April 22, 2020 Federal Update: COVID-19

Stimulus 3.5 – Congress is hoping to pass by this Wednesday April 22 a fourth stimulus package some have dubbed “Stimulus 3.5.”  It will purportedly include an additional $300 billion to replenish the SBA’s Paycheck Protection Program that ran out of funds in less than two weeks; $50 billion for the Small Business Administration’s disaster relief fund, $75 billion for hospitals and $25 billion for testing.

The Democrats in Congress have apparently proposed funds for local governments in addition to the above.  Their proposal would include:

$150 Billion for State and Local Fiscal Relief for lost revenue and budget needs.

$80 billion for states and District of Columbia

$29.5 billion for counties

$29.5 billion for cities, towns, townships and villages

$8 billion for tribal governments

$3 billion for territories

It would also make the $150 billion awarded to local governments through the CARES Act available to be used for lost revenues (versus expenses directly due to COVID-19).

However, Treasury Secretary Mnuchin stated as of late April 19 that such funds would be included in a future relief package.  Also on April 19, Senators Bill Cassidy (R, Louisiana) and Bob Menendez (D, New Jersey) announced “a major bipartisan breakthrough” regarding funds for local governments.  Their proposal would make counties and towns with 50,000 or more people eligible for federal dollars (the population threshold under the CARES Act is 500,000). The senators said they would introduce the plan when the Senate reconvenes April 20.

H.R.6074 – The Coronavirus Preparedness and Response Supplemental Appropriations Act was passed by Congress and signed by President Trump March 6.  It is an $8 billion emergency funding measure for government entities such as the Department of Health and Human Services, the Center for Disease Control and Prevention, the National Institute of Health, the Indian Health Service, and the Food and Drug Administration. It was passed to provide funds to develop and purchase vaccines, medical supplies and products, as well as provide state and local governments with preparedness grants, training and other forms of assistance.

H.R. 6021 – The Families First Coronavirus Response Act was signed into law by President Trump on March 18.  This legislation provides free testing, paid emergency leave to qualified employees, increases Medicaid funding and expands unemployment insurance, nutritional assistance and small business loans.  It expands the Family Medical Leave Act (FMLA) to cover 14 days paid sick leave, then 10 additional weeks of FMLA leave paid at two-thirds the regular pay rate.  Employers with less than 50 employees and greater than 500 employees are exempted.

3548 – The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed by President Trump March 27.  It offers the most direct business assistance of the three stimulus packages and includes provisions such as:

The Paycheck Protection Program, which expands eligibility for SBA 7(a) loans by allowing the Small Business Administration to provide loans of up to $10 million per business at interest rates not to exceed 4%. Funds for this program were exhausted as of April 15 due to heavy demand.  Any portion of the loan that goes toward payroll, rent/mortgage payments, utilities or existing debt can be forgiven provided that the business maintains its number of full-time equivalent employees (FTEs).  More information is at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp#section-header-3

Employee Retention Tax Credits, which are a fully refundable tax credit for all businesses to help keep employees on their payroll. The credit covers 50% of wages actually paid to each employee, capped at $10,000 of wages per employee. Essentially, an employer can claim a credit of up to $5,000 per employee. For companies with more than 100 full-time employees, the credit is only applicable to workers not working due to coronavirus. For companies with 100 full-time employees or fewer, the credit can be applied even if workers are still working;

Deferred Payments on Social Security, allowing employers to defer payment of the 6.2% employer share of the Social Security tax payable through December 31, 2020, and requires that the deferred payroll tax be paid over the following two years. The repayment would have to occur by at least half in 2021 and half in 2022;

Payroll Tax Credit Advance, which allows employers to receive an advance payroll tax credit on wages paid that qualify under the retention tax credit provisions and on any paid leave provided under the Families First Coronavirus Response Act (FFCRA);

Expansion of Net Operating Loss provisions, allowing NOLs from 2018, 2019 or 2020 to be carried back five years. NOLs from tax years beginning after 2017 and ending before January 1, 2021, may fully offset taxable income;

Loans and Programs for Large Corporations, which are subject to various public disclosures and other requirements.  Businesses that take these loans will be prohibited from making any stock buybacks during the term of the loan, plus an additional year after. All loans and their terms will also be subject to public disclosure. The eligible businesses must be organized in one of the states and have significant operations in and a majority of its employees based in the United States and

Grants and Loans for Critically Distressed Industries, which will target severely distressed industries such as airlines (passenger, cargo and associated contractors).

The CARES Act also provides assistance to individuals, including:

Direct Payments to adults of $1,200 or less and $500 per child ($3,400 for a family of four). The amount phases out based on earnings of between $75,000 and $99,000 ($150,000 / $198,000 for couples);

Increased Unemployment Compensation, increasing the unemployment compensation payment to individuals collecting unemployment in their state by $600 per week, all from federal funds. That increased payment will last for 4 months. It also extends the maximum benefit period by 13 additional weeks, for both new and existing filers;

Flexibility in Retirement Plans, allowing certain participants to take penalty-free distributions from certain retirement plans and allowing expanded loans against qualified plans to COVID Impacted participants,

Deductions for Charitable Giving, allowing an above-the-line deduction of up to $300 for individuals who do not itemize deductions and make charitable contributions of cash in 2020. Individuals who itemize deductions may take deductions of up to 100% of AGI for charitable contributions of cash made in 2020, and

Students Loans Relief, providing roughly $40 billion loan relief for college students and graduates who have outstanding federal loan debt. It would defer all payments on that debt until September, and for current students who have been forced to drop out, the law ensures that this semester’s loan is forgiven and would not count against any lifetime limits on subsidized loans or Pell Grant eligibility.