How the American Rescue Plan Act Affects Churches & Nonprofits

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The American Rescue Plan Act (ARPA), signed into law by President Biden on March 11, 2021, added another $1.9 trillion in COVID-19 relief for individuals and organizations, including — in some instances — churches and nonprofits.

Unemployment benefits.

Since churches may be exempt from unemployment taxes, church employees have historically not been eligible for unemployment benefits. However, the Pandemic Unemployment Assistance (PUA) program opened the door for individuals usually ineligible for unemployment compensation, including clergy and those working for religious organizations that are not covered by regular unemployment compensation.

The ARPA increases the duration of unemployment benefits under temporary pandemic relief programs from March 14, 2021, to September 6, 2021. Unemployment claimants will receive an additional $300 per week in benefits. In addition, eligibility has been expanded to the self-employed, individuals lacking sufficient work history, and those who otherwise do not qualify for regular unemployment compensation or extended benefits.

Expanded FFCRA leave.

The Families First Coronavirus Response Act (FFCRA) provides paid leave for employees unable to work due to the COVID-19 pandemic. Churches and other nonprofits with fewer than 50 employees that were previously ineligible for FMLA benefits were included in the FFCRA unless leave payments would jeopardize the organization’s viability as a going concern.  

The ARPA has extended FFCRA benefits for sick and family leave to September 30, 2021 and requires all employers to offer FFCRA leave. This requirement applies to health care providers as well as companies with fewer than 50 employees and more than 500 employees. Additionally, the ARPA requires up to 14 weeks of paid sick, family, and medical leave and expands covered parental caregiving circumstances. Employers with fewer than 500 employees will be reimbursed in full for the total cost of providing leave.

COBRA subsidy. 

Although churches and church-related tax-exempt organizations are exempt from COBRA requirements, nonprofits with more than 20 full-time employees are not exempt.

Under the ARPA, employers would receive a 100% subsidy of COBRA health insurance premiums through a payroll tax credit against their quarterly taxes. Employees who lost their jobs due to the pandemic and their covered relatives would be allowed to remain on their employer-sponsored health plans for a six-month period beginning April 1, 2021, through September 30, 2021. The subsidy is not available to employees who voluntarily quit their jobs.

Extension of Employee Retention Tax Credit.

ARPA includes an extension of the Employee Retention Tax Credit through December 31, 2021. This refundable payroll tax credit for wages paid to employees during the COVID-19 pandemic was created by the CARES Act in 2020.

The Church Law Center of California advises churches and other nonprofits on how to protect themselves from risk while furthering their mission. Call us today at (949) 892-1221 or reach out to us through our contact page.

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