Insight

American rescue plan: Key financial services implications

$1.9 trillion economic stimulus package intended to facilitate recovery from the economic and health effects of COVID-19

Amy S. Matsuo

Amy S. Matsuo

ESG and Regulatory Insights Lead, KPMG LLP

The American Rescue Plan Act is a $1.9 trillion economic stimulus package intended to facilitate recovery in the United States from the economic and health effects of COVID-19. The Act aligns with a number of the immediate priorities outlined by the Biden-Harris Administration, including COVID-19, racial equity, the economy, and healthcare. It will directly impact financial services providers that are SBA lenders and those that work directly with local/community groups (amidst others). The Act will also have indirect implications to financial services via direct payment and/or tax provisions that may benefit their customers. A core objective of the Act is to target assistance to vulnerable individuals and communities, consistent with the anticipated rise in financial services regulatory attention and activity.

Key points

  • More than $40 billion in funding to address potential housing insecurities related to COVID-19, including mortgage and rental assistance.
  • Assistance to small businesses includes PPP funding of $7.25 billion (along with expanded eligibility for certain nonprofit organizations and internet publishing companies) and more than $50 billion for other small business programs (including $15 billion to SBA EIDL, $1.25 billion to shuttered venue operators, $25 billion for restaurants/food services, and $10 billion for a State-based initiative.)
  • New programs funded include the Homeowner Assistance Fund, the State Small Business Credit Initiative, Restaurant Revitalization Fund, and Community Navigator Pilot Program.
  • In most cases, prioritization given to individuals, households, and small businesses most severely impacted by COVID-19 as well as to vulnerable groups, including Black/Brown/Indigenous communities, women, and veterans.
  • Funds provided by the American Rescue Plan Act of 2021 are additive to the funds provided in December 2020 by the Consolidated Appropriations Act of 2021.

The American Rescue Plan Act of 2021 provides continued COVID-19-related relief for individuals and businesses. The following summary looks at key provisions that specifically impact the financial services industry, including measures to provide additional assistance in support of housing needs and small businesses.

Title III, Committee on Banking, Housing, and Urban Affairs; Subtitle B, Housing Provisions

  • Emergency rental assistance
  • $21.55 billion in appropriations to the Department of the Treasury available through September 2027 for emergency assistance grants to cover rent, utilities, and other housing expenses by eligible households.
  • $2.5 billion carve out for “high-need grantees” (defined to include “very low-income renter households paying more than 50 percent of income on rent or living in substandard or overcrowded conditions”) and $305 million to the U.S. territories.
  • Provided to states, local governments, and U.S. territories for allocation to eligible households.
  • Eligible households include low-income households that show housing instability due to COVID or have someone that qualifies for unemployment benefits.
  • Emergency housing voucher
  • $5 billion in appropriations to the Department of Housing and Urban Development (HUD) available through September 2030 for emergency rental assistance for individuals or families who are homeless, at risk of homelessness, or fleeing domestic violence or human trafficking.
  • Emergency assistance for rural housing
  • $100 million in appropriations to the Department of Agriculture available through September 2022 to support households in USDA-subsidized properties that have experienced income losses.
  • Housing counseling
  • $100 million in appropriations to the Neighborhood Reinvestment Corporation for grants to organizations approved by HUD to provide housing counseling, education, and outreach.  
  • 40 percent set aside for “minority and low-income populations facing housing instability” and “neighborhoods having high concentrations of minority and low-income populations.”
  • Homelessness assistance and supportive services programs
  • $5 billion in appropriations available to HUD through September 2025 for homelessness assistance and supportive services, including rental assistance, housing counseling, homelessness prevention, and the acquisition and/or development of shelter units and affordable housing.
  • Homeowner Assistance Fund
  • $9.961 billion available to Treasury through September 2025 to establish and fund the Homeowner Assistance Fund for states and other grantees to use for purposes of assisting households affected by COVID-19 with housing expenses (e.g., mortgage payments, utilities, insurance); at least 60 percent of funds distributed by eligible grantees must be allocated to assist homeowners having incomes equal to or less than 100 percent of the area median income for their household size or equal to or less than 100 percent of the median income for the U.S.
  • Fair housing activities
  • $20 million in appropriations available to HUD through September 2023 to provide resources in support of fair housing organizations’ efforts to address inquiries, complaints, investigations, and education and outreach activities related to COVID-19.

Title III, Committee on Banking, Housing, and Urban Affairs; Subtitle C, Small Business (SSBCI)

  • State Small Business Credit Initiative (SSBCI)
  • $10 billion in appropriations available to Treasury to fund the State Small Business Credit Initiative for use in state programs.
  • Funds are to: i) support small businesses responding to and recovering from the economic effects of COVID–19; ii) ensure “business enterprises owned and controlled by socially and economically disadvantaged individuals” (as defined) have access to credit and investments; and iii) provide technical assistance to help small businesses applying for various support programs.
  • $1.5 billion set aside for business enterprises owned and controlled by socially and economically disadvantaged individuals, plus $1 billion incentive for states that “demonstrate robust support” for this group of individuals.
  • Additional $500 million set aside for “very small businesses,” defined as having fewer than 10 employees and may include sole proprietors and independent contractors.
  • Only states that provide a plan for encouraging minority depository institutions (MDIs) and community development financial institutions (CDFIs) to participate in the initiative may be deemed eligible to receive funds. Similarly, states must provide a plan for utilizing the funds to support small businesses, including business enterprises owned and controlled by socially and economically disadvantaged individuals, in responding to and recovering from economic effects of COVID-19.

Title V, Committee on Small Business and Entrepreneurship

  • Small Business Administration (SBA), Payment Protection Program (PPP)
  • $7.25 billion in appropriations to the SBA for the PPP.
  • Expands eligibility to certain nonprofits (including organizations as described under section 501(c) except paragraphs 3, 4, 6, 19 and tax exempt under section 501(a)), adding limitations on lobbying activities/income and numbers of employees.
  • Expands eligibility to certain internet publishing companies.
  • SBA Targeted Economic Injury Disaster Loan (EIDL) Advance
  • $15 billion in appropriations available to SBA for the EIDL program.
  • Funding to be allocated: 1) $10 billion to businesses that didn’t receive the full amount applied for initially (up to $10,000), and 2) $5 billion to small businesses that have experienced an economic loss of greater than 50 percent and employ no more than 10 employees.
  • Payments made from the $5 billion tranche will be limited to $5,000
  • Support for restaurants
  • Establishes the Restaurant Revitalization Fund in Treasury with $25 billion to be administered by the SBA: $5 billion set aside for entities with 2019 gross receipts of $500,000; $20 billion to be granted based on annual gross receipts.
  • Initial prioritization given to women-owned small businesses, veteran-owned small businesses, and “socially and economically disadvantaged small business concerns” (as defined by the Small Business Act)
  • Grants limited to $10 million in total and $5 million per location; eligible entities may not operate more than 20 locations (together with affiliated businesses).
  • Funds are to be used for eligible expenses including payroll, mortgage, rent, utilities, and other expenses related to an accommodation of COVID-19.
  • Community Navigator Pilot Program
  • $175 million appropriations available to the SBA to establish and fund a Community Navigator Pilot Program; funds to remain available through September 2022.
  • The program will make grants to, or enter into contracts or cooperative agreements with, community navigators (e.g., community organizations, CDFIs, nonprofits, government units) to raise awareness and ensure the delivery of free services (outreach, education, and technical assistance) to eligible small businesses and improve access to COVID-19-related assistance programs.
  • Initial prioritization given to women-owned small businesses, veteran-owned small businesses, and socially and economically disadvantaged small business concerns.
  • Shuttered Venue Operations
  • $1.25 billion in appropriations to the SBA for shuttered venue operations, including movie theaters, museums, performance venues, and other entities whose principle business activity is live events.
  • Funds allocated to recipients will be adjusted for new PPP loans received after December 27, 2020. 

Other measures

  • Housing assistance and service programs for Native Americans
  • $750 million available to HUD through September 2025 for housing assistance and support services through the Indian Community Development Block Grant, Native Americans Housing Block Grant, and Native Hawaiian Housing Block Grant programs. (Title XI, Section 11003)

KPMG Regulatory Insights’ Regulatory Alert Beyond day one: New administration impacts on financial services is available here.  Additional Regulatory Alerts covering regulatory relief measures to address COVID-19 can be found in KPMG Regulatory Insights’ Regulatory Alert library homepage, accessible here.
 

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