The American Rescue Plan Act:
Highlights for the Community Action Network

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the "Act"), a sweeping anti-poverty bill focused on local needs. While the Act appropriates federal funds to extend and expand existing relief measures, it also provides more robust and generalized assistance to struggling individuals, families, and businesses nationwide. This article highlights key provisions of the Act that are particularly relevant to the Community Action network. We will continue to analyze the Act and monitor its implementation, providing the network with updates, as necessary.

Child Poverty Prevention + Child Care Stabilization

The Act establishes a broad framework of child care stabilization and child poverty prevention in response to the COVID-19 public health emergency. Existing programs such as Head Start and the Child Care Development Block Grant Program (CCDBG) will receive an infusion of funds, low-income families will receive direct stimulus payments, and qualified child care providers will receive a substantial financial boost to operations.

Head Start + CCDBG

The Act appropriates $1 billion, available through the end of fiscal year 2022, to carry out the Head Start Act, including payment of federal administrative expenses. The funds will be allocated to Head Start agencies via one-time grants calculated based on the number of enrolled children served by each given agency. CCDBG will receive roughly $15 billion in appropriations that may be obligated in fiscal year 2021 or the succeeding 2 fiscal years. Grantees are authorized to use these CCDBG funds to provide child care assistance to health care sector employees, emergency responders, sanitation workers, and other essential workers without regard to income eligibility requirements.

Child Tax Credit

Of particular note, the Act expands the Child Tax Credit, effectively creating a near-universal child allowance benefit for the next year. The credits amount to $3,600 for children 5 years old and younger, and $3,000 for children from ages 6 through 17 (the tax credit previously excluded 17-year old children). The credit will be partially paid out monthly, from July to December, with the remainder of the credit to be claimed when recipients file their tax returns.

Child Care Stabilization Grants

The Act also includes nearly $24 billion for newly established “child care stabilization grants", which are to be issued in accordance with CCDBG and remain available through September 30, 2021. State agencies may retain up to 10% for administration purposes as set forth in the Act, and the remainder must be awarded to qualified child care providers to support the stability of the child care sector during and after the COVID-19 public health emergency. A qualified child care provider is defined as an eligible child care provider that on the date an application is submitted was either open and available to provide child care services or closed due to public health, financial hardship, or other reasons relating to the COVID-19 public health emergency. An eligible child care provider is either an entity that is eligible to receive CCDBG funding; or a provider that is licensed, regulated or registered in the State, territory or Indian Tribe on the date the Act took effect and meets applicable State and local health and safety requirements.

The Act sets forth the process by which lead agencies must solicit child care stabilization applications and requires providers to certify that they will: (i) when open, implement policies in line with corresponding state, tribal and local authorities’ guidance and orders and, to the greatest extent possible, with guidance from the CDC; (ii) not pay less than the full compensation, including benefits, that was provided to the employee as of the date of their funding application or take action to reduce compensation; and (iii) provide tuition and copayment relief to enrolled families struggling to make either payment to the provider.

The amount of a child care stabilization subgrant is based on a provider's 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, cover sufficient operating expenses to ensure continuous operations for the intended period of the subgrant. The funds received must be used for the following: (i) personnel costs including employee benefits, or employee recruitment and retention; (ii) rent or payment of any mortgage obligation, utilities, facility maintenance or improvements or insurance; (iii) personal protective equipment, cleaning and sanitization supplies and services or training and professional development related to health and safety practices; (iv) purchases of or updates to equipment and supplies to respond to the COVID-19 public health emergency; (v) goods and services necessary to maintain or resume child care services; and (vi) mental health supports for children and employees. The funds may be used for costs associated with allowable uses that were incurred prior to the Act to respond to the COVID-19 public health emergency.

LIHEAP + Water Assistance

The Act appropriates an additional $4.5 billion to remain available through September 30, 2022 to the Low-income Home Energy Assistance Program for states to assist low-income households, particularly those with the lowest incomes, that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs.

The Act also appropriates $500 million for a new water assistance program serving low-income households that will be facilitated by the U.S. Department of Health and Human Services (HHS). The funds will remain available until expended and provide grants to states, territories, and tribal organizations to provide water assistance to low-income households, particularly those with the lowest incomes, spending a high proportion of their monthly income on drinking water and wastewater services. Allocations to States or Indian Tribes will be based on the percentage of households in a state or Indian Tribe with (i) an income equal or less that 150 % of the federal poverty line and (ii) that spend more than 30% of monthly income on housing. Up to 3% of this water assistance funding is explicitly reserved for Indian tribes and other tribal organizations.

Housing Assistance

The Act makes significant financial contributions to housing assistance programs and funds, some of which CAAs are familiar with, and others that are new.

Emergency Rental Assistance

The Act appropriates $21.5 billion to the U.S. Treasury Department for emergency rental assistance programs, to be allocated to state and local governments in the same manner as emergency rental assistance was allocated under the Consolidated Appropriations Act of 2021. Such funds will be available to eligible grantees through September 30, 2025, and the Act also extends existing emergency rental assistance funding through September 30, 2022. A portion of the new appropriation will be reserved for high-need state and local grantees, as determined by the number of very low-income renter households paying more than 50% of their income on rent or living in substandard or overcrowded conditions, rental market costs, and change in employment since February 2020. States may choose to pass on these funds to entities, like community action agencies (CAAs), to provide financial assistance for rent and utilities, housing stability services, and other affordable housing and eviction prevention purposes.

To be eligible for assistance under this program, a household (i.e., one of more individuals obligated to pay rent on a residential dwelling) must meet the following qualifications, which mirror those in the Consolidated Appropriations Act of 2021:

• One or more individuals in the household has—(a) qualified for unemployment benefits; or (b) experienced a reduction in household income, incurred significant costs, or experienced other financial hardship during or due, directly or indirectly, to the coronavirus pandemic;
• One or more individuals in the household can demonstrate a risk of experiencing homelessness or housing instability; and
• The household is a low-income family under the United States Housing Act of 1937, meaning their income does not exceed 80% of the area median income.

Households that receive assistance under both appropriations may not receive, in the aggregate, more than 18 months' worth of assistance. 

The Act raises the administrative cost cap on emergency rental assistance funds from 10% to 15% of the total amount paid to an eligible grantee and explains that such funds may be used for administrative costs attributable to providing financial assistance, housing stability services and other affordable rental housing and eviction prevention activities, including data collection and reporting. It does not, however, address the charging of indirect costs or the use of an indirect cost rate. It also places a 10% cap on providing case management and other housing stability services and indicates that the cap applies to the funds received by an eligible grantee. CAAs should continue to monitor the Treasury Department website and stay tuned for more information and guidance.

Housing Counseling

The Act appropriates $100 million to the Neighborhood Reinvestment Corporation, to remain available through fiscal year 2025, for grants to housing counseling organizations including NeighborWorks organizations, state housing finance agencies, and other housing counseling organizations approved by the U.S. Department of Housing and Urban Development (HUD). Since many CAAs are HUD-approved housing counseling agencies, and some are also members of the NeighborWorks network, they may be eligible to receive some of this funding. At least 40% of the funds are reserved for counseling organizations that target their services to minority and low-income populations facing housing instability, or else serve neighborhoods with a high concentration of minority and low-income populations. Note that eligible housing counseling services means (1) housing counseling provided directly to households facing housing instability, such as eviction, default, foreclosure, loss of income, or homelessness; (2) education, outreach, training, technology upgrades, and other program related support; and (3) operational oversight funding for grantees and subgrantees.

Homeowner Assistance Fund

The Act creates a Homeowner Assistance Fund under the U.S. Treasury Department and appropriates almost $10 billion, available through fiscal year 2025, for the provision of assistance to entities working to mitigate the financial hardships faced by homeowners as a result of the coronavirus pandemic. The Treasury Department will distribute funds to states, tribes, and territories based on the average number of unemployed individuals over the last 3-12 months and the total number of mortgagors with mortgages that are more than 30 days past due or in foreclosure (the Act reserves certain amounts to small states, territories, and tribes). No less than 60% of the funds made available to each state or eligible entity must be used for qualified expenses that assist homeowners with incomes equal to or less than the area median income for their household size or the median income for the United States, whichever is greater. Eligible entities must also prioritize “socially disadvantaged individuals” with the remaining 40% of funds.

Qualified expenses that may be paid for out of the Homeowner Assistance Fund include the following, starting on January 21, 2020:

• Mortgage payment assistance;
• Financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing related costs related to a period of forbearance, delinquency, or default;
• Principal reduction;
• Facilitating interest rate reductions;
• Payment assistance for—(a) utilities, including electric, gas, home energy, and water; (b) internet service, including broadband internet access service; (c) homeowner's insurance, flood insurance, and mortgage insurance; and (d) homeowner's association, condominium association fees, or common charges;
• Reimbursement of funds expended by a state, local government, or tribe for the purpose of providing housing or utility payment assistance to homeowners or otherwise providing funds to prevent foreclosure or post-foreclosure eviction of a homeowner or prevent mortgage delinquency or loss of housing or utilities as a result of the COVID-19 pandemic between January 21, 2020, and the date when funds are disbursed;
• Any other assistance to promote housing stability for homeowners, including preventing mortgage delinquency, default, foreclosure, post-foreclosure eviction of a homeowner, or the loss of utility or home energy services, as determined by the Secretary.

Other

The Act appropriates $5 billion for Emergency Housing Vouchers for public housing agencies to administer as tenant-based rental assistance for people recovering from homelessness or otherwise especially at risk for homelessness, available through fiscal year 2030. It also provides funding for USDA to provide rent and mortgage relief for rural individuals and lenders through various housing assistance programs.

The Act also appropriates $5 billion to HUD, available through fiscal year 2025, for tenant-based rental assistance, the development and support of affordable housing under the Cranston-Gonzalez National Affordable Housing Act, the acquisition and development of non-congregate shelter units, and other supportive services such as housing counseling, homeless prevention services, and supportive services under the McKinney-Vento Homeless Assistance Act. Qualifying individuals and families include those who are homeless or at-risk of homelessness, as defined under McKinney-Vento, those fleeing, or attempting to flee, domestic violence, dating violence, sexual assault, stalking, or human trafficking, and veterans.

Nutrition Programs

CAAs that provide clients with nutrition-related assistance should take note that the Act appropriates additional funding to bolster nutrition assistance programs during and after the pandemic. CAAs that assist clients with Supplemental Nutrition Assistance Program (SNAP) applications should be aware that the Act extends the 15% increase in SNAP benefits initiated by the Consolidated Appropriations Act of 2021 for all participants through to September 20, 2021. It also appropriates an additional $1.15 billion for state administrative expenses that are anticipated to rise as the need for assistance increases.

For CAAs that administer Women, Infants, and Children Nutrition Programs (WIC), the Act appropriates $880 million to increase and support WIC food benefits programs. This includes $490 million to increase cash-value voucher amounts to up to $35 through September 30, 2021, for any state agency that notifies HHS of its intent to do so. This $880 million also includes $390 million, available from 2021 to 2024, for the Department of Agriculture to lead WIC program outreach, innovation, and modernization efforts. While specifics with regard to these efforts are not yet available, CAAs that administer WIC could play a role in the future in informing and/or leading such efforts.

An additional appropriation of $37 million has been provided for senior nutritional support via the existing Commodity Supplemental Food Program. These funds are available through September 2022 and may be used for the same purposes as authorized under the program’s governing statute.

For CAAs that operate emergency shelters, during the pandemic, emergency shelters may be reimbursed the cost of meals and supplements provided to individuals who are under the age of 25 and receiving assistance at those shelters.

National Service Programs

For CAAs that run national service programs, and for those interested in doing so, the Act provides additional funding to the Corporation for National and Community Service (CNCS) to support existing as well as new national service awards. The Act appropriates $852 million to CNCS, available through fiscal year 2024, to be allocated to a number of programs, including $620 million for state and national programs such as Education Corps, Healthy Futures Corps, Clean Energy Service Corps, Veterans Corps, and Opportunity Corps. The funding is meant to both increase living allowances of participants and volunteers, as well as adjust existing awards and fund new awards for these volunteer programs. When considering these award adjustments and grants, the Act directs CNCS to prioritize entities that serve communities disproportionately impacted by COVID-19, as well as take into account the diversity of communities and participants served by those entities, including racial, ethnic, socioeconomic, linguistic, or geographic diversity.

In addition, and of particular relevance to CAAs, a further $80 million is allocated to bolster to bolster Americorps VISTA, and $30 million to support the National Senior Service Corps. The funds are to be used in support of these programs’ current purposes. Of the $852 million provided to CNCS, the Act allows it to use $73 million for administrative expenses associated with the programs.

Paid Sick Leave + Family Leave Payroll Tax Credits

The Act extends the time period within which employers may receive IRS tax credits for Emergency Paid Sick Leave (EPSL) and Family and Medical Leave Act (EFMLA) leave under the Families First Coronavirus Response Act (FFCRA) from March 31, 2021 to September 30, 2021. Employers are still no longer required to provide EPSL and EFMLA, but to the extent they choose to do so, qualified leave wages will be fully reimbursable through a payroll tax credit.

The Act adds the following to the list of qualifying reasons for EPSL and EFMLA leave:

• Employee is obtaining COVID-19 vaccination;
• Employee is recovering from any injury, disability, illness, or condition related to vaccination; or
• Employee is seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19, or else their employer has requested such a test or diagnosis.

As a result, EPSL may now be taken for any one of nine qualifying reasons – the six laid out under the FFCRA along with the three set forth above. The Act also expanded the EFMLA qualifying reasons to include all nine reasons meaning that the EFMLA leave bank (10 weeks of leave at 2/3 pay) may now be taken for the same reasons that EPSL may be taken.

The Act also imposes non-discrimination rules on the reimbursement of qualified leave wages by the IRS. Tax credits will now be denied if the employer has discriminated in favor of highly compensated employees, full-time employees, or employees on the basis of tenure.

The Act effectively resets the amount of leave for which employers may obtain tax credits. Beginning on April 1, 2021, employers may apply for tax credits for EPSL or EFMLA leave taken by any employee for up to the full amount available under the FFCRA – 80 hours of EPSL and 10 weeks of EFMLA per employee. In other words, any tax credits received for leave taken prior to April 1, 2021 do not count against the employer’s ability to receive tax credits for leave taken as of April 1. The Act also increases the aggregate cap on EFMLA leave credits received after April 1, 2021, from $10,000 to $12,000 per employee.

The Act directs the U.S. Department of Labor to issue regulations and further guidance regarding these tax credits, and CAPLAW will provide updates as new information becomes available. In the meantime, please refer to CAPLAW's FFCRA Leave FAQ & Refresher for more information.

Direct Stimulus Payments + Unemployment Benefits

All individuals with an adjusted gross income of $75,000 or less will receive a direct stimulus payment of $1,400 under the Act. Individuals with an adjusted gross income between $75,000 and $80,000, heads of households with an income between $112,500 and $120,000, and married couples with an income between $150,000 and $160,000 will receive a partial payment of a value less than $1,400. Households with higher incomes will not receive any payments under the Act.

Unlike the stimulus payment scheme set up under the CARES Act, the Act provides that families may receive $1,400 for dependents 16 years and older. However, like the stimulus payments under the CARES Act, direct stimulus payments under the Act are structured as income tax credits paid out in advance. For this reason, in the absence of a state rule or CAA policy to the contrary, they will not count as income for the purposes of determining eligibility for CSBG or Head Start. As discussed in CAPLAW’s CSBG Q&A on Client Eligibility, neither the federal CSBG Act nor regulations contain a definition of “income” for purposes of determining eligibility for CSBG services. Head Start regulations define "income" but the definition does not include refundable tax credits. CAAs with questions about how direct stimulus payments will affect client eligibility for other programs should turn to the program rules to see if refundable tax credits are included in the definition of “income”.

Additionally, the Act extends enhanced unemployment benefits, including the $300 per week supplement originally enacted via the Consolidated Appropriations Act of 2021, through to September 6, 2021. The Act also creates a tax exemption rendering up to $10,200 per worker in 2020 unemployment benefits tax-free, for individuals and families with incomes of up to $150,000. As discussed above, since the federal CSBG Act does not define “income”, such benefits may not be counted towards an individual’s income for CSBG eligibility purposes (depending on state law and CAA policy). The Head Start Performance Standards include unemployment compensation in their definition of income, but the Office of Head Start has stated that it does not consider short-term, federally funded assistance directly related to the COVID-19 pandemic to be included in the definition of income for Head Start eligibility purposes.

PPP Loans + EID Loans + Other Small Business Support

As a part of a broader small business support initiative, the Act appropriates $7.25 billion for Paycheck Protection Program (PPP) loans, as well as expands eligibility for PPP loans to previously ineligible nonprofit organizations. The Act also appropriates $15 billion for Economic Injury Disaster (EID) loans, including $5 billion for supplemental targeted EID loan advance payments for particularly hard-hit businesses. Other small business support is an $100 million for a new Community Navigator pilot program meant to support eligible organizations providing services to improve access to COVID-19 pandemic assistance programs and resources. For more information about PPP and EID loans, see CAPLAW's CARES Act Benefits for Nonprofit CAAs Web Portal.

This News Flash is part of the Community Services Block Grant (CSBG) Legal Training and Technical Assistance (T/TA) Center. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Grant Award Number 90ET0467-03-02. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

The contents of this news flash are intended to convey general information only and do not constitute legal advice. Any communication through this publication or through CAPLAW’s website does not constitute or create an attorney-client relationship. If you need legal advice, please contact CAPLAW or another attorney directly.