2 minute read 16 Mar 2021
EY - The United States Capitol building at night

Key takeaways from the American Rescue Plan Act

Authors
Bridget Neill

EY Americas Vice Chair, Public Policy

Regulatory and policy strategist. Three decades in shaping public policy impacting global financial markets and accounting profession. Passionate about family. Outdoor sports enthusiast.

John D. Hallmark

Ernst & Young LLP Principal, Public Policy, and US Political and Legislative Leader

Public policy professional with a deep understanding of the Washington legislative and political arenas. Works with key stakeholders to formulate and execute on the firm’s policy initiatives.

2 minute read 16 Mar 2021

The 117th Congress and the Biden administration have accomplished one of their first major policy priorities with the enactment of the American Rescue Plan Act (ARPA).

The $1.9 trillion bill is the first major federal response to the COVID-19 pandemic in 2021, following closely behind the passage of the $900b COVID-19 relief bill in late December. Since the start of the pandemic a year ago, Congress has approved more than $5 trillion in stimulus and relief through a handful of bills.

The ARPA strengthens and extends certain federal programs enacted through the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and other COVID-19 relief measures, and it establishes a few new federal programs. Below is a summary of select provisions in the bill:

Item

American Rescue Plan Act as enacted

Unemployment insurance

  • Extends pandemic unemployment programs through 6 September
    • $300/week add-on
    • First $10,200 of unemployment compensation not taxable for households with incomes below $150,000

Federal minimum wage

Increase to federal minimum wage not included after ruling by Senate parliamentarian that it did not meet the requirements of budget reconciliation

Direct payments to individuals

$1,400 per individual and dependent, $2,800 for joint filers

Cut off at income levels of $80,000 or higher for individuals and $160,000 or higher for joint filers

State and local funding

Provides $360b to help state, local, tribal and territorial governments combat the effects of COVID-19:

  • $195.3 billion for state governments and Washington, DC
  • $130.2 billion for local governments
  • $20 billion for federally recognized tribal governments
  • $4.5 billion for territorial governments
  • Adds authority to use for water, sewer and/or broadband infrastructure; prohibits use for tax cut or deposits into any pension funds

Housing

Provides the following for the remainder of FY 2021:

  • $21.6 billion for rental assistance payments through the Treasury Department
  • $9.96 billion to establish the Homeowner Assistance Fund at the Treasury Department
  • $5 billion for emergency Section 8 Housing Choice Vouchers

Health care

  • Subsidizes 100% of premiums for FY 2021 for individuals eligible for COBRA continuation coverage if they lose their job
  • Expands the Affordable Care Act’s premium tax credits for health insurance purchased through an exchange for tax years 2021 and 2022
  • Provides funding for Department of Health and Human Services programs, including:
    • $47.8 billion for testing and tracing activities
    • $8.5 billion for vaccine activities at the Centers for Disease Control and Prevention
    • $7.66 billion to expand the public health workforce and COVID-19 response efforts
    • $7.6 billion for community health centers

Restaurant grants

  • Provides $28.6 billion in grants for the Restaurant Revitalization Fund to be administered by the Small Business Administration
    • Eligible recipients include restaurants, bars, food trucks and caterers, including businesses in airport terminals and tribally owned entities
    • Eligible recipients limited to 20 locations

Education

  • Provides $122.8 billion for grants to states to support local educational agencies in addressing learning loss
  • Excludes from taxable income any student loans discharged between 31 December 2020 and 1 January 2026
  • Creates the Emergency Connectivity Fund in the US Treasury and appropriates $7.17 billion into it to cover the purchase of broadband service and devices by schools and libraries for use by students, staff and patrons at other locations

Paycheck Protection Program

  • Increases funding by $7.25 billion and expands eligibility for the Paycheck Protection Program, and allows forgiveness for additional expenses

 

Defense Production Act

  • Provides $10 billion to use the Defense Production Act to purchase, produce and distribute medical supplies and equipment related to COVID-19

Child care

  • Provides $24 billion for grants for child care providers to use for payroll, rent, personal protective equipment, mental health support and other needs, including $15 billion for the Child Care and Development Block Grant and $1 billion for Head Start

Child Tax Credit (CTC) for tax year 2021

  • Makes the CTC fully refundable
  • Increases the maximum credit to $3,600 for children under 6 years old and $3,000 for other children up to 18 years old
  • Phases out beginning at $75,000 for individuals and $150,000 for joint filers

Dependent Care Tax Credit for tax year 2021

  • Makes the credit refundable
  • Increases the maximum allowable expenses to $8,000 for one dependent and $16,000 for two or more
  • Allows the credit to cover 50% of expenses

Congress: what to watch for next

Now that the American Rescue Plan Act has been enacted, President Biden and congressional Democrats have expressed a desire to immediately turn to a broader, long-term economic growth and recovery proposal.

Biden is expected to detail his “Build Back Better” recovery plan in an address to Congress later in March. Recent speculation suggests that the proposal will include several trillion dollars in new spending and center on infrastructure investment, while also tackling other priorities such as clean energy, domestic manufacturing, and child and elder care. The proposal may also include new tax provisions, including tax increases on wealthy individuals and corporations to finance the bill in part. While specifics remain uncertain, any proposal by the administration also will be consistent with the president’s priorities to address climate change and racial equity. 

Summary

The 117th Congress and the Biden administration enacted the American Rescue Plan Act (ARPA), the first major federal response to the COVID-19 pandemic in 2021.

About this article

Authors
Bridget Neill

EY Americas Vice Chair, Public Policy

Regulatory and policy strategist. Three decades in shaping public policy impacting global financial markets and accounting profession. Passionate about family. Outdoor sports enthusiast.

John D. Hallmark

Ernst & Young LLP Principal, Public Policy, and US Political and Legislative Leader

Public policy professional with a deep understanding of the Washington legislative and political arenas. Works with key stakeholders to formulate and execute on the firm’s policy initiatives.