American Rescue Plan Act: What Private Schools Need To Know

CATEGORY: Special Bulletins
CLIENT TYPE: Private Education
PUBLICATION: LCW Special Bulletin
DATE: Mar 18, 2021

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“American Rescue Plan” or “Plan”), a $1.9 trillion dollar legislative package intended to address the economic damage caused by COVID-19.  This bulletin highlights some of the key American Rescue Plan provisions applicable to private schools.

Additional Funding For K-12 Private Schools

The American Rescue Plan allocates $2.75 billion to the states in order for the states to provide services or assistance to “non-public schools” (i.e., private schools) that enroll a significant percentage of low-income students and that have been most impacted by the qualifying emergency.[1]

While the Plan expressly prohibits states from using these funds to reimburse non-public schools, this is new funding that supplements the Emergency Assistant to Non-Public Schools (EANS) funding that the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act previously authorized. Employers may find additional information about EANS funding on the California Department of Education (CDE) website at https://www.cde.ca.gov/fg/cr/eans.asp.  We expect the CDE to provide additional information on this website about how private schools can obtain the new funding provided by the American Rescue Plan.

Funding For Child Care Providers

The Plan provides approximately $24 billion in Child Care Stabilization Funding (CCSF) for grants allotted to the states in accordance with the Child Care and Development Block Grant Act of 1990.[2]  The funding will be used by State agencies to provide sub-grants to qualified child care providers in order to support the stability of the child care sector during and after the COVID–19 public health emergency.

Qualified child care providers include a child care provider that, as of the date of the submission of the application for the sub-grant, was either: (1) Open and available to provide child care services; or (2) Closed due to public health, financial hardship, or other reasons relating to the COVID–19 public health emergency.

The amount of the sub-grant provided to a qualified child care provider will be based on the provider’s stated current operating expenses, including costs associated with providing or preparing to provide child care services during the COVID–19 public health emergency, and, to the extent practicable, will provide sufficient funding to cover the provider’s operating expenses to ensure continuous operations for the duration of the coverage period.

State lead agencies are required to make available on the lead agency’s website an application for qualified child care providers for these sub-grants.  In order to apply for a sub-grant, the child care provider must certify that it will adhere to the following for the duration of the sub-grant:

    1. The provider will, when open and available to provide child care services, implement policies in line with guidance from the corresponding state and local authorities, and in accordance with State and local orders, and, to the greatest extent possible, implement policies in line with guidance from the Centers for Disease Control and Prevention (CDC);
    2. For each employee, the provider will pay not less than the full compensation, including any benefits, which was provided to the employee as of the date of submission of the application for the sub-grant. Further, the provider will not take any action that reduces the weekly amount of the employee’s compensation below the weekly amount of full compensation, or that reduces the employee’s rate of compensation below the rate of full compensation, including the involuntary furloughing of any employee employed on the date of submission of the application for the sub-grant; and
    3. The provider will provide relief from co-payments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and will prioritize such relief for families struggling to make either type of payment.

The Plan provides that child care providers may only use funding provided through these sub-grants for the following purposes:

    1. Personnel costs, including payroll and salaries or similar compensation for an employee (including any sole proprietor or independent contractor), employee benefits, premium pay, or costs for employee recruitment and retention;
    2. Rent (including rent under a lease agreement) or payment on any mortgage obligation, utilities, facility maintenance or improvements, or insurance;
    3. Personal protective equipment, cleaning and sanitization supplies and services, or training and professional development related to health and safety practices;
    4. Purchases of or updates to equipment and supplies to respond to the COVID–19 public health emergency;
    5. Goods and services necessary to maintain or resume child care services; or
    6. Mental health supports for children and employees.

A child care provider may use the sub-grant funds to reimburse itself for expenses incurred, whether obligated or expended, before the date of enactment of the Plan, so long as the expenditures are for one of the purposes described above related to the provider’s response to the COVID–19 public health emergency. 

Extension Of Payroll Tax Credits For Voluntarily Providing FFCRA-Type Leave And Benefits

The American Rescue Plan does not re-enact the Families First Coronavirus Response Act (FFCRA),[3] which expired on December 31, 2020,[4] or reinstate the paid leave obligations, including Emergency Paid Sick Leave (EPSL)[5] or Expanded Family and Medical Leave (EFML),[6] as some speculated the bill would[7].  Rather, the American Rescue Plan extends a system of payroll tax credits available to private employers, initially established under the Consolidated Appropriations Act of 2021 (CAA),[8] for employers who voluntarily decide to continue providing employees with EPSL or EFML.  There is currently no legal obligation to continue providing EPSL or EFML as the requirement to provide these leaves expired on December 31, 2020.

Under this payroll tax credit system, eligible employers, including private schools, which voluntarily provide or provided their employees EPSL and EFML between January 1 and March 31, 2021,[9] may take advantage of payroll tax credits to offset the costs associated with the provision of such benefits. The American Rescue Plan extends these payroll tax credits to employers who provide these paid leave benefits through September 30, 2021.[10]

Under the American Rescue Plan, employers may receive payroll tax credits for providing employees EFML for the reasons previously only available for EPSL.  Accordingly, employees may now take both EPSL and EFML where the employee (1) is unable to work because the employee is quarantined[11]; (2) is experiencing COVID-19 symptoms and seeking a medical diagnosis; (3) is unable to work because of a bona fide need to care for an individual subject to quarantine[12]; (4) or is unable to work due to a need to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19. Further, the Plan expands the reasons why an employee may take EPSL or EFML.  In addition to the prior reasons, employees may now take EPSL and EFML, to obtain an immunization related to COVID-19, to recover from any injury, disability, illness, or condition related to a COVID-19 vaccine, or to await the results of a COVID-19 test or a COVID-19 diagnosis after a COVID-19 exposure, including where their employer has requested the test or diagnosis.

The current 10-day limitation on the maximum number of days for which an employer can claim the EPSL credit runs from the start of the credits in 2020 through March 31, 2021.  The Plan resets the 10-day limit to begin April 1, 2021.  Accordingly, an employer may, but is not required to, provide an additional 10 days of paid sick leave benefits beginning April 1, 2021, and, if so, would be eligible for the payroll tax credit.  The Plan further increases eligible wages for which an employer may claim the EFML payroll tax credit to up to $12,000 per employee instead of the previous cap of $10,000.

The Plan also now provides that payroll tax credits will not be provided if an employer discriminates in the administration of such leave in favor of highly compensated employees, full-time employees, or employees on the basis of tenure with the employer.

If schools elect to provide EPSL and EFML to employees, they should understand that employees may be entitled to up to 14 weeks of leave now due to the expansion of the reasons for leave formerly available only for EPSL to now also apply to EFML.  Also, employers must now pay employees for the first two weeks of EFML taken if an employer decides to take advantage of these payroll tax credits.

We anticipate that the Internal Revenue Service (IRS) will issue guidance to employers on extension and expansion of this payroll tax credit.

For more information about these payroll tax credits, see the LCW special bulletin, New Covid-19 Relief Legislation and its Impact on Private Schools and other Nonprofit Organizations, issued on December 28, 2020.

Increases Paycheck Protection Program (PPP) Funding

The Plan includes $7.25 billion in additional funding for PPP loans and expands the eligibility of the loans to more categories of not-for-profit entities.  However, the Plan does not extend the PPP’s current application period, which is scheduled to close March 31, 2021.

Extension Of The Employee Retention Credit

The bill extends the Employee Retention Credit (ERC) through December 31, 2021.  Prior to the enactment of the bill, the ERC was limited to the first half of the 2021 calendar year.

The ERC is an employer tax benefit created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act,[13] and amended by the CRRSA.  Private schools are eligible to claim an ERC if, between January 1 and December 31, 2021, they experience either: (1) A full or partial suspension of the operation of their business because of governmental orders limiting commerce, travel or group meetings due to COVID-19; or (2) A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than eighty percent (80%) of the gross receipts in the same calendar quarter in 2019.  To be eligible based on a decline in gross receipts in 2020, the gross receipts were required to be less than fifty percent (50%).

The maximum allowable ERC is equal to seventy percent (70%) of the qualified wages provided to employees by the school.  Qualified wages are limited to $10,000 per employee, per quarter in 2021.  Accordingly, the maximum ERC is $7,000 per quarter, per employee (or $28,000 per employee for the 2021 calendar year).  In addition, the ERC may not exceed applicable employment taxes on the wages paid with respect to the employment of all employees of the eligible employer for the quarter at issue.  If the calculated credit exceeds the taxes paid, the excess will be treated as an overpayment and refunded to the employer.

The IRS issued information to employers about how to take advantage of the ERC, which is accessible here: https://www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll.

Private schools are encouraged to consult with their payroll providers and tax-professionals for further guidance on how to take advantage of the ERC.

Funds COVID-19 Emergency Grants Available Through The SBA’s Economic Injury Disaster Loan (EIDL) Program

The Plan allocates $15 billion to the Small Business Administration (SBA), of which, $10 billion is for covered entities that have not received the full amount to which they are entitled under the Targeted Economic Injury Loan (EIDL) Advance Grants Program.  The Targeted EIDL Advance Grants Program provides grants of up to $10,000 to small businesses and nonprofit organizations experiencing a temporary loss of revenue due to COVID-19.  Entities entitled to these targeted grants must be located in low-income communities, employ not more than 300 employees, and have suffered an economic loss of greater than thirty percent (30%), generally determined by the amount that the entity’s gross receipts declined during an eight (8) week period between March 2, 2020, and December 31, 2021, compared to the eight (8) week period immediately preceding March 2, 2020, or during 2019.

The remaining $5 billion allocated under the Plan is for Emergency EIDL Grants of $5,000 for small businesses and nonprofit organizations that have suffered an economic loss of greater than fifty percent (50%) and employ not more than 10 employees.  This is in addition to payments made to entities eligible for Targeted EIDL Advance Grants.

Extension Of CARES Act Unemployment Provisions

The American Rescue Plan extends two important unemployment assistance programs[14]: (1) The Federal Pandemic Unemployment Compensation (FPUC) program[15]; and (2) The Pandemic Emergency Unemployment Compensation (PEUC) program[16], that were initially established under the CARES Act, but are set to expire on March 14, 2021.[17]

Under the FPUC program, eligible individuals may qualify to receive federal unemployment compensation to supplement the unemployment compensation provided to the individual by the state. Under the PEUC program, individuals who exhausted state unemployment compensation benefits because of the length of their unemployment would receive extended federal unemployment compensation.  Collectively, these programs provided much-needed relief to employees furloughed or laid off last year.

Under the CAA, Congress reauthorized both programs before their initial expiration on December 31, 2020, however, the reauthorization provided only a temporary extension which was set to expire on March 14, 2021. The extension passed through the CAA also reduced the benefit payable under the FPUC program from $600 per week to $300 per week.[18]  Rather than let these programs lapse, the American Rescue Plan Act extends both programs at their current benefit funding levels through September 6, 2021.

Private schools need not undertake any specific action with respect to the extensions of the FPUC and PEUC programs.  However, to the extent that an employer furloughed or laid off any employees, the school may elect to inform those employees or former employees of the extension of the benefits under these programs.

Increased Funding For Higher Education

The American Rescue Plan sets aside approximately $39 billion dollars through September 30, 2023, for making allocations to institutions of higher education in accordance with the same terms and conditions of section 314 of CRRSA, passed on December 27, 2020.  Colleges and universities must apply for the funding, which is allocated to institutions of higher education based on several measures of an institution’s enrollment, including the number of Pell and non-Pell students; full-time enrollment and headcount; and students who were or were not exclusively online at the start of the pandemic.

Colleges and universities can use the funds to defray expenses associated with coronavirus, including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll.  Colleges and universities can also use the funds to provide financial aid grants to students, including students exclusively enrolled in distance education, which may be used for any component of student attendance or for emergency costs that arise due to the coronavirus, such as tuition, food, housing, health care, mental health care, or child care.  Colleges and universities should prioritize financial aid grants to students with exceptional needs, such as students who receive Pell Grants.  Depending on how money is allocated to the institution, a college or university may be required to use not less than fifty percent (50%) of the allocation to provide emergency financial aid grants to students.

Colleges and universities must use a portion of the funds to implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines, and to conduct direct outreach to financial aid applicants about the opportunity to receive financial aid adjustments due to the recent unemployment of a family member or independent student, or other special need circumstances.  The funds cannot be used for pre-enrollment recruitment activities; marketing or recruitment; endowments; capital outlays associated with facilities related to athletics; sectarian instruction or religious worship; senior administrator or executive salaries, benefits, bonuses, contracts, or incentives; or any other cash or other benefit for a senior administrator or executive.

LCW attorneys are familiar with the American Rescue Plan Act, and are available to help employers assess eligibility for funding and benefits under the Act and to otherwise provide advice and counsel related to the Act.

[1] These funds will remain available through September 30, 2023.

[2] These funds will remain available for grant funding through September 30, 2021.

[3] PL 116-127.

[4] See FFCRA, Secs. 3102, 5109; 29 U.S.C. § 2601.

[5] FFCRA, Sec. 5101, et seq.

[6] FFCRA, Sec. 3101, et seq.

[7] See The White House, “President Biden Announces American Rescue Plan” [“President Biden is calling on Congress to … put the [FFCRA paid leave] requirement back in place.”] https://www.whitehouse.gov/briefing-room/legislation/2021/01/20/president-biden-announces-american-rescue-plan/ (Uploaded on January 20, 2021).

[8] PL 116-260.

[9] The CAA only extended the payroll tax credits through March 31, 2021. (See CAA Section 286(a).)

[10] American Rescue Plan, Sec. 3131(g) (making the tax credits available for wages paid between April 1 and September 30, 2021).

[11] Quarantine must be pursuant to a Federal, State, or local government order or advice of a health care provider.

[12] Quarantine must be pursuant to a Federal, State, or local government order or advice of a health care provider.

[13] PL 116-136.

[14] American Rescue Plan Act, Secs. 9013 (extending the Federal Pandemic Unemployment Compensation (FPUC”) and 9016 (extending the Pandemic Emergency Unemployment Compensation (PEUC))

[15] CARES Act, Sec. 2104(e)(2).

[16] Social Security Act, Sec. 903(i)(1)(D).

[17] The CAA reauthorized the Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Emergency Unemployment Compensation (PEUC) programs, described in this section, extending such programs, which were set to expire on December 31, 2020, through March 14, 2021. (See CAA, Div. N., Tit. II, Subt. A., Secs. 203 and 206.)

[18] See CAA, Div. N., Tit II, Subt. A., Sec. 203, amending CARES Act Section 2104(e) to reduce the amount of the FPUC benefit from $600 to $300 per week.

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