Senate HEALS Act Proposal: Key Provisions of Interest to Ohio’s Economic Developers

Details about the Senate’s approach to a second coronavirus relief package, titled the Health, Economic Assistance, Liability, and Schools Act or HEALS Act, have been released but federal lawmakers and interested parties are still scrambling to understand what is included in the $1 trillion stimulus package.

Senate Republicans have said they are hesitant to endorse the package until they have more time to vet the bill’s provisions.  A number of items which are seemingly unrelated to coronavirus relief, such as $1.75 billion for a new FBI building, have made Senate Republicans hesitant to endorse the measures.  The feasibility of certain provisions, such as basing the among of stimulus payments on a yet to be create system that will have to coordinate with individual state unemployment offices, have also drawn concerns.

The bill’s provisions will continue to be debated in the Senate and ultimately change during bipartisan negotiations with the House of Representatives and White House. OEDA would like to share information about current key provisions of interest to economic developers and local governments. These include:

• Lack of EDA Funding
• Use of Local Government CARES ACT Funds
• Paycheck Protection Program (PPP) Funding and Forgiveness
• Unemployment Insurance (UI) Referred to as Stimulus Payments
• Liability Protections for COVID-19 Claims

Lack of funding for Economic Development Administration (EDA)

One of the glaring omissions in the HEALS Act is funding for EDA.  Under the original CARES Act approved just months ago, lawmakers appeared to understand the value of the EDA and the programs it administers, approving $1.5 billion in funding for economic development assistance programs.  As such, economic developers were cautiously optimistic that the EDA would receive an additional round of funding in future COVID-19 relief and stimulus packages.

IEDC is advocating for EDA funding to be included in the HEALS Act, noting that EDA received funding in the HEROES Act, a House-passed package in May which stalled in the Senate.  While IEDC leads the charge on this issue in Washington, it is critical that lawmakers hear from their state’s constituents who are concerned about the lack of funding for EDC in the HEALS Act.  Ohioans can contact Senator Portman and Senator Brown to share their concerns.

Use of Local Government CARES ACT Funds

Title IV of the Senate’s CARES Act II proposal contains a number of provisions of interest to local governments.  If enacted, these will likely play into local government responses to the pandemic and consequently impact disclosure.  OEDA partnered with Bricker & Eckler for a webinar about the ways initial local CARES Act Funds could be used to provide economic relief.  A recording of the webinar can be found HERE.  The new bill would make major changes to how the funds can be used, giving local governments more flexibility, but it does not include additional aid to state and local governments

Expansion of allowable use of Coronavirus Relief Fund Payments:

• End date for allowable Coronavirus Relief Fund expenditures extended from Dec. 30, 2020 to 90 days after the end of the fiscal year in 2021.
• Relief may be used to cover “revenue shortfalls” (taxes, fees or other sourced of funds relative to FY 2019) incurred during fiscal year ’20 and ’21 from March 1, 2020 to 90 days after FY 21 end. These expenditures need not be specifically for expenditures for the public health emergency.
  • Limit of 25% of COVID Relief Fund for these types of expenditures.
  • Cannot be used for pension or post-retirement benefits.
  • Cannot be used to replenish “rainy day” fund.
• Not to be used by state or local government officers in personal capacity, to influence passage of legislation or to improve the image of an officer of government

Paycheck Protection Program (PPP)

The Continuing Small Business Recovery and Paycheck Protection Program Act, introduced by Sens. Susan Collins, R-Maine, and Marco Rubio, R. Fla., provides a number of changes for the PPP program.  It also includes additional funding to continue to make loans under the original PPP and to fund a second loan.

• $190 billion to continue to make original PPP loans and to fund a second PPP loan to eligible businesses.
• Those second PPP loans would be open to small businesses with fewer than 300 employees with at least a 50% reduction in revenue. The maximum size for a second loan would be $2 million, and small businesses would only be able to receive $10 million total across both loans.
• A $25 billion set-aside for small businesses or organizations with 10 or fewer employees and a $10 billion set-aside for loans made by community lenders, which include community financial institutions and those with assets of less than $10 billion.

New forgiveness provisions will be of great interest to small business owners. Small business owners who already received — and spent — their PPP loan, is that the proposal includes provisions for automatically forgiving PPP loans under $150,000

• For loans under $150,000, “borrowers are not required to submit to the lender documentation required by section 1106(e) of the CARES Act, but must attest to a good faith effort to comply with Paycheck Protection Program loan requirements, retain relevant records for three years, and may complete and submit demographic information.” It also says the SBA may review and audit these loans to ensure against fraud.
• The proposal also simplifies loan forgiveness for amounts between $150,000 and $2 million, stating that those borrowers are also not required to submit to the lender certain documentation but must complete the required certification and retain records for three years, and that lenders must review the application and submit it to the agency.

Some private economic development organizations and business associations such as chambers of commerce may be interested in provisions which extend eligibility to certain 501(c)6 organizations.  According to the International Economic Development Council (IEDC):

• All 501(c)6’s are eligible to apply for PPP, provided they employ 50 or fewer people and that their loan amount is not greater than $500,000.
• Lobbying activities are restricted to 10% or less in receipts/revenue and overall activity, meaning any organization which takes in more than that or lobbying work constitutes more than 10% of the organization’s work, would be ineligible even as a 501(c)6.
• There are certain exceptions for chamber of commerce, which can have up to 300 employees, no restrictions on lobbying, and no cap on the organization’s loan beyond those that are otherwise included in the PPP.

IEDC is urging Congress to expand eligibility to all 501(c)6’s without restriction and encouraging impacted organizations to contact their US Senator to do the same.

Unemployment Insurance (UI) Referred to as Stimulus Payments

The $600 unemployment insurance payments, often referred to as the individual stimulus payments, end this week, without passage of an extension or other legislation altering the program. The Senate Republican proposal calls for a temporary reduction of the amount to $200.  The temporary reduction can increase in the future under a plan for coordination with individual state unemployment systems, but many lawmakers are skeptical that such a plan is feasible.

• State unemployment insurance systems would need to be recalibrated to cover up to 70% of previous income. The recalibration would increase the supplemental payment could increase up to $500, depending on the formulas used by each individual state.

Liability Protections for COVID-19 Claims

The proposal also raises the liability threshold for businesses being sued for Covid-19-related claims, raising the bar from simple negligence to gross negligence or willful misconduct and the incident must have violated local public health guidelines at the time it occurred. Damages would also be capped.

More details can be found in Finance Committee Chairman Grassley’s Summary: American Workers, Families, and Employers Assistance Act