STIMULUS PHASE 2 – KEY PROVISIONS THAT IMPACT SMALL BUSINESS AND RETAILERS
This is a description of legislation passed by the Senate on March 18 and on its way to the President for his signature. The bill – informally referred to as Coronavirus Stimulus Phase 2 – includes provisions that will provide some initial relief to businesses but that are largely viewed as being too small to meet the rapidly expanding crisis. This spending in this bill will be dwarfed by upcoming stimulus packages – including a Phase 3 plan currently being debated by Congress.
Below you will find information on the family leave, sick leave, employer tax credits for sick leave payment and emergency unemployment provisions of the Phase 2 bill. These are the provisions most relevant to small businesses and retailers.
Other provisions, also summarized below, are more focused on food security, health care and other national needs. The bill is estimated to include just over $100 billion in spending while the next stimulus package (potential components of which are described below in “Stimulus Phase 3”) will include over $1 trillion in spending.
When Phase 2 goes into effect — The bill would go into effect 15 days after the date of enactment and expire 1-year after enactment – except the Emergency Paid Sick Leave portion, which would expire on December 31st.
There are several provisions in the bill of great interest and potential impact to employers:
Emergency Family & Medical Leave Act
The bill provides “up to 12 weeks of job-protected leave under the Family and Medical Leave Act.” Only employers of fewer than 500 employees and government employers are covered, and only employees who have been employed for at least 30 calendar days are eligible. In addition, the Secretary of Labor is authorized to exempt health care providers and emergency responders, and to exempt employers with fewer than 50 employees whose business viability would be jeopardized by the bill’s provisions.
The first 14 days may be unpaid (although unpaid leave is essentially eliminated by the Emergency Paid Sick Leave provisions below), but employees have the option to use accrued paid time off during that time. After the first 14 days, employers must compensate employees in an amount that is not less than two-thirds of the employee’s usual pay.
Employees will only be eligible for such pay if on leave for coronavirus-related reasons, which are defined in the statute as:
- To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus;
- To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus; and
- To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to a coronavirus.
Emergency Paid Sick Leave Act
This provision requires employers with fewer than 500 employees and government employers to provide employees two weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for coronavirus.
For other coronavirus leave, emergency sick leave is paid at 2/3 the employee’s regular rate of pay. That 2/3 pay leave can be taken to care for a family member for such coronavirus-related purposes or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus.
In calculating the 2 weeks of paid leave, full-time employees are entitled to 80 hours, and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.
The bill states that both Acts would go into effect 15 days after the date of enactment and expire on December 31, 2020. Employers would be required to provide employees with notice of the right to leave. Employers should proactively review their policies with an employment law attorney in preparation for making necessary changes to ensure compliance if the bill is enacted.
Tax Credits for Emergency Paid Sick Leave and Paid FMLA
This section provides tax credits for employers paying Emergency Paid Sick Leave or Paid FMLA, including:
- A 100% tax credit, each calendar quarter, for Emergency Paid Sick Leave – credited against quarterly employer taxes. With self-employed individuals, the tax credit is limited to 2/3 in cases of caring for a quarantined family member or a child whose school or child care is closed due to coronavirus. If the credit exceeds quarterly employment taxes, the employer can keep the excess.
- A 100% tax credit, each calendar quarter, for Emergency FMLA Leave – credited against quarterly employer taxes. This credit is capped at $200 per employee per day and $10,000 per quarter. With self-employed individuals, the credit is capped at the lesser of $200 per day or average daily taxable income. If the credit exceeds the employer’s quarterly employment taxes, the employer can keep the excess.
Emergency Unemployment Insurance Stabilization and Access Act of 2020
This section provides $1 billion in 2020 for emergency grants to states for activities related to processing and paying unemployment insurance (UI) benefits, under certain conditions.
$500 million would be used to provide immediate additional funding to all states for staffing, technology, systems, and other administrative costs, so long as they meet basic requirements about ensuring access to earned benefits for eligible workers. Among them is that states must require employers to (1) provide notification of potential unemployment eligibility to laid-off workers; (2) ensure workers have multiple methods to apply for benefits (e.g., by phone and electronically); and (3) provide notice of application status and how to ensure processing of the employee’s application.
Another $500 million would be reserved for emergency grants (in the same amount as the grant above) to states which experienced at least a 10 percent increase in unemployment. To be eligible a state must demonstrate “steps it has taken or will take to ease eligibility requirements and access to unemployment compensation for claimants, including waiving work search requirements and waiting periods, and non-charging employers directly impacted by the coronavirus due to an illness in the workplace or direction from a public health official to isolate or quarantine workers.
Additional Bill Provisions:
HHS Funding & Health-Care Provisions
Nutrition: The measure would appropriate $250 million for HHS programs that aid elderly Americans, divided as follows:
- $160 million for home-delivered nutrition services.
- $80 million for congregate nutrition services that provide food in group settings, such as adult day care centers and meal sites.
- $10 million for nutrition services for American Indians.
State matching requirements wouldn’t apply to funds provided under the bill.
It also would provide $64 million to the Indian Health Service for items and services related to Covid-19.
Medicaid Funding: States would be eligible for a 6.2 percentage point increase in their federal medical assistance percentages (FMAP). They would have to provide coverage of coronavirus testing without cost sharing and meet other criteria, such as not imposing more stringent eligibility standards or additional premiums.
States could cover tests for uninsured people through their Medicaid programs and receive a 100% FMAP to cover the cost.
Medicaid funding for U.S. territories would be increased.
Test Coverage: Insurers would be required to cover coronavirus tests and related services, such as provider visits for testing, without cost-sharing or prior authorization requirements. The cost-sharing prohibition would also apply to Medicaid, Medicare, TRICARE, veterans’ health programs, the Indian Health Service, and coverage provided to federal civilian employees.
The bill would appropriate $1 billion to allow the National Disaster Medical System to reimburse provider costs associated with testing uninsured individuals.
Major insurance companies — including BlueCross BlueShield Association companies, Humana Inc., and UnitedHealth Group Inc. — have committed to waiving coronavirus test co-pays, according to Vice President Mike Pence.
Medicare currently covers testing without any patient cost-sharing. The Centers for Medicare and Medicaid Services wrote in March 12 guidance that states can modify their Medicaid plans to eliminate cost-sharing for certain services, such as Covid-19 tests, as long as their policy applies regardless of the diagnosis. The emergency declaration will also give states more flexibility in their programs.
The administration is also examining ways to provide free tests to the uninsured, CDC Director Robert Redfield said March 12.
Mask Liability: The measure would make personal respiratory protective devices a covered countermeasure under the Public Readiness and Emergency Preparedness Act (Public Law 109-148). The law allows HHS to provide liability protections for certain emergency response products.
Funding: The measure would provide:
- $500 million in emergency funding for the WIC program.
- $400 million for the Commodity Assistance Program for the emergency food assistance program (TEFAP), $100 million of which could be used for costs related to the distribution of goods.
- $100 million for grants to the Northern Mariana Islands, Puerto Rico, and American Samoa for nutrition assistance provided in response to the virus.
SNAP Benefits for Kids: If a school is closed for at least five consecutive days because of a coronavirus-related public health emergency, states could adjust their Supplemental Nutrition Assistance Programs (SNAP) to provide additional aid to households with children eligible for free or reduced price school meals.
Additional benefits would have to be equal to the value of the meals for each eligible child in a household. Benefits could be distributed through an electronic benefits transfer card system. The Agriculture Department could purchase food commodities to ensure it can distribute them in areas where a public health emergency has been declared. “Such amounts as are necessary” would be appropriated for the meal provisions.
SNAPWork Requirements: The measure would waive federal work requirements for SNAP eligibility. The waiver would begin the first full month after the bill is enacted and terminate at the end of the first full month after a federal coronavirus-related emergency declaration is lifted. State-imposed work requirements wouldn’t be changed, but a person’s participation in SNAP during the emergency couldn’t be counted for determining compliance with work requirements.
Other SNAP Benefits: States that make their own emergency or disaster declarations related to Covid-19 could request emergency allotments of food aid to support increased participation in SNAP and address temporary food needs. The provision wouldn’t change the maximum monthly allotment for any household size. States would have to provide data sufficient to demonstrate the need for additional aid.
Meal Program Waivers: The package would allow USDA to waive statutory requirements for several food programs to ensure that meals can be provided during the emergency and to implement safety measures related to preventing the spread of Covid-19. It would allow nationwide waivers of eligible National School Lunch Program, School Breakfast Program, Child and Adult Care Food Program, and Summer Food Service Program requirements.
The department could waive nutritional content requirements and rules to provide meals through the Child and Adult Care Food Program in group settings.
Waivers related to Covid-19 that increase the cost to the federal government for school meals would be allowed.
USDA granted waivers to all 50 states, Puerto Rico, and Washington, D.C., to allow school systems to continue serving meals during prolonged coronavirus-related closures.
WIC Waivers: The measure would allow states to request waivers for the requirement that WIC recipients certify their eligibility in person and for deferring biometric and bloodwork requirements. USDA could also modify or waive WIC administrative requirements that a state can’t meet due to the Covid-19 outbreak.
Self-Employed Tax Credit
The measure would provide a similar refundable credit against self-employment tax.
The sick leave credit would be for the lesser of $511 per day or an individual’s average daily self-employment income if quarantining themselves. It would be for the lesser of 67% of their average daily self-employment income or $200 if they were caring for someone else.
The credit would be available for 10 days over the number of days taken into account in preceding years.
Self-employed individuals could receive a family leave credit for as many as 50 days for the lesser of $200 or 67% of their average daily self-employment income.
Self-employed individuals would have to submit documentation, as required by the Treasury Department.
The measure would establish alternate requirements for self-employed individuals who also receive sick-leave pay from an employer. It would also establish rules for the credits to be provided in U.S. territories.
The measure also would provide:
- $82 million to the Defense Department for Covid-19-related items and services through the Defense Health Program.
- $60 million for the Veterans Affairs Department.
- $15 million to the Internal Revenue Service to carry out the bill’s provisions.
STIMULUS PHASE 3 – WHITE HOUSE PROPOSAL
As the Senate works on a third stimulus package of over $1 trillion they will be taking into consideration the White House’s proposal for stimulus spending which is outlined below.
Components below that are expected to be part of the final Senate bill include direct cash payments to Americans and some form of small business economic relief, either loans or payroll tax relief. While payroll tax relief was championed by the White House and others early on in this crisis, it is no longer seen as a quick enough stimulus for struggling small businesses that are quickly running out of operating cash.
- APPROPRIATION TO THE EXCHANGE STABILIZATION FUND FOR SPECIFIED USES
- Airline Industry Secured Lending Facility ($50 billion)
- This provision would appropriate an additional $50 billion to the ESF and authorize use of those funds for secured lending to U.S. passenger and cargo air carriers
- Treasury Department to determine appropriate interest rate and other terms and conditions
- Secured by collateral specified by the Treasury Department
- Requirements on borrowers would include:
- Specified continuation of service requirements
- Limits on increases in executive compensation until repayment of the loans
- Other Severely Distressed Sectors of the U.S. Economy ($150 billion)
- This provision would appropriate an additional $150 billion and authorize use of those funds for secured lending or loan guarantees to assist other critical sectors of the U.S. economy experiencing severe financial distress due to the COVID-19 outbreak.
- TEMPORARILY PERMIT USE OF THE EXCHANGE STABILIZATION FUND TO GUARANTEE MONEY MARKET MUTUAL FUNDS
- Temporarily suspend the statutory limitation on the use of the Exchange Stabilization Fund (Section 131 of the Emergency Economic Stabilization Act of 2008) for guarantee programs for the United States money market mutual fund industry.
- Sunset date: Terminate authority to establish any new MMMF guarantee program upon the conclusion of the National Emergency Concerning the Coronavirus Disease 2019 (COVID-19) Outbreak declared by the President on March 13, 2020.
III. ECONOMIC IMPACT PAYMENTS
- This provision would authorize and appropriate funds for two rounds of direct payments to individual taxpayers, to be administered by the IRS and Bureau of the Fiscal Service.
- $250 billion to be issued beginning April 6
- $250 billion to be issued beginning May 18
- Payment amounts would be fixed and tiered based on income level and family size. Treasury is modeling specific options.
- Each round of payments would be identical in amount.
- SMALL BUSINESS INTERRUPTION LOANS
- To provide continuity of employment through business interruptions, this provision would authorize the creation of a small business interruption loan program and appropriate $300 billion for the program.
- The U.S. government would provide a 100% guarantee on any qualifying small business interruption loan.
- Qualifying loan terms:
- Eligible borrowers: Employers with 500 employees or less (phased out)
- Loan amounts: 100% of 6 weeks of payroll, capped at $1540 per week per employee (approx. $80,000 annualized)
- Borrower requirement: Employee compensation must be sustained for all employees for 8 weeks from the date the loan is disbursed.
- Lender: U.S. financial institutions
- Streamlined underwriting process: Lender verifies the previous 6-week payroll amount and later verifies that the borrower has paid 8 weeks of payroll from date of disbursement.
- Authority for the Treasury Department to issue regulations establishing appropriate interest rate, loan maturity, and other relevant terms and conditions
STIMULUS PHASE 3 – BUSINESS PROPOSALS
While Congress and the Administration work on both a third and potentially fourth stimulus package, major business groups continue to make suggestions for industry-specific and economy-wide relief. Among the most common requests are a payroll tax holiday, cash injections in specific industries like travel and tourism, loan programs for small business and tariff relief. Here is a summary of the requests coming in from major business associations:
Chamber of Commerce
- Cancel the payment of all payroll taxes typically paid by employers for the months of March, April, and May. Includes Social Security, Medicare, and unemployment taxes.
- A payroll tax holiday has also been floated through the end of the year at a cost of roughly $400 billion. It is expected to be central to any Republican stimulus proposal.
- Expand loan programs for small businesses with fewer than 500 employees experiencing revenue loss as a result of the Coronavirus. The Small Business Administration disaster loan program for those impacted by the Coronavirus should be immediately made available nation-wide, eliminating the state-by-state and county-by-county certification process and remove the requirement that small businesses demonstrate that they cannot access credit elsewhere before receiving a SBA-disaster loan.
- Provide loans and loan guarantees to employers with more than 500 employees experiencing significant revenue loss as a result of the Coronavirus. Specifically, legislation should expand the use of the Federal Reserve Discount Window through the liberalization of the restrictions of Section 13-3 of the Federal Reserve Act.
National Association of Manufacturers:
- Provide a tax credit for employers who continue to pay workers who are quarantined.
- Provide a tax credit for employers who continue to pay workers during periods that a business is forced to close temporarily.
- Enhance tax deductions for employers who invest in safety equipment, including handwashing stations,
- respiratory equipment and cleaning products.
- Provide protections to employers under medical privacy laws, the Americans with Disabilities Act and the Equal Opportunity Employment Act to allow businesses to inquire about employee health information relating to COVID-19 to ensure a safe workplace.
- Enact liability protection legislation that will allow businesses to require employees to engage in proper hygiene procedures.
- Enact legislation to ensure employers who implement practices to reduce the risk of COVID-19 in the workplace are protected against frivolous litigation.
- Accelerate negotiations on a binding “phase two” China trade agreement to improve trade certainty.
- Extend critical tariff relief programs, such as the Miscellaneous Tariff Bill and the Generalized System of Preferences, to allow import of components used in U.S. manufacturing of coronavirus-needed products.
- Develop a targeted list of products for which Section 301 tariffs and retaliatory tariffs can be suspended or removed to spur economic growth and job creation.
- Grants to protect the travel workforce: To keep workers employed, businesses solvent, and compensate for losses incurred in the interest of public health, provide $250 billion in direct grants to travel-dependent businesses through a Travel Workforce Stabilization Fund at the Department of Treasury. Convert a portion of SBA loans to grants for small businesses and non-profits to keep employment at pre-coronavirus levels.
- Loans to stabilize business operations: Provide travel-dependent businesses with zero interest, unsecured lines of credit from the Treasury Department through a liquidity facility program. For small businesses and nonprofits, maximize the benefit of SBA loan programs by increasing loan limits above $2 million and guarantee percentages, waiving loan fees, and providing forbearance on interest and loan payments through 2020.
- Tax relief to mitigate losses and spur recovery: Among other tax proposals in this document, of the utmost importance is to permit affected businesses to temporarily defer tax liability, delay or eliminate estimated quarterly tax payments and filings deadlines, and allow for an extended carryback of the Net Operating Loss (NOL) Deduction.
Business Roundtable (BRT):
- Employee Retention Tax Credits: In prior disaster relief packages, Congress
has approved an “employee retention tax credit” to help businesses most affected by the disaster to retain their workforce and continue making payroll. Consistent with disaster-related retention credits, Congress can provide an employer credit equal to a percentage of a specific amount of wages paid to each eligible employee.
- Temporary Employer Payroll Tax Holiday: Congress can repeal employer payroll tax liabilities for the coming months. This would provide immediate liquidity for businesses and would promote worker retention. Preserving Business Liquidity and Viability, Especially for Small- and Medium-Sized Companies
- Loan Guarantees for Small and Medium-Sized Businesses: Congress should grant Treasury authority to guarantee loans made by U.S. banks to SMEs.
- Temporary Delay in Pension Funding Requirements: With interest rates near all-time lows, defined benefit pension liabilities are estimated to be higher and employers are required to contribute more to meet minimum funding obligations, exacerbating business liquidity issues as cash flow dries up. Consistent with legislation enacted during prior low interest rate environments, lawmakers can provide relief via “pension smoothing,” which utilizes a broader temporal range of discount rates.
- Temporary Restoration of Net Operating Loss (NOL) Carrybacks: The 2017 Tax Cuts and Jobs Act eliminated the ability of companies to use current Net Operating Losses (NOLs) against income in prior tax years. Congress can temporarily restore the two-year NOL carryback period and consider increasing the period to five years, which was done in 2002 and 2009 stimulus legislation, providing longer-term certainty and support for businesses.
- Tariff Relief: To respond quickly to the current public health crisis and economic disruption, Congress and the Administration should provide immediate tariff relief. As an immediate step, the U.S. government should suspend all tariffs on all medical and health products and other supplies necessary for the public health response to COVID-19 outbreak.
- Regulatory Actions to Ensure Cargo Flow and Sustain Infrastructure and Production Congress and the Administration can provide regulatory flexibility and, if necessary, direct resources to sustain port infrastructure and multi-modal transportation and delivery networks in order to boost the public health response, get essential supplies to families and critical components to keep businesses operating.
- Common Approach to Health Standards for Supply Chain, Transportation, and Critical Infrastructure and Production Workers: Congress and the Administration can work together to develop common health protocols and standards domestically and globally to ensure that pilots, port and rail operators, and drivers can safely deliver needed medical supplies and essential products. In addition, they can work to ensure common health standards to ensure workers can continue to go to, and work to maintain, critical infrastructure and production.
- Facilitate Global Movement of Critical Supplies: The U.S. government can negotiate commitments with other countries to limit export controls or “buy local” requirements that restrict the movement of critical health and medical supplies to ensure they can reach patients with highest need and to mitigate.
 Descriptions of the Stimulus 2 courtesy of https://www.jdsupra.com/legalnews/attention-employers-federal-legislation-82261/ and Bloomberg)