New! Policy Matters Podcast
Before we dive into this week's stimulus-focused update, we here at the PMN are excited to announce the new Policy Matters Podcast. Policy issues often have long term widespread and pervasive impact on businesses. Not only can new governmental policies significantly affect the climate for business innovation and growth, they create precedents that affect future legislation and can potentially spread across jurisdictions.
Each installment of the Policy Matters Podcast will provide timely updates regarding potential adverse impacts on benefits that policy changes can have on industry growth and offer a preview of what’s next in the competitive marketplace. The first four episodes of the podcast are available now and can be found here. To date, the topics include: (1) an introduction to Labor Secretary Marty Walsh, (2) the consequences of the Senate flip, (3) what to expect at OSHA under the new administration, and (4) an introduction discussing what to expect from the new administration.
And now, for our stimulus update:
We Had To Make Sure We Weren’t Dreaming: Now That Stimulus Checks Are In The Mail, What Are The Contours Of The Package?
Seyfarth Synopsis: Late last month, the Senate and the House of Representatives approved $1.4 trillion in fiscal 2021 under the spending portion of H.R. 133, which would also provide more than $900 billion for unemployment, direct payments, and business loans to combat the economic effects of the COVID-19 pandemic. The President ultimately signed the measure on Sunday, December 27, 2020. A lot was left out of the final package that was discussed during the elongated, seven-month negotiations. But some money now is better than no money ever. The below is a high-level summary of the provisions of the newest stimulus legislation, with links to more detailed summaries of the stimulus.
Welcome to another somewhat special edition of the Policy Matters Newsletter, with a particular focus on the most recent round of COVID-19 legislation. With the excitement and dust from the election(s) – hopefully – settled, and despite the tragic events of January 6th, policy still matters, and going forward we will resume publication of the regularly-formatted Newsletter.
Seyfarth’s policy and government relations team has been fastidiously following Congress’ response to the Pandemic for close to a year now, and has devoted a remarkable amount of real estate to the issue. On March 10, the World Health Organization declared the spread of the Coronavirus a global pandemic. Congress – somewhat surprisingly – jumped right into action within days, passing the Families First Coronavirus Response Act (“FFCRA”), aimed at mitigating the collateral damage COVID-19 leaves in its wake, which we wrote about here. Hard on the heels of the FFCRA, Congress also passed the historic, $2 Trillion Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which we wrote about here, and to which Seyfarth has dedicated its own page. Even harder on the heels of the CARES Act, the Department of Labor issued implementing regulations, which we wrote about here.
Passage of the FFCRA, the CARES Act, and the regulations governing the same came so quickly after the pandemic was announced, the nation had no reason to believe the federal government would immediately lose its appetite for Coronavirus legislation. Indeed, directly after the Trump administration issued reopening guidelines in the middle of April – which we wrote about here – the Government team at Seyfarth excitedly drafted a significant legal alert on a bill from Congressman Raskin intended as a response to the guidelines, but it went absolutely nowhere after introduction. Though we continued to follow additional Coronavirus legislation, we learned our lesson that Congress would not continue to legislate in response to the pandemic with the same sense of urgency.
Since the passage of those flagship pieces of legislation, we have seen a bevy of guidance from the EEOC, IRS, NLRB, hundreds of state agencies, and numerous bills introduced in both houses that went nowhere, all of which were in response to the pandemic. The nation had been waiting patiently – really, impatiently given the consequences – as we witnessed the House pass the HEROES Act and the Senate pass the HEALS Act, neither of which went anywhere.
Well, after months of many being out of work without access to any stimulus, late last month, Congress finally passed an additional stimulus package, H.R. 133, a 5,593-page behemoth combining pandemic relief with a bill to fund government operations, commonly referred to as Covid-19 Relief and Fiscal 2021 Omnibus. Despite a veto threat, the President signed the measure. This package has been critiqued across the left as being much, much too small. However, those critics should not lose sight of President-elect Biden’s pledge to press an even bigger stimulus package.
On a somewhat related note, the President initially indicated he opposed the bill because it included $600 rather than $2,000 direct payments to most Americans. Nancy Pelosi used her own Twitter machine to respond directly to the President, encouraging the President and introducing stand-alone legislation to increase the payment to $2,000. The House approved the measure in a 275-134 vote, but Mitch McConnell immediately blocked it.
We appreciate the readers slogging through this long introduction as we partially rehash our efforts following this issue, which has been a cathartic exercise. So, now, it is our pleasure to summarize what the legislation mandates, what it offers, and what was left out.
Top Dollar Items
Under the combo omnibus and COVID-19 relief package, agencies and other federal programs would receive $1.4 trillion in fiscal 2021 under the spending portion of H.R. 133, which would also provide more than $900 billion for unemployment, direct payments, and business loans to combat the economic effects of the Covid-19 pandemic. While state and local aid was conspicuously absent from the legislation, some of the targeted expenditures such as transportation and education will assist local government. On a more micro level, the legislation can be broken down as follows:
- $286 Billion in Direct Economic Relief: All workers receiving unemployment benefits will continue to receive an additional $300 per week through March 14, 2021. The measure extends the Pandemic Unemployment Assistance (PUA) and the Pandemic Emergency Unemployment Compensation (PEUC) programs, provides for Economic Impact Payments of $600 for individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent.
- $45 Billion for Transportation: $15 billion will go to the airline industry for payroll support; $1 billion for airline contractor payrolls; $14 billion for transit; $10 billion for state highways; $2 billion for airports and airport concessionaires; $2 billion for the private motorcoach, school bus, and ferry industries; and $1 billion for Amtrak.
- $345 Billion for Small Businesses: $284 billion would be added to the Paycheck Protection Program (PPP); $20 billion for new EIDL Grants for businesses in low-income communities; $3.5 billion for continued SBA debt relief payments; $2 billion for enhancements to SBA lending; and $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions;
- $69 Billion for Vaccinating, Testing, and Tracing: The bill provides more than $22 billion to states for testing, tracing and COVID mitigation programs; $2.5 billion will be granted to target underserved areas.
- Other Appropriations: $82 Billion for Education, $10 billion for child care, $25 billion in rent and utilities support, $26 billion in food aid, $10 Billion to USPS, and $7 Billion for Broadband
Direct Payments And Taxes
The measure would provide another round of direct payments of as much as $600 for an individual, $1,200 for joint filers, and $600 for each qualifying child. The calculus for determining the amount of direct payment is similar to the CARES Act, reducing the payments by 5% for individuals with adjusted gross incomes of more than $75,000, stopping at $87,000.
Those who chose to defer their payroll taxes would be given until Dec. 31, 2021, to pay back the government, instead of through April 30, 2021, as originally directed by the Treasury Department. The legislation also extends credits for paid sick and family leave provided under the FFCRA (Public Law 116-127) through March 31, 2021. Gross income wouldn’t include certain forgiven debt, emergency SBA disaster loans, and loan repayment aid provided by the CARES Act. The legislation directs the Treasury Department to issue regulations making PPE and other supplies used to prevent the spread of COVID-19 eligible for the educator expense deduction.
The Great Expansion: Paycheck Protection Program (“PPP”)
The PPP was probably the most popular program created by the CARES Act. The new measure would authorize a second round of loans under the PPP, offering low-interest, forgivable loans guaranteed for small businesses and other entities to keep workers on the payroll during the COVID-19 crisis. The measure would increase the program’s combined lending authority to $806.5 billion, from $659 billion, and extend it to March 31, 2021, from Aug. 8, and appropriate $284.5 billion in new funds for the SBA to guarantee first and second round loans. The measure also would rescind $146.5 billion in unobligated small business funds from the CARES Act and from a subsequent law that replenished the program (Public Law 116-139), which we wrote about here.
To qualify for a second loan, small businesses must employ 300 or fewer workers, instead of the current 500-employee threshold; demonstrate that they had at least a 25% reduction in gross revenue during a quarter in 2020 compared with the same period in 2019, with some exceptions; and exhaust their first loan before receiving a second one. Most eligible borrowers could receive second loans for as much as $2 million or 250% of their average monthly payroll costs, whichever is less. Restaurants and hospitality businesses could receive the lesser of $2 million or 350% of their average monthly payroll costs.
The legislation also expands the use of PPP funds that would qualify for loan forgiveness. Additional expenditures for nonpayroll costs would include:
- Payments for software or cloud computing services that facilitate operations, product delivery, payroll expenses, and other functions;
- Costs related to property damage, vandalism, or looting due to public disturbances in 2020, if the damage wasn’t covered by insurance;
- Payments made to suppliers of essential goods under contracts and purchase orders in effect before a PPP loan was issued;
- Purchases of personal protective equipment;
- Specific COVID-19 adaptations such as drive-through windows, ventilation systems, sneeze guards, and screening capabilities to comply with social distancing, and sanitation.
The measure allows borrowers to deduct eligible expenses paid for with forgiven PPP loans, effectively reversing guidance from the IRS, and permits small business debtors to receive PPP loans if approved by a bankruptcy court. Despite these helpful changes to the program, entities primarily engaged in political or lobbying activities or entities that are required to register under the Foreign Agents Registration Act remain ineligible for the program. Seyfarth issues a helpful summary of the PPP provision here.
What About Unemployment And Leave Requirements?
The measure would restore and reduce to $300 per week, from $600, the Federal Pandemic Unemployment Compensation (FPUC) created under the CARES Act, through March 14, 2021. The new legislation provides for some nuanced changes to the program that expired on December 31, 2020. Specifically, the new measure extends the duration of Pandemic Unemployment Assistance benefits to as long as 50 weeks, from 39 weeks and increases to 24 weeks, from 13 weeks, benefits for those who’ve exhausted regular benefits under the Pandemic Emergency Unemployment Compensation program.
What About Those Behind on Their Rent?
The legislation provides $25 billion for emergency rental assistance payments through the Treasury Department. At least 90% of the allocation must be used to provide financial assistance to eligible households, including for rental and utilities payments. The CARES Act temporarily barred landlords with federally backed mortgages from evicting tenants. After the moratorium expired, the Centers for Disease Control and Prevention expanded it to cover additional tenants and extended it through Dec. 31 to prevent the further spread of Covid-19. This measure extends the CDC’s eviction moratorium for one month, through Jan. 31, 2021.
Additional Requirements for Airlines
To qualify for the billions allocated to the airline industry, they cannot reduce pay rates and benefits or furlough employees until March 31, 2021. Air carriers and their affiliates would additionally be prohibited through March 31, 2022, from purchasing stock in the air carrier or paying dividends and would have to recall and compensate certain employees who were furloughed or laid off. The measure also extends a CARES Act provision that bars conditioning aid on entering into collective bargaining negotiations. Finally, airlines must limit compensation for higher-paid officers and employees until Oct. 1, 2022.
That Did Not Even Cover Everything, and it is A Lot! So What Was Left Out?
Often, what is purposefully not included in a broad piece of legislation such as this illuminates just as much, if not more, about the Congress’ legislative priorities more than what remains in the final product. So what was left out of this package? Well, a lot of issues important to a lot of contingencies did not make the final cut. For example, the legislation does not:
- extend the payment pause for student loan borrowers;
- provide for the $1 trillion in aid to state and local governments democrats pushed for;
- provide for a liability shield for corporations against Coronavirus claims, much less a liability shield as powerful as the Senate-proposed Heals Act;
- provide hazard pay for essential workers;
- extend stimulus checks to adult dependents;
- extend financial aid to cruise lines.
The reasons those specific issue were tabled are varied and nuanced. Often, however, the answer is as simple as the contentious provisions being dropped to avoid a protracted battle over singular issues that could sink the overall package. For example, some outlets have surmised that student loan relief was not included because Joe Biden can do so through executive action on January 20, or simply that Congress has higher priorities than protecting student borrowers during the pandemic.
Some More Detailed Summaries From Seyfarth
Seyfarth recently summarized key changes impacting retirement plans, here, and issued a parallel Legal Update describing the health and welfare-related provisions of the legislation. This update discusses how the recent legislation impacts unemployment compensation benefits through a section called the Continued Assistance for Unemployment Workers Act of 2020. In addition to this post, we encourage any interested readers to review a UIPL released by the Department of Labor on December 30, 2020, which you may access here.
The stimulus package was the result of significant compromises from all 360 degrees of the stakeholders’ interests. As such, the current stimulus package leaves a lot to be desired from a number of lobbying contingents. Even if the top dollar size of the package is not commensurate with the pain caused by the pandemic, it is some help now with more likely on the way, as President-elect Biden has already begun outlining the contours of the next stimulus package. This measure contains nuances far too numerous for comprehensive coverage in this limited space. Should you have question about any of these nuances, please reach out to your favorite Seyfarth attorney.