The American Rescue Plan Act of 2021, which among other things, provides for additional funding and changes to the Paycheck Protection Program.
On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021, which among other things, provides for additional funding and changes to the Paycheck Protection Program (PPP), as established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and subsequent legislation and executive department rules and guidance.
The American Rescue Plan Act allocates funds to existing and new small business assistance programs, including:
- $7.25 billion in additional funding for the PPP loan program;
- $15 billion for targeted Economic Injury Disaster Loan (EIDL) funds;
- $25 billion for restaurants and other similar businesses under the Restaurant Revitalization Fund (RRF) program;
- $1.25 billion for the Shuttered Venue Operator Grant (SVOG) program; and
- $175 million for the Community Navigator program to promote and publicize business assistance programs made available by federal, state and local governments during the COVID-19 pandemic.
In general, the American Rescue Plan continues the PPP loan program as administered by the Small Business Administration (SBA), though devotes less funds to the PPP program as compared to prior legislation. Among other changes, the American Rescue Plan:
- Keeps in place the deadline of March 31, 2021, for businesses to apply for PPP loans;
- Makes certain nonprofit entities and online news organizations eligible to apply for PPP loans;
- Provides a program for restaurants, bars and similar businesses to receive grant money, rather than loans, under the RRF program; and
- Provides opportunities for businesses that previously applied for EIDL grants, but did not receive them, to receive additional funds, as well as funding for “severely impacted” and “substantially impacted” businesses under the Targeted EIDL Advance Grant program.
We expect the SBA to release further rules and guidance following the enactment of the American Rescue Plan.
Restaurant Revitalization Fund
In addition to PPP loans and other assistance provided for under past legislation, the American Rescue Plan includes targeted assistance for restaurants, bars and similar businesses via the RRF program.
Entities that are eligible for RRF funds include restaurants, food stands and trucks, bars and taverns or any other business “in which the public or patrons assemble for the primary purpose of being served food or drink.” However, this does not include any business that (i) is operated by state or local governments, (ii) owns or operates more than 20 locations, (iii) has applied for or received an SVOG (as summarized in our prior Alert) or (iv) is a publicly traded company.
Businesses that wish to receive RRF funds must complete an application to the SBA, including certifications that the uncertainty of current economic conditions makes it necessary for the business to apply for an RRF grant and that the business has not applied for or received a grant under the SVOG program. Borrowers should review the previously published FAQs for the guidance issued regarding the need certification, which have been updated to reflect the Second Draw PPP loans implemented in the December 2020 COVID Relief Bill, as summarized in our prior Alert.
As of the publication of this Alert, the SBA has not yet released applications for the RRF program. However, the application process for RRF funds is likely to be similar to the application process for the SVOG program (which has also not yet been established at the time of this Alert).
Terms and Conditions
Unlike the PPP, RRF funds will be distributed as grants that businesses are not required to pay back. Grants under the RRF program will be less than $10 million and will be limited to $5 million per physical location of any eligible business.
The precise amount of an RRF grant will be equal to the pandemic-related revenue loss of the business. “Pandemic-related revenue loss” is, generally, calculated by subtracting the 2020 gross receipts of the business from the 2019 gross receipts, with the difference being the amount of the RRF grant.
Similar to PPP loans, businesses that receive RRF grants are required to use the funds for certain items “incurred as a direct result of, or during,” the COVID-19 pandemic, such as: payroll costs; mortgage payments; rent payments; utilities; maintenance expenses; supplies (including personal protective equipment); food and beverage expenses that are within the scope of the normal business practice of the business, as compared to before February 15, 2020; supplier costs; operational expenses; paid sick leave; and any other expenses determined by the SBA.
Business that receive but do not use all of an RRF grant must return any leftover funds. Businesses that permanently cease operations are also required to return RRF funds.
Paycheck Protection Program
March 31 Deadline for PPP Loan Applications
A significant item that the American Rescue Plan did not change was the deadline for businesses, entities and individuals to apply for PPP loans. The December 2020 COVID Relief Bill set a deadline of March 31, 2021, for businesses to apply for PPP funds. The March 31 deadline remains in place under the American Rescue Plan, while more entities are now eligible to apply for PPP funds. As before, businesses and individuals may apply for PPP loans through lenders and banks, which often have their own online portals and applications based on forms and guidance released by the SBA.
Additional Eligibility for Certain Nonprofit Entities
The American Rescue Plan permits additional nonprofit entities to apply for PPP loans. A new category of “additional covered nonprofit entities” is now eligible to apply for PPP loans, which includes any nonprofit set forth in Section 501(c) of the Internal Revenue Code (IRC), such as social clubs and employee benefit associations, among others.
Generally, 501(c) entities will be eligible for PPP funds, as well as second-draw PPP loans, so long as the entities do not primarily engage in lobbying activities. Any such “additional covered nonprofit entity” must also satisfy the following conditions to be eligible to apply for a PPP loan: (i) the entity employs 300 or fewer employees per physical location; (ii) the entity does not receive more than 15% of its receipts from lobbying activities; (iii) lobbying activities do not comprise more than 15% of all of the activities of the entity; and (iv) the total cost of the entity’s lobbying activities was not more than $1 million during the most recent tax year ending before February 15, 2020.
In addition, larger nonprofit entities are eligible to apply for PPP loans. Nonprofit entities with more than 500 employees that operate across multiple physical locations will be eligible to apply for a PPP loan if no more than 500 employees work at any one location. The American Rescue Plan also provides that larger nonprofit entities will be eligible to apply for PPP loans even if they are affiliates of larger, national organizations.
Online News Publishers Eligible for PPP Loans
The American Rescue Plan allows internet-only publishers (such as an online newspaper that does not print physical copies) to apply for PPP loans, as well as second-draw PPP loans, so long as the publisher does not have more than 500 employees and makes a certification that the PPP loan proceeds will be used to support the components of the business that touch upon local or regional news activities.
Targeted EIDL Advance Grants
The American Rescue Plan provides increased funding for the Targeted EIDL Advance Grant program, as well as steps for the SBA to take in fully funding these grants. Targeted EIDL Advance Grants are available to businesses that (i) are located in low-income communities, (ii) employ 300 or fewer employees and (iii) have suffered an economic loss of more than 30%. The American Rescue Plan provides $15 billion to address funding shortfalls in the Targeted EIDL Advance Grant program generally by establishing the following steps:
First, the SBA will reach out to businesses that applied for, but did not receive (due to lack of EIDL funding), the full amount the applicant was entitled to under the original EIDL Advance Grant program.
Second, the SBA is directed to make grants to “severely impacted” small businesses. A “severely impacted” business is one that (i) has suffered an economic loss of more than 50% and (ii) employs 10 or fewer employees. Any eligible “severely impacted” business would be eligible to apply for a $5,000 grant under the Targeted EIDL Advance Grant program.
Third, the SBA is directed to make grants to “substantially impacted” businesses. A “substantially impacted” business is one that (i) has suffered an economic loss of between 30% and 50% and (ii) employs 10 or fewer employees.
Shuttered Venue Operator Grants
The American Rescue Plan Act allocates $1.25 billion for the SVOG program. In general (and as described more fully in our prior Alert), SVOG grants provide funds to live venue operators, museums, theater owners and other such venues that have been negatively impacted by the COVID-19 pandemic and public health measures enacted by federal, state and local governments.
The American Rescue Plan provides that the total SVOG amount received by a business will be reduced by the amount of any PPP loan received by such business on or after December 27, 2020.
Community Navigator Program
The American Rescue Plan promises $175 million towards the Community Navigator Program, which generally provides the SBA with funds to allocate to, or enter into contracts with, certain nonprofit and governmental entities “to improve access to assistance programs and resources made available” during the COVID-19 pandemic.
Certain Tax Consequences of the American Rescue Plan
The American Rescue Plan continues certain tax provisions promulgated under the CARES Act and subsequent legislation. The American Rescue Plan extends the employee retention tax credit through December 31, 2021. In addition, if a business receives a Targeted EIDL Advance Grant, the amount of that grant will not be included in gross income for tax purposes.
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Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
For More Information
If you have any questions about this Alert, please contact Nanette C. Heide, Stephen Morrissey, Mark Zhuang, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.
 If a business was not in operation at all 2019, the calculation would be: (i) the average monthly gross receipts for months in 2019 multiplied by 12 minus (ii) the average monthly gross receipts in 2020 multiplied by 12. If a business opened on or after January 1, 2020, the calculation would be the expenses summarized in the “Terms and Conditions” section above, minus any gross receipts received. If a business has not yet opened as of the date of its application, the calculation would be the amount of the expenses summarized in the “Terms and Conditions” section above. The SBA is also permitted to establish a different formula(s) for such calculations.
 This does not include any 501(c)(3), 501(c)(4), 501(c)(6) or 501(c)(19) entities.
 In addition, such entities may be eligible if they employ less than the size standard established by the NAICS code per physical location.
 This is calculated by comparing an eight-week period beginning on March 2, 2020, or later to a comparable period in 2019.
 Businesses are eligible under the EIDL program to receive a grant of $1,000 per employee, up to a maximum of $10,000.
 Twenty-eight days after the enactment of the American Rescue Plan.
 Fourteen days after the program has opened up to “severely impacted” businesses.
 The employee retention credit generally permits employers to claim a credit for paying qualified wages to employees.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.