Relief bill includes several revenue raisers

| 3/12/2021
Relief bill includes several revenue raisers

On March 11, President Joseph Biden signed the American Rescue Plan Act of 2021, a $1.9 trillion COVID-19 relief package that provides significant federal aid for programs such as extended unemployment payments, vaccines, schools, and small businesses. The act also includes tax changes, including several revenue raisers.

Tax benefits

In addition to the well-publicized tax benefits, such as a third round of direct stimulus checks and increases in the child tax credit, the earned income tax credit, and the dependent care credit, the act includes compensation and benefit tax-related relief, including extension and modification of the employee retention payroll tax credit and the payroll tax credit for paid sick and family leave, pension relief, and expansion of continuing health benefit coverage and the premium tax credit. Most of these tax benefits are set to expire after 2021, though it is possible that some could be made permanent. 

The act also includes exclusion from gross income and other tax benefits for the following:

  • Unemployment benefits of up to $10,200 received in 2020 for taxpayers with adjusted gross income of less than $150,000
  • Certain student loan debt forgiven between 2021 and 2025
  • Certain Small Business Administration Economic Injury Disaster Loans
  • Restaurant revitalization grants
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Revenue raisers

Less publicized are the revenue raisers included in the package, including the following:

  • Repeals the worldwide interest allocation election under IRC Section 864(f) for tax years beginning after 2020
  • Extends through the end of 2026 the Section 461(l) limit on excess business losses for noncorporate taxpayers that was set to expire at the end of 2025 under the 2017 tax reform known as the Tax Cuts and Jobs Act or TCJA
  • Beginning with the 2022 calendar year, reduces the threshold for marketplace and gig economy Form 1099-K, “Payment Card and Third Party Network Transactions,” reporting to $600 or more regardless of the number of transactions involved
  • For taxable years beginning after 2026, adds the five highest-compensated employees to the current law list of officers (which includes any individual who in any taxable year beginning after 2016 was either the CEO, the CFO, or among the three highest-compensated officers) whose compensation is subject to the Section 162(m) $1 million compensation deduction limitation for public and certain nonpublic companies

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Rochelle Hodes
Rochelle Hodes
Principal, Washington National Tax