President Joe Biden signed into law the American Rescue Plan on March 11, 2021, providing desperately needed COVID-19 relief.
The American Rescue Plan provides many benefits to nonprofits. The sweeping $1.9 trillion legislative package includes a significant range of policies to provide additional pandemic relief, plus it includes direct assistance to schools, housing assistance, and, crucial new child anti-poverty measures. (Ironically, the 2017 GOP tax cut also amounted to $1.9 trillion.)
Here are highlights of what this landmark bill will do for nonprofits:
Charitable Giving Incentives
The new law does not yet expand incentives for charitable giving, but Senators and Representatives introduced the Universal Giving Pandemic Response and Recovery Act, 618 and H.R 1704. If enacted, the legislation would allow taxpayers who claim the standard deduction, rather than itemizing deductions, on their tax returns to take a deduction for charitable giving valued at up to one-third of the standard deduction (around $4,000 for an individual filer and $8,000 for married joint filers). This added giving incentive would be available for tax years 2021 and 2022. Stay tuned.
Child Tax Credit
The bill would expand the child tax credit in 2021, a move that Democratic lawmakers and economists say could substantially reduce child poverty. Democrats are hoping to make the expansion permanent in future legislation.
These changes will lift 10 million American children out of poverty.
The measure increases from $2,000 to $3,600 the credit for children under 6 years old, and to $3,000 for older children. The additional amount phases out for individuals with income above $75,000, head-of-household filers with income above $112,500 and $150,000 for married couples filing jointly.
The bill also makes the credit fully refundable, in an effort to ensure that the lowest-income households receive the full amount. It also makes 17-year-olds eligible for the credit.
The IRS is directed to make periodic advance payments of the credit, so that households could receive it in installments throughout the year instead of having to wait to file their taxes to receive all the money.
Families will become able to receive the credit as a monthly payment.
Provides $7.6 billion for community health centers, $1.44 billion for Older Americans Act programs, and $800 million for the National Health Services Corps.
Provides a temporary 7.35% increase in the federal share of Medicaid for Home-and Community-Based Services which helps pay to home and personal care providers.
Medicaid & CHIP Provisions
The American Rescue Plan also includes sweeping changes to the Medicaid program. The new legislation will, among other changes, provide higher federal matching funds to states to promote home- and community-based services, allow a new state option for 12 months of post-partum coverage for new mothers, require the coverage of COVID-19 vaccines and treatment, and expand a prior Medicaid option for states to cover COVID-19 testing for the uninsured. These changes—from the bill that was passed by the House—have been well summarized by Georgetown University’s Center for Children and Families and are not recounted in detail here.
The American Rescue Plan will subsidize 100 percent of the cost of premiums for COBRA continuation coverage for workers who are laid off or have reduced hours. (The prior House version of the bill included 85 percent subsidies; this was increased in the Senate to 100 percent subsidies.) The subsidy will begin on April 1, 2021 and extend through September 30, 2021. This subsidy will not count towards an individual’s gross income and will be treated as an advance refundable payroll tax credit. COBRA subsidies have been considered in prior COVID-19 packages in the House, and Congress authorized similar (albeit less generous) subsidies during prior economic crises. The COBRA subsidy is only available to individuals who are involuntarily terminated or had their hours reduced.
Building On The Affordable Care Act (ACA) Marketplace Subsidies
Significant changes are included to bolster the ACA and improve healthcare marketplace access and affordability by increasing ACA subsidies for lower-income people who already qualify for 2021 and 2022; Providing maximal ACA subsidies for individuals that receive unemployment benefits in 2021.
Earned Income Tax Credit
The bill expands the earned income tax credit (EITC), which benefits low- to moderate-income households. It expands the eligibility and amount of the credit for workers without children and allow married but separated spouses to claim the EITC on separate returns in certain circumstances. It also allows taxpayers to use their 2019 income for purposes of the credit instead of their 2021 income, which could help people who have lost income due to the pandemic receive larger credit amounts for 2021.
The bill provides about $15 billion to the child care and development block grant program, which provides grants to states to help low-income families afford child care. States will be able to use the funds to help essential workers regardless of those workers’ income. The measure also provides about $24 billion for states to provide grants to child care providers.
Additionally, the bill expands the child and dependent care tax credit and would increase the amount of a tax exemption for employer-provided dependent care assistance.
The rescue plan provides $27.4 billion in emergency rental assistance for eligible people, which housing advocates say will help stave off evictions. Another $10 billion is set aside to help homeowners avoid foreclosure. The bill gives $5 billion in vouchers for public housing, another $5 billion to tackle homelessness and $5 billion more to help cover utility bills.
The National Low Income Housing Coalition estimates that between 30 million and 40 million American renters are at risk of losing their homes due to the pandemic without support.
Education (Title II)
Provides $125 billion in funding for K-12 schools, including $2.75 billion for states to provide services to non-public schools that serve a significant percentage of students from low-income families.
Provides $40 billion to colleges and universities, with half devoted to emergency student financial aid grants and half available to defray lost revenue and increased costs due to adjustments needed in response to the pandemic.
Provides $39 billion for childcare, including about $24 billion for Child Care Stabilization grants and nearly $15 billion for the Child Care and Development Block Grant program.
Provides $350 million in additional funding for Child Abuse Prevention and Treatment Act (CAPTA) programs.
Provides $7.2 billion to the Federal Communications Commission to expand broadband access to support remote learning (see Title VII of the bill).
Nutrition Assistance (Title I)
Extends the 15% increase in SNAP benefits through Sept. 30, 2021.
Extends Pandemic EBT program that provides families with the value of missed school breakfasts and lunches.
Provides funding for outreach and modernization to make the WIC program more user-friendly.
Increases the Cash Value Voucher benefit.
Provides $135 million each to the National Endowment for the Arts and the National Endowment for the Humanities.
Includes $200 million in funding for libraries through the Institute of Museum and Library Services.
Provides $1 billion to the Corporation for National and Community Service (AmeriCorps) to increase the number of participants and stipends.
Paycheck Protection Program (PPP) Supplemented
The SBA’s Paycheck Protection Program receives an additional $7.25 billion, and expands PPP eligibility to charitable nonprofits that operate at multiple locations and employ not more than 500 employees per physical location. It also expands PPP eligibility to other types of nonprofits, but with a 300-emplyee limit per location. There is no change to “Second Draw” PPP loans eligibility. However, PPP application deadline is Mar. 31, 2021 unless extended by Congress, a change that is currently being worked on.
$1,400 direct payments go to individuals making less than $75,000 or couples making less than $150,000 and each of their dependent children. (Some individuals earning up to $80,000 and couples earning up to $160,000 will be eligible to receive a reduced amount of this benefit).
On top of $600 checks approved in December, these $1,400 payments fulfill a promise of providing $2,000 stimulus payments per person.
Unlike previous rounds, adult dependents would be eligible for payments.
Citizen spouses and children living in mixed-status families are also eligible for payments.
Emergency provisions expanding unemployment insurance benefits that were due to lapse March 14 will now be extended to September 6.
These changes extend the $300 federal weekly enhanced benefit through September 6.
The American Rescue Plan makes the first $10,200 of unemployment insurance benefit income tax-free for individuals earning up to $150,000.
Freelancers, gig workers and independent contractors are eligible for expanded benefits.
The American Rescue Plan provides $14 billion for vaccines, helping to scale up America’s vaccine capacity.
The law also provides $49 billion for testing, contact tracing, genomic sequencing to track new variants and monitor of COVID-19 to better prevent its spread.
It also provides $7.6 billion to hire 100,000 public health workers to administer vaccines and support the pandemic response.
$360 billion is provided in direct, flexible aid to every state, county and municipal government, to help cover increased costs and lost revenues due to the pandemic, while keeping essential public workers on the job and maintaining critical services for residents.
$10 billion goes to expand broadband internet access.
The law provides $50 billion for Federal Emergency Management Administration (FEMA) Disaster Relief Fund (DRF) to reimburse state and local COVID response costs at 100% cost share.
The National Council of Nonprofits prepared a terrific summary chart which highlights the key provisions affecting nonprofits and those we serve.
If you uncover other provisions in the legislation that nonprofits should be aware of, please let us know on our blog.