Program (EIDL). The ARP legislation earmarks $15 billion to the EIDL) Program which provides long-term, low-interest loans from the SBA.  Severely impacted small businesses with fewer than 10 workers will reportedly be given priority for some of these funds.
• Workplace Safety: The ARP provides $150 million to the U.S. Department of Labor to carry out worker-protection activities related to the COVID-19 pandemic.
• Community Navigator Services has been funded to the tune of $100 million to provide outreach, education and technical assistance with the SBA’s many programs. Community Navigators, community organizations or community financial institutions provide services to women-owned businesses as well as those owned and operated by veterans or the “socially and economically disadvantaged.”
• Employee Retention Tax Credit. To encourage employers to keep workers on their payroll, last year’s CARES Act created the Employee Retention Tax Credit (ERTC). The ERTC allows 70% (up from 50%) of a textile services operation’s qualified wages to be immediately refundable via reductions in the required employment tax deposits.
• Paid Sick and Family Leave. Last year lawmakers guaranteed many workers quarantining because they contracted COVID-19 two weeks pay. They also provided an additional 10 weeks of paid family leave to those staying home with children whose schools were closed. Although these benefits expired in December 2020, ARP will allow tax credits for wages voluntarily paid through Oct. 1, 2021.

The new law also includes tax provisions that could take a bite out of large company’s bottom lines. Specifically, the ARP addresses business-tax elements by:

• Raising the top corporate tax rate to 28% from 21% and phasing out the 20% qualified business-income deduction.
•  Imposing a minimum 15% tax on large corporations with over $100 million in profits, if deductions would otherwise allow them to pay less (much like the alternative minimum tax for individuals).
• Imposing tax punishments on businesses that shift jobs overseas, and enhancing tax breaks for businesses that expand domestic jobs
• Addressing climate change with enhanced tax credits for electric vehicles; energy-efficient homes and businesses; carbon recapture, use and storage; and eliminating tax breaks for fossil fuels.

These provisions – and tax hikes – are only a small part of the overall American Recovery Plan. As noted above, individuals will receive a third round of relief. Specifically, the bill will provide $1,400 payments to individuals earning up to $75,000 and couples earning up to $150,000.  The payments phase out fully for those individuals making $80,000 and couples making $160,000.

In another issue concerning individuals, the ARP’s provision on unemployment insurance continues to extend benefits for the self-employed and “gig” workers, along with those who have exhausted their regular jobless benefits, with a $300 weekly boost in jobless benefits into September. Tax relief on the first $10,200 in unemployment payments for workers in households earning up to $150,000 a year will provide much welcome tax-free payments

There are many more items included in the bill, which is one of the largest relief measures Congress has ever enacted. Obviously, professional guidance will be required to maximize the benefits a linen, uniform and facility services business may wish to explore.

Freelance writer Mark Battersby wrote this article for Textile Services Weekly. Watch for a more-detailed piece on the ARP legislation in May’s Textile Services magazine