I will take a break from the usual crap and write a little bit about P.L. 117-7, the 2021 stimulus bill. The official name of the statute is The American Rescue Plan Act of 2021, but it is referred to hereinafter as the “Act”. In its final version, it is 242 pages of turgid PDF that only a tax lawyer could enjoy (I will refrain here from repeating the joke about the lady who went to the doctor).[1] Several provisions in the new law are helpful to the affordable housing industry. These include, inter alia, the following:
- Direct stimulus payments;
- Rental assistance;
- Increased unemployment benefits; and,
- An enhanced child tax credit.
Here is a brief discussion of the foregoing.
- Stimulus Payments
Section 9601 of the Act amends Subchapter B of chapter 65 of the Internal Revenue Code of 1986 as amended to date (hereinafter the “Code”) by inserting after current Code section 6428A new section 6428B. Code section 6428B provides a tax credit of $1,400 per taxpayer ($2,800, in the case of a joint return),[2] plus $1,400 multiplied by the number of dependents of the taxpayer for the tax year. This tax credit may be taken once, for the first tax year beginning in 2021. Effectively, that is $1,400 for each man, woman and child that appears on a tax return for the tax year that begins in 2021.
Here’s what to know about this tax credit:
- It is refundable. That means that it does not just offset a taxpayer’s liability to pay the government; the government has to write the taxpayer a check, if no tax is owed;
- Like the $600 tax credit passed in December of last year, it has to be paid out immediately. See new 64238B(g)(3):
“TIMING AND MANNER OF PAYMENTS: The Secretary shall, subject to the provisions of this title and consistent with rules similar to the rules of subparagraphs (b) and (C) of section 6428A(f)(3), refund or credit any overpayment attributable to this subsection as rapidly as possible, consistent with a rapid effort to make payments attributable to such overpayment electronically if appropriate.”;
- It phases out at $75,000 for individuals and $150,000, very quickly; and,
- Taxpayers have to have put their social security number on their return in order to receive the credit.
Effectively, this means that a family of two adults filing jointly with two kids should receive – or has already received – a federal stimulus payment of $5,600, provided they have filed a tax return correctly.
2. Rental Assistance
I have written elsewhere about the importance of a rental insurance scheme. The Act builds upon the rental relief scheme contained in the December 2020 stimulus bill. It is not well drafted, and appears to have eliminated an important component of the previous law. But, as my grandfather used to say, half a loaf is better than a poke in the eye with a rusty stick.
The Act appropriates $21.55b of federal funds for rent relief. The funds are allocated to state, territorial and local governments, which are to administer their distribution to housing-insecure residents. The funds are to be used for rent, rental arrears, utility costs and utility cost arrears, and any other expenses related to housing, as defined by the federal executive branch. Eligible recipients include households with one or more member who has qualified for unemployment benefits or experienced financial hardship during or due to the coronavirus epidemic, households with one or members who can demonstrate risk of homelessness or housing instability, and households which qualify as low income families under section 3(b) of the United States Housing Act of 1937. The cutoff for the distribution of funds allocated under this section of the Act is September 30, 2025. The Act also appropriates an additional $5b for Section 8 emergency housing vouchers.
3. Unemployment Benefits
The Act extends the federal subsidy to state unemployment schemes (the Federal Pandemic Unemployment Compensation Program) of $300 per week through September 6, 2021, and extends the number of weeks of potential coverage from fifty to seventy-nine. Effectively, this provides a person collecting unemployment under a state scheme to collect an additional $8,700 over a period of twenty-nine weeks.
4. Child Tax Credit
The Act amends Code section 24 by instituting a refundable credit of $3,000 per child under the age of eighteen ($3,600, per child below the age of six by the end of the applicable calendar year) for the tax year that begins during 2021. The benefit is phased out for individual taxpayers with an AGI of greater than $75,000 ($112,500 for heads of household and $150,000 for couples filing jointly). The statute instructs the Treasury department to establish a program for advance periodic payments of the credit to taxpayers to whom it is due.
5. Case Study
Assume a spherical cow…sorry – that’s a mathematician joke. Assume a family of four who live in a mobile home park. Father usually works in construction but he has been laid off because of the coronavirus pandemic. Mother stays home with the kids. Child 1 is three years old. Child 2 is six. Lot rent is $375 per month, and they are six months in arrears. They currently owe the park owner $2,322 in lot rent and water bills. The park owner is chewing leather straps because he can not evict them or collect on an outstanding money judgment. Table 1 summarizes the benefits payable to the family under the Act:
Table 1
| Father | Mother | Child 1 | Child 2 | Family | |
| Stimulus Payment | $ 1,400.00 | $ 1,400.00 | $ 1,400.00 | $ 1,400.00 | $ 5,600.00 |
| Rental Relief | $ 2,322.00 | ||||
| Unemployment | $ 8,700.00 | $ 8,700.00 | |||
| Child Tax Credit | $ 3,600.00 | $ 3,000.00 | $ 6,600.00 | ||
| Total | $23,222.00 |
The family can use that money to get current on their lot rent, fix their steps and skirting, arrange childcare and maybe invest in a job training program. If handled correctly, it will be a leg up to get them out of the cycle of poverty. It should be a very welcome subsidy.
[1] The doctor tells the lady that she has only six months to live.
“Oh, my – what should I do?”
“Marry a tax lawyer and move to Cleveland.”
“Will that make me live longer?”
“No – but it will be a very long six months.”
[2] Joint filing has an interesting history. When the federal income tax was first instituted, all tax returns had to be filed individually. This rule created inequality of treatment between taxpayers resident in states such as Louisiana or California, which inherited their laws from civil law systems and which treated property of married couples as “community property”, and everyone else. Congress solved this by allowing all married couples to file jointly regardless of their residence. I am curious whether in the near future taxpayers who engage in nontraditional family arrangements – polygamists on the right, polyamorists on the left – will challenge the fact that joint filing is restricted to 2-person couples under current law.
Which grandfather said that?
yeah; which grandfather?
Please do not impugn my family.