American Rescue Plan Includes Additional Tax Credits
The American Rescue Plan (ARP), which was signed by President Biden on March 11, has two additional tax credits that may me of interest to AFSA members.
Employee Retention Credit
The ARP includes an extension of the Employee Retention Tax Credit (ERTC) through December 31, 2021. Originated in the CARES Act, the ERTC encourages businesses affected by Covid 19 to keep employees on payroll by providing a refundable tax credit of 50% up to $10,000 in wages to an employee each quarter by businesses. The ERTC has now been expanded to cover 70% of qualified wages up to $10,000 per quarter and includes established as well as newly formed businesses.
A business is eligible for an ERTC if it has been subject to a full or partial shut-down during COVID-19 or has experienced revenue declines (50% for 2020 ERTC and 20% for 2021 ERTC) when compared to 2019 revenues.
Paid Leave Credit Programs
The ARP extends tax credits for employer-provided paid sick and family leave through September 30, 2021. While these tax credits are voluntary, only employers with less than 500 employees may claim the refundable tax credits. Additionally, wages covered by the paid family leave credit increase to $12,000 per employee, from $10,000.
The Rescue Plan adds three additional qualifying reasons for paid sick leave and family and medical leave to include:
- Obtaining a COVID-19 vaccine;
- Recovering from an injury, disability, illness or condition related to a COVID-19 vaccination; or
- Seeking or awaiting the results of a COVID-19 test, or diagnosis because either the employee has been exposed to COVID-19 or the employer requested the test or diagnosis.
The ARP also resets the ten days (80 hours) per employee of qualifying paid sick leave.
March 25th, 2021 by Dan Bucherer