Tax News Update    Email this document    Print this document  

January 15, 2021

Biden announces $1.9 trillion 'American Rescue Plan'

Package includes vaccination program, direct payments and community supports

On January 14, President-elect Biden announced a $1.9 trillion "American Rescue Plan," the first step in a two-step plan of rescue and recovery "to build a bridge to the other side of the crisis we face to a better, stronger, more secure America." The plan includes more than $400 billion to combat the pandemic through a national vaccination program, increased testing and tracing, and additional funding for schools to help them reopen safely, along with $350 billion in funding to state and local governments experiencing budget shortfalls. It also includes $1,400 in direct payments, enhanced unemployment benefits, federally mandated paid leave, and various other supports for individuals, small businesses, and communities.

President-elect Biden noted that while Congress's bipartisan action in December was a "very important first step" it was "just a down payment" that fell short of the resources needed to tackle the immediate crisis. Biden said he will lay out the second step in his plan — the Build Back Better recovery plan — in front of his first joint session of Congress next week, which will "make historic infrastructure, manufacturing, innovation, research and development, and clean energy investments" and "create 18 million good-paying jobs."

He urged Congress to "act expeditiously to help working families, communities, and small businesses persevere through the pandemic," calling for unity in the path forward.

Key provisions in the American Rescue Plan

Health care provisions:

  • Provide $20 billion for a national vaccination program, including launching community vaccination centers and mobile units in hard-to-reach areas, and increasing the Federal Medicaid Assistance Percentage (FMAP) to 100% for the administration of vaccines
  • Provide $50 billion for a "massive expansion" of testing, including funds to purchase rapid tests, expand lab capacity, and help schools implement regular testing to support reopening
  • Fund the hiring of 100,000 public health workers to perform tasks like vaccine outreach and contact tracing
  • Address health disparities by expanding health services funding for underserved populations, including community health centers and health services on tribal lands
  • Provide funding for states to deploy strike teams to long-term care facilities experiencing COVID-19 outbreaks and to conduct better infection control oversight'
  • Provide $30 billion for the Disaster Relief Fund to ensure sufficient supplies and protective gear and 100% federal reimbursement for emergency response, in addition to $10 billion in expanding domestic manufacturing to support the full use of the Defense Production Act
  • Provide for a 100% continuation health coverage (COBRA) subsidy through the end of December
  • Expand and increase the value of the Premium Tax Credit to ensure enrollees do not pay more than 8.5% of their income for coverage
  • Provide $4 billion to enable the Substance Abuse and Mental Health Services Administration and the Health Resources and Services Administration to expand access to mental health services
  • Provide $20 billion in additional funding for veterans' health to combat COVID-19
  • Provide funding to identify and address emerging strains of COVID-19, invest in COVID-19 treatments and more

Tax provisions:

  • Increase tax credits to help cover the cost of childcare to as much as half of spending for children under age 13, or a total of up to $4,000 for one child or $8,000 for two or more children, which would be refundable and available in full to families making less than $125,000 a year and partially up to $400,000 per year
  • Make the Child Tax Credit fully refundable for one year, increase the credit to $3,000 per child ($3,600 for a child under age 6) and make 17 year-olds qualifying children for the year
  • Expand the Earned Income Tax Credit for one year to raise the maximum amount for childless adults from roughly $530 to close to $1,500, raise the income limit for the credit from about $16,000 to about $21,000, and expand the age range that is eligible, including by eliminating the age cap for older workers so that older workers can claim the credit

Business provisions:

  • Reinstate paid sick and family leave benefits that expired at the end of December until September 30 and extend the benefit to workers employed at businesses with more than 500 employees and less than 50, as well as federal workers, who were excluded from the original program — so that people who are sick or quarantining, or caring for a child whose school is closed, will receive 14 weeks of paid leave, with the government reimbursing employers with fewer than 500 workers for the full cost of providing the leave
  • Provide $15 billion — separate from the reopening of the Paycheck Protection Program (PPP) authorized by the year-end COVID bill — for a new program for the hardest-hit small businesses, to fund "flexible, equitably distributed grants [that] will help small businesses get back on their feet"
  • Make a $35 billion investment in state, local, tribal and nonprofit financing programs, which could be leveraged, according to the plan summary, to generate "as much as $175 billion in low-interest loans and venture capital to help entrepreneurs — including those in the clean energy sector — innovate, create and maintain jobs, build wealth, and provide the essential goods and services"
  • Provide $20 billion in relief "for the hardest hit public transit agencies"

Individual aid, nutrition and rental assistance:

  • Send another $1,400 per person to eligible recipients, in addition to the $600 payments that were approved by Congress in December and sent out earlier this month
  • Increase the federal bump in unemployment benefits to $400 a week, from the $300 weekly enhancement contained in Congress's relief package from December, and extend the payments, along with two key pandemic unemployment programs, through September
  • Extend the 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits through September and invest another $3 billion in the Women, Infants, and Children (WIC) program
  • Provide $25 billion in rental assistance for low- and moderate-income households who have lost jobs during the pandemic, in addition to the $25 billion Congress approved for rental assistance in the year-end package
  • Provide an additional $5 billion for "struggling renters" to cover home energy and water costs, through programs like the Low Income Home Energy Assistance Program (LIHEAP)
  • Provide $5 billion to help secure housing for people who are homeless or are at risk of becoming homeless
  • Extend the CARES Act's moratorium on evictions and foreclosures to September 30, which the year-end COVID bill had previously extended only to January 31, give people who are applying for forbearance on federally guaranteed mortgages would have an additional period to do so (until September 30, 2021), and call on Congress to "provide funds for legal assistance for households facing eviction or foreclosure"
  • Call on Congress to raise the minimum wage to $15 an hour, and to end the tipped minimum wage and the sub-minimum wage for people with disabilities

Other aid for states, schools and childcare providers:

  • Provide $350 billion to state, local and territorial governments to keep their frontline workers employed, distribute the vaccine, increase testing, reopen schools and maintain vital services
  • Provide $170 billion in additional funding to K-12 schools, colleges and universities to help them reopen and operate safely or to facilitate remote learning
  • Create a $25 billion Emergency Stabilization Fund for hard-hit childcare providers in danger of closing and add $15 billion to the Child Care and Development Block Grant program


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Any member of the group, at (202) 293-7474.