What is PL 117-2? The American Rescue Plan Act

Public Law 117-2, formally known as the American Rescue Plan Act of 2021 (ARPA), was signed into law on March 11, 2021. This legislation represented a federal government response to the ongoing public health crisis and the resulting economic fallout from the COVID-19 pandemic. The act authorized approximately $1.9 trillion in funding across a wide array of programs.

Its primary objective was to provide continued relief to individuals, families, businesses, and state and local governments. The legislation built upon previous relief packages, aiming to stabilize the economy and support the national public health response.

Direct Financial Relief for Individuals

The American Rescue Plan Act authorized a third round of direct payments, officially called Economic Impact Payments. The payments amounted to $1,400 for each eligible person, including all dependents, but the IRS is no longer issuing them. Eligibility for the full payment was based on Adjusted Gross Income (AGI), with the amount phasing out for those with higher incomes.

A separate, one-time tax benefit excluded up to $10,200 of unemployment compensation received in 2020 from federal gross income. This tax relief was for households with a modified AGI of less than $150,000 and is no longer in effect.

Major Tax Credit Changes for Individuals and Families

The American Rescue Plan Act made substantial, but temporary, changes to several tax credits for the 2021 tax year.

• For the 2021 tax year only, the Child Tax Credit was increased, made fully refundable, and paid partially in advance monthly installments. These changes have since expired, and for the 2024 tax year, the credit has reverted to $2,000 per qualifying child under age 17, with a refundable portion of up to $1,700 per child.
• The Child and Dependent Care Credit also saw a one-year enhancement for 2021, which made the credit more valuable and fully refundable. This expansion was only for the 2021 tax year and has since reverted to a non-refundable credit calculated on employment-related expenses, capped at $3,000 for one qualifying individual and $6,000 for two or more.
• For the 2021 tax year, the Earned Income Tax Credit (EITC) for workers without qualifying children was expanded. These changes were not extended, and for the 2024 tax year, the credit and its eligibility have reverted to their previous levels, with a maximum credit of $632 for workers with no children.
• The law enhanced the Premium Tax Credit (PTC), making health insurance purchased through the Health Insurance Marketplace more affordable. It temporarily eliminated the “subsidy cliff” by capping the amount anyone would pay for a benchmark plan at 8.5% of their household income. These enhanced subsidies were extended by the Inflation Reduction Act and are currently set to expire at the end of 2025.

Relief Programs for Businesses

The American Rescue Plan Act extended and created several programs to help businesses, though these programs are now closed.

• The law extended the Employee Retention Credit (ERC), a tax credit for businesses that kept employees on their payroll. The program ended for most employers on September 30, 2021, but the deadline for employers to file amended returns to claim the credit for the 2021 tax year is April 15, 2025.
• A new program created by the act was the Restaurant Revitalization Fund (RRF), which provided grants to restaurants and other food businesses. The Small Business Administration (SBA) stopped accepting applications for this fund in July 2021 after its initial funding was exhausted.
• The legislation also provided additional funding for the Paycheck Protection Program (PPP). This program is now closed, as the SBA stopped accepting new loan applications on May 31, 2021, but existing borrowers may still be eligible for loan forgiveness.
• The act allocated more funding to the Shuttered Venue Operators Grant (SVOG) program for live venues, theaters, and museums. This program is also closed to new applications.

State and Local Government Funding

A portion of the American Rescue Plan was dedicated to providing fiscal relief to non-federal governments. The law established the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, allocating $350 billion for state, local, territorial, and Tribal governments to help them manage the public health and economic impacts of the pandemic.

The funds were distributed through various formulas, with governments receiving direct allocations from the U.S. Department of the Treasury. Allowable uses were broadly defined and included supporting public health expenditures, addressing negative economic impacts, and replacing lost public sector revenue. The funds could also be used for making necessary investments in water, sewer, and broadband infrastructure. Recipient governments must obligate all funds by December 31, 2024, and spend them by December 31, 2026.