Congress has approved $350 billion in emergency loans for small businesses to help keep workers employed in the CARES (Act).
"Direct payments: Americans who pay taxes will receive a one-time direct deposit of up to $1,200, and married couples will receive $2,400, plus an additional $500 per child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples.
Unemployment: The program provides $250 billion for an extended unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through Dec. 31 for eligible workers. The deal applies to the self-employed, independent contractors and gig economy workers." - Forbes.com
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
SBA Economic Injury Disaster Loans (EIDL) – Emergency Grant
If you applied for an EIDL loan, this allows you to request an advance on that loan which the SBA must distribute within three days
· Purpose: Advance payment may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.
· Repayment: Applicants shall not be required to repay advance payments, even if subsequently denied for an EIDL loan.
· Eligibility: Eliminates creditworthiness requirements and appropriates an additional $10 billion to the EIDL program so that eligible nonprofits and other applicants can get checks for $10,000 within three days.
· Expands eligibility for access to (EIDL) to include Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees or any individual operating as a sole proprietor or an independent contractor during the covered period (January 31, 2020 to December 31, 2020). Private non-profits are also eligible for both this grant and EIDLs.
· In advance of payment, the SBA must verify that the entity is an eligible applicant for an EIDL loan. This approval shall take the form of a certification under penalty of perjury by the applicant that they are eligible.
· Requires that an advance payment be considered when determining loan forgiveness, if the applicant transfers into a loan made under SBA’s Paycheck Protection Program.
· Waiver of personal guarantee: For any EIDL loans made in response to COVID-19 before December 31, 2020, the SBA shall waive any personal guarantee on advances and loans below $200,000, the requirement that an applicant needs to have been in business for the 1-year period before the disaster, and the credit elsewhere requirement.
· Termination: Terminates the authority to carry out Emergency EIDL Grants on December 30, 2020.
SBA Paycheck Protection Program
This new $39 billion lending program is modeled the existing SBA 7(a) program, with 100% government guarantee. It is for nonprofits of not more than 500 employees.
· Eligibility: Among others, includes 501(c)(3) nonprofit with not more than 500 employees (counting each individual – full time or part time and not FTEs).
· All lenders (non-SBA lenders to be approved by Treasury and SBA) can provide loans
· No personal guarantee or collateral required
· Lenders defer fees, principal, and interest for no less than 6 months and no more than 1 year.
· Loan Amount: Up to $10 million through December 31, 2020. The size of the loans would equal 250 percent of an employer’s average monthly payroll. Generally, monthly payroll costs for 2 ½ months, not to exceed $10 million. Payroll costs exclude compensation paid to individuals, including the self-employed, above $100,000 a year.
· Covered loan period: beginning on February 15, 2020 and ending on June 30, 2020.
· Loan Purpose: Allowable uses of the loan include payroll support to retain workers, such as employee salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments.
· One cannot receive duplicative funds for the same uses from another SBA program. However, it allows a borrower who has an EIDL loan unrelated to COVID-19 to apply for a PPP loan, with an option to refinance that loan into the PPP loan. The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the Paycheck Protection Program.
· Outlines the treatment of any portion of a loan that is not used for forgiveness purposes. The remaining loan balance will have a maturity of not more than 10 years, and the guarantee for that portion of the loan will remain intact.
· Sets a maximum interest rate of four percent.
· “Loans” would be constructed to create an incentive for employers to hire back as many workers as is feasible. Meeting those incentives would cause the “loans” to evolve into grants that do not have to be repaid. Layoffs will not disqualify application of those SBA 7a loans.
· Increases the government guarantee of 7(a) loans to 100 percent through December 31, 2020, at which point guarantee percentages will return to 75 percent for loans exceeding $150,000 and 85 percent for loans equal to or less than $150,000.
· Allows complete deferment of 7(a) loan payments for at least six months, and not more than a year and requires SBA to disseminate guidance to lenders on this deferment process within 30 days.
· Establishes that the SBA will administer the program, including purchasing and guaranteeing loans, with guidance from Treasury.
Loan Forgiveness for the Paycheck Protection Program
The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs (not including costs for compensation above $100,000 annually), interest payments on mortgages, rent payments, and utility payments between February 15 and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if borrower reduces salaries and wages by more than 25%.
· Amounts forgiven may not exceed the principal amount of the loan.
· Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages: Payroll costs plus any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation + and any covered utility payment.
· The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
· Employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant.
· Borrowers will verify through documentation to lenders their payments during this period. Upon a lender’s report of an expected loan forgiveness amount for a loan or pool of loans, the SBA will purchase such amount of the loan from the lender.
· Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with terms of a max of 10 years, at max 4% interest. The 100% loan guarantee remains intact.
Economic Stabilization Loan
Funding through the Treasury Department to lending facilities for certain industries. For nonprofits of 500-10,000 employees. No loan forgiveness; interest of not more than 2%; contains employee retention and restoration provisions.
· Provides $454 billion, as well as any amounts available but not used for direct lending, for loans, loan guarantees, and investments in support of the Federal Reserve’s lending facilities to eligible businesses, states, and municipalities.
· Defines an “Eligible Business” as a United States business that has not otherwise received adequate economic relief in the form of loans or loan guarantees provided under this Act.
Nonprofit Eligibility: In addition to whatever other loan facilities might be created, the Treasury Secretary will “endeavor to seek the implementation” of a Middle Market loan facility for banks to provide loans to businesses and eligible nonprofits with 500-10,000 employees.
· The annualized interest rate cannot be higher than 2%. For the first six months after such direct loan is made, or the Treasury Secretary has the discretion to make the time longer, no principal or interest shall be due and payable.
· Requirements: Any eligible borrower applying for a direct loan under this program must make a good-faith certification that:
o Uncertainty of the economic conditions as of the rate of the application makes necessary the loan request to support the ongoing operations.
o Funds received will be used to retain at least 90% of the recipient’s workforce at full compensation and benefits, until September 30, 2020 [Note it is likely 90% of workforce as of March 24, 2020 but more clarity is needed]
o The recipient intends to restore not less than 90% of the workforce of the recipient that existed as of February 1, 2020 and to restore all compensation and benefits no later than 4 months after the termination of the public health emergency declared by HHS Secretary on January 31, 2020.
· All direct lending must meet the following criteria:
o Alternative financing is not reasonably available to the business;
o The loan is sufficiently secured or made at an interest rate that reflects the risk of the loan and, if possible, not less than an interest rate based on market conditions for comparable obligations before the coronavirus outbreak;
o The duration of the loan shall be as short as possible and shall not exceed 5 years;
o Borrowers must, until September 30, 2020, maintain its employment levels as of March 24, 2020, to the extent practicable, and retain no less than 90 percent of its employees as of that date;
o A borrower must certify that it is a U.S.-domiciled business and its employees are predominantly located in the U.S.;
o The loan cannot be forgiven
· Prohibits recipients from increasing the compensation of any officer or employee whose total compensation exceeds $425,000, or from offering such employees severance pay or other benefits upon termination of employment which exceeds twice the maximum total annual compensation received by that employee, until one year after the loan is no longer outstanding.
· Termination/Duration: All authority to make new loans, loan guarantees, or other investments shall terminate on December 31, 2020. The duration of all loans shall not exceed five years.
Employee Retention Payroll Tax Credit
Employee retention credit in refundable payroll taxes for employers subject to closure due to COVID-19. The Treasury Department will be creating additional guidance on how employers can access these credits.
· Would create a refundable payroll tax credit computed as 50% of wages paid by eligible employers. Up to $10,000 in qualified wages could be taken into account per employee in determining the credit amount. Health plan expenses can be treated as wages when computing the credit.
· Qualified wages depend on the number of employees the employer had during 2019. If the employer had more than 100 full-time employees, qualifying wages are wages paid when employee services are not provided, limited to 30 days per employee. If the employer had 100 or fewer full-time employees, all employee wages paid by eligible employers are credit-eligible.
· For nonprofits with over 500 employees who do not qualify for the SBA 7(a) loan program
· The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.
· The entity had to be an ongoing concern at the beginning of 2020 and saw a drop in revenue of at least 50 percent in the first quarter compared to the first quarter of 2019. The availability of the credit would continue each quarter until the organization’s revenue exceeds 80 percent of the same quarter in 2019. For tax-exempt organizations, the entity’s whole operations must be takin into account when determining the decline in revenues.
· The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
Delay of payment of employer payroll taxes
Employers would be able to defer, or postpone, the employer share of the Social Security payroll tax through the end of 2020.
· Employers are allowed to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.
· Requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security
Charitable Giving Incentives
· Includes an above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total charitable contributions of up to $300.
· The incentive applies to contributions made in 2020 and would be claimed on tax forms next year.
· Lifts the existing cap on annual contributions for those who itemize, raising it from 60 percent of adjusted gross income to 100 percent. For corporations, the bill raises the annual limit from 10 percent to 25 percent.
Funding is given to states who in turn reimburse nonprofits. This is an optional program and states have to request the funding. The PUA, PUC and PEUC described below are fully federally funded. States will also receive additional administrative funds to administer these programs.
There is a “nonreduction rule” -- as long as the states are participating in these programs, they may not do anything to decrease the maximum number of weeks of UI or the weekly benefits available under state law as of January 1, 2020.
Self-Funded Nonprofits and Unemployment: Relief for Workers Affected by Coronavirus Act
· Only reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees.
· States the Secretary of Labor shall provide for the transfer of funds during the applicable period (beginning March 13, 2020 and ending on December 31, 2020) to the accounts of the States in the Unemployment Trust Fund.
· The amount of funds transferred to the account of a State under subparagraph (A) during the applicable period shall, as determined by the Secretary of Labor, be equal to one-half of the amounts of compensation that were paid by the State for weeks of unemployment beginning and ending during such period. Such transfers shall be made at such times as the Secretary of Labor considers appropriate.
· Funds transferred to the account of a State shall be used exclusively to reimburse governmental entities and other organizations for amounts paid (in lieu of contributions) into the State unemployment fund pursuant to such section.
Pandemic Unemployment Assistance (PUA)
· This section creates a temporary Pandemic Unemployment Assistance (PUA) program through December 31, 2020 to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others, including someone who has exhausted their state UI benefits included Extended Benefits) who are unable to work as a direct result of the coronavirus public health emergency.
· Eligibility for the program runs from January 27, 2020 through December 31, 2020, so eligibility is retroactive. The duration is 39 weeks.
· Applicants will need to provide self-certification that they are (1) partially or fully unemployed, OR (2) unable and unavailable to work because of one of the following circumstances:
· They have been diagnosed with COVID-19 or have symptoms of it and are seeking diagnosis;
· A member of their household has been diagnosed with COVID-19;
· They are providing care for someone diagnosed with COVID-19;
· They are providing care for a child or other household member who can’t attend school or work because it is closed due to COVID-19;
· They are quarantined or have been advised by a health care provider to self-quarantine
· Was scheduled to start employment and does not have a job or cannot reach their place of employment as a result of a COVID-19 outbreak;
· They have become the breadwinner for a household because the head of the household has died as a direct result of COVID-19;
· They had to quit their job as a direct result of COVID-19;
· Their place of employment is closed as a direct result of COVID-19; or
· They meet other criteria established by the Secretary of Labor
is (3) self-employed; (4) seeking part-time employment (if state law allows for benefits for PT workers); or (5) does not have sufficient work history to qualify for UI, or otherwise does not qualify for state UI.
· People who can telework with pay and anyone receiving paid sick or paid leave benefits cannot receive PUA.
· PUA benefits are calculated the same way as they are for the federal Disaster Unemployment Assistance program under the Stafford Act--which is the model for the PUA program--which have a minimum benefit that is equal to one-half the state’s average weekly UI benefit (about $190 per week).
Emergency Increase in Unemployment Compensation Benefits/Enhanced Benefits
· This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months. This is federally funded.
· This benefit is for anyone receiving regular state UI or PUA. The additional $600 per week may be paid either with the regular UI payment or at a separate time. But it must be paid weekly
Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week
· Provides funding to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
Pandemic Emergency Unemployment Compensation (PEUC)
· Provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available - for those who were classified as employees who have exhausted or will exhaust state UI benefits without finding a new job.
· In order to receive PEUC, workers must be engaged in active work search requirements. However, the bill explicitly provides that “ a State shall provide flexibility in meeting such [work search] requirements in case of individuals unable to search for work because of COVID-19, including because of illness, quarantine, or movement restriction.
Temporary Financing of Short-Time Compensation Payments in States with Programs in Law
· This section provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation through December 31, 2020.
Additional Protections: If workers receive overpayments of PUA, the State UI agencies may waive repayment if the
OTHER SIGNIFICANT PROVISIONS
· Direct Payments to adults of $1,200 or less and $500 per child ($3,400 for a family of four) to be sent out in weeks. The amount of the payments phases out based on earnings of between $75,000 and $99,000 ($150,000 / $198,000 for couples).
Amendments to the New Paid Leave Mandates
Makes the limitations on wages for employees taking time off though the emergency family leave and paid sick leave programs established under the Families First Coronavirus Response Act (enacted March 19) consistent with the refundable payroll tax credits available to employers.
· For emergency family leave, an employer is not required to pay more than $200 per day or $10,000 total to an employee taking family and medical leave to care for a child whose school or care provider has closed because of COVID-19.
· For emergency paid sick leave, wages are capped at either $511 per day or $5,110 total for an employee who is under quarantine order, advised to self-quarantine or seeking a diagnosis, or $200 per day or $2,000 total for those providing care to a child or quarantined individual.
· Allows an employee who was laid off by an employer to access to emergency family and medical leave if they are rehired by the employer. This applies to an employee who was laid off not earlier than March 1, 2020, and had worked for the employer for at least 30 days of the last 60 calendar days prior to being laid off.
· Allows employers to receive an advance on the refundable payroll tax credit provide to cover wages and employer costs for health plan coverage while an employee is taking emergency family leave or paid sick leave. The U.S .Treasury Department will waive penalties for employers failing to make payroll tax payments in anticipation of such tax credits.
SCSEP: Continuity of service and opportunities for participants in community service activities under title V of the Older Americans Act of 1965: Allows the Secretary of Labor to extend older adults’ participation in community service projects under OAA and make administrative adjustments to facilitate their continued employment under the program.
Department of Labor – DOL receives $345 million for National Emergency Grants, which are requested by states to address significant unanticipated layoffs. Provides local workforce boards with additional flexibility to use funds received under the Workforce Innovation and Opportunity Act for increased administrative costs in response to COVID-19 by raising the existing cap from 10 percent to 20 percent. Allows Governors to use reserved workforce funds on rapid response activities in response to COVID-19.
Federal Contractor Authority Allows federal agencies to reimburse federal contractors and subcontractors for paid leave and paid sick days provided to their employees when the contractors are unable to fulfill the work under their contracts because they are unable to access a federal facility or are otherwise restricted due to COVID-19.
Exclusion for certain employer payments of student loans: Enables employers to provide a student loan repayment benefit to employees on a tax-free basis. An employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. Applies to any payments made by an employer on behalf of an employee through January 1, 2021.