The bill must still clear the Senate and be signed into law, but the House has now passed the American Rescue Plan of 2021.[1]  The bill has 592 pages of material which, while far shorter than the year end Comprehensive Appropriations Act, 2021, is still a very substantial bill with a number of tax and non-tax provisions.

The Journal of Accountancy published two articles on the bill as passed by the House, one discussing tax-related provisions in the bill[2] and the other discussing other business related provisions.[3]

One provision in the House bill that almost certainly will not be in the Senate bill is the provision to increase the minimum wage to $15 per hour.  The Senate parliamentarian has ruled that the provision would not be allowed under the reconciliation rules of the Senate, a necessity for all items in the bill since it is not expected to garner any Republican support.  While the Vice President could override the ruling, that move is not expected.  This would mean that there would be at least this difference between the bills passed by the chambers, leading to a need to reconcile the bills.

There have been discussions about replacing that provision with a penalty tax on large businesses that don’t provide a higher base wage, and a tax credit for smaller businesses that raise such wages.  As these would clearly be tax-related items, they could be cleared to be part of a reconciliation package.  Whether that provision will be added, clear the Senate and be accepted by the House remains to be seen.

Tax Provisions

Alistair M. Nevius’s article notes the following key tax-related provisions found in this bill.[4]

• Recovery Rebates:  The bill would provide a third advance payment of a recovery rebate, this time providing $1,400 per taxpayer ($2,800 for a married couple) and an additional $1,400 per dependent. Despite discussions that the payment would phase out earlier than prior versions, this version again begins phasing out at $75,000 of adjusted gross income ($150,000 if filing married filing joint).  The advance payment will be made using 2019 return numbers unless the taxpayer has already filed his/her 2020 income tax return that the IRS has processed.

• COBRA Continuation Coverage Credit

• Refundable and Advance Child Tax Credit

• More Generous Earned Income Tax Credit

• Refundable Child and Dependent Care Credit for 2021

• Extension Through September 30 and Expansion of Family and Sick Leave Credits

• Extend the Employee Retention Credit through the end of 2021

• Expansion of the Premium Tax Credit

• Repeal of §864(f) that Allowed Affiliated Groups to Allocate Interest on a Worldwide Basis

Nontax Provisions

Jeff Drew’s article[5] outlines a number of other changes in the Bill:

• Funding for state, local and Tribal governments of $350 billion, $130 billion for elementary and high schools, $40 billion for colleges and universities, and $75 billion for COVID-19 testing and support of vaccine rollout

• Small business support including $15 billion for targeted Economic Injury Disaster Loan advance payments, $25 billion for restaurants, bars and other providers of food and drink, $1.25 billion for shuttered venue operators and $175 million to create a “community navigator” pilot program

• Although the end of the program would remain March 31, 2021, the PPP program receives an additional $7.25 billion of funds and expands to cover additional nonprofit entities

[1] American Rescue Plan of 2021, February 27, 2021, https://docs.house.gov/billsthisweek/20210222/BILLS-117hrPIH-american-rescue-planRH.pdf (retrieved February 27, 2021)

[2] Alistair M. Nevius, J.D., “Tax provisions in the American Rescue Plan Act,” Journal of Accountancy website, February 27, 2021, https://www.journalofaccountancy.com/news/2021/feb/tax-provisions-american-rescue-plan-act.html (retrieved February 27, 2021)

[3] Jeff Drew, “House passes $1.9 trillion stimulus bill with a variety of small business relief,” Journal of Accountancy website, February 27, 2021, https://www.journalofaccountancy.com/news/2021/feb/house-passes-stimulus-bill-small-business-relief.html (retrieved February 27, 2021)

[4] Alistair M. Nevius, J.D., “Tax provisions in the American Rescue Plan Act,” Journal of Accountancy website, February 27, 2021

[5] Jeff Drew, “House passes $1.9 trillion stimulus bill with a variety of small business relief,” Journal of Accountancy website, February 27, 2021