C. Randall Nuckolls

House sends US$2 trillion in Economic Aid Package to the President to sign

To respond to the coronavirus health crisis and the enormous economic downturn caused by the pandemic, the House of Representatives just now passed by voice vote the CARES Act, the US$2.2 trillion stimulus package that the Senate passed late Wednesday night by a 96-0 vote. The bill now goes to President Trump who has said that he will sign it into law immediately. 

This bill, the third legislative response to the coronavirus crisis, marks the biggest economic rescue package in US history. Passage of the bill marked the end to nearly week-long negotiations between senators, House Speaker Pelosi and the Trump administration.

Among its many provisions, the bill provides US$150 billion in aid for the health care industry. US$100 billion of which will be widely available.to hospitals and providers. It has substantial support for laid off employees, small businesses, non-profits, and numerous other industries that have been reeling from the economic impact of the virus. The wide-reaching bill includes a US$1,200 one-time check for individuals who make up to US$75,000 annually and married up to US$150,000.  It provides US$377 billion in small loan relief loan to numerous businesses, defers federal student loan payments through September 30 and provides US$260 billion in unemployment benefits. 

The bill also includes a US$500 billion infusion into the Treasury Department’s Exchange Stabilization Fund, to be used to make loans, loan guarantees, and other investments to businesses, states, and municipalities in 2020. Of that amount, it would provide as loans and loan guarantees as much as: US$25 billion in direct lending for passenger airlines, ticket agents, and aviation inspection and repair services, US$17 billion for unspecified businesses critical to national security and US$4 billion for cargo airlines.  As much as US$454 billion, and any other unused loan funds, would be available to make loans, loan guarantees, and other investments to support programs or facilities established within the Federal Reserve. Funds could be used to purchase obligations or other interests from businesses, states, or municipalities directly or in secondary markets.

Subject to returning to Washington, DC on 24 hours’ notice, the Senate has now adjourned until April 20 and the House also is not expected to return to DC for at least a comparable period.  We will continue to update you on all legislative and regulatory developments in connection with the COVID-19 crisis.

Click here to download the Senate bill.

Click here to download a section by section summary of the bill.

Existing Federal Economic Assistance Options for Small Businesses Affected by the Coronavirus (COVID-19): Part 1

This alert focuses on the existing federal economic assistance option with the U.S. Small Business Administration (“SBA”) called Economic Injury Disaster Loans (“EIDLs”).  Dentons will provide updates on the EIDL discussed below, as well as updates on additional economic assistance options, notably the anticipated Small Business Interruption Loan Program (see our most recent client alert on that program here), as new information becomes available. 

U.S. Small Business Administration – Economic Injury Disaster Loan

While the SBA’s EBILs have existed for some time, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123) increases the amount made available to the SBA to use for EBILs to $197.2 million. 

What Is The EIDL?

The EIDL is a low-interest federal disaster loan of up to $2 million offered by the SBA to small businesses, as well as private, non-profit organizations to help alleviate economic injury directly caused by the coronavirus in certain approved areas. 

Which States Are Eligible?

As of March 23, 2020, small business owners in the following designated states are eligible to apply for a loan: Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, and West Virginia.

Certain contiguous counties located in the following states are also eligible: Alabama, Arizona, Arkansas, Idaho, Iowa, Kentucky, Mississippi, Missouri, North Dakota, Oregon, Texas, Vermont, Wisconsin, and Wyoming.

The most current list of states and contiguous counties can be found here.

What Is An Eligible “Small Business?”

There unfortunately is no single SBA guideline when it comes to size of the business.  Factors taken into account vary by industry and may include:

  • Average annual revenue (depending on the industry, annual revenue may not exceed $1 million or $30 million); or
  • Average annual number of employees (depending on the industry, the maximum number of employees might be 250 or 1,500).

See 13 C.F.R. § 121.201 (setting forth a table of SBA size standards identified by North American Industry Classification System (NAICS) codes).  Moreover, when calculating the size of your business, the SBA requires including the revenue and employees of any affiliates (i.e., a business that controls or has the power to control another, or a third party that controls or has the power to control both businesses).  The SBA offers online a Size Standards Tool for prospective applicants to check if their organization qualifies as a small business.

Additionally, a “business concern” for the purposes of EIDL is: (1) a business entity organized for profit; (2) with a place of business located in the United States; and (3) which operates primarily within the United States, or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.”  13 C.F.R. § 121.105(a).  The business concern may be:

  • An individual proprietorship;
  • A partnership;
  • A limited liability company;
  • A corporation; or
  • A joint venture, association, trust, or cooperative, except that where the form is a joint venture there can be no more than 49% participation by foreign business entities in the joint venture.

13 C.F.R. § 121.105(b). 

Importantly, your organization is not eligible for the EIDL if, for example, your organization is:

  1. Engaged in lending, multi-level sales distribution, speculation, or investment (except for real estate investment with property held for rental when the disaster occurred);
  2. A non-profit or charitable concern, other than a private non-profit organization;
  3. A consumer or marketing cooperative;
  4. Deriving more than one-third of gross annual revenue from legal gambling activities;
  5. A loan packager which earns more than one-third of its gross annual revenue from packaging SBA loans;
  6. Principally engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs, whether in a religious or secular setting; or
  7. Primarily engaged in political or lobbying activities.

13 C.F.R. § 123.301. 

Use of EIDL Proceeds?

EIDL proceeds are working capital loans and may be used to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid due to the impact of the coronavirus.  See 13 C.F.R. § 123.303(a).

Importantly, loan proceeds may not be used to:

  • Refinance existing debt;
  • Repay other SBA loans or loans from another federal agency;
  • Pay, directly or indirectly, any taxes, fines or penalties;
  • Repair physical damage; or
  • Pay dividends or other disbursements to owners, partners, officers or stockholders, except for reasonable remuneration directly related to their performance of services for the business. 

13 C.F.R. § 123.303(b).

What Are The Conditions?

  • The interest rate is 3.75% for small businesses and 2.75% for private, non-profit organizations. 
  • The SBA offers loans with long-term repayment options, up to a maximum of 30 years; however, the term ultimately will be determined on a case-by-case basis, depending on the borrower’s ability to pay. 

The Application Process and Timing?

The application for the EIDL is a three-step process:

  • Apply for a loan;
  • Verify property and make loan processing decision; and
  • Close loan and disburse funds. 

The timing of the first step is largely in the control of the applicant as it consists of filling out the forms listed below.  With respect to the second step, it has historically taken the SBA loan officers up to three weeks to make a decision.  As to the third step, the SBA will prepare and send loan closing documents for signature upon approving the application.  Once the loan closing documents are received, an initial disbursement of $25,000 has historically been made within five days.  The loan will be fully disbursed in subsequent disbursements pursuant to a schedule determined by a case manager assigned to work with the borrower. 

When Do I Need To Apply By?

  • The deadline to apply for the EIDL is nine months from the date of the state governor’s disaster declaration. 
  • While the deadline may seem like months away, if your organization needs access to capital immediately, your organization may wish to consider applying for the EIDL sooner, rather than later, because processing applications may take a considerable amount of time.  
  • Prospective applicants should also be mindful that the SBA likely will experience significant backlog in processing applications, or that the SBA could deny the application, which would delay relief.

How To Prepare?

Review the following forms and collect information prior to starting the application:

Gather the following information or documents:

  • Year-end and current profit and loss statements;
  • A monthly breakdown report of sales; and
  • Complete copies of the business’s most recent Federal income tax returns (typically the last three).

Where Can I Apply?

Prospective borrowers may submit an online application here.  While the SBA prefers online applications, prospective borrowers can also call contact the SBA disaster assistance customer service center at (800) 659‑2955 (TTY: (800) 877‑8339) or e-mail disastercustomerservice@sba.gov and request a paper application by mail. 

Trump Impeachment Update: Senate acquits

On Wednesday, February 5, the United States Senate voted to acquit President Trump of the two articles of impeachment that the US House of Representatives passed on December 18 and hand-delivered to the Senate on January 15. The vote concluded a trial that lasted 20 days, saw 36 hours of presentations, 16 hours of Senate questioning, and some late-inning drama that ultimately resulted in Senate Majority Leader Mitch McConnell securing enough votes to prevent introduction of witnesses and new evidence, a move that would have delayed the final vote indefinitely. 

Late last Friday after Senate questioning ended, Republican Senator Lamar Alexander, a retiring senator from Tennessee, announced that he would vote against a measure to introduce witnesses and new evidence. Senator Susan Collins (R-ME) announced that she would support the measure, joining Senator Mitt Romney (R-UT) as the only members of their party willing to break ranks with their caucus to hear from witnesses. Had Senator Lisa Murkowski of Alaska, another moderate Republican, joined her colleagues from Maine and Utah, the vote count on the measure would have been 50-50, and Chief Justice John Roberts would have had to cast the deciding vote as the presiding officer. But Senator Murkowski ultimately voted against the measure, offering as one of the reasons that it had become clear that some of her colleagues intended to “politicize this process, and drag the Supreme Court into the fray, while attacking the Chief Justice. I will not stand for nor support that effort.”

Some Senate Republicans, as well as the President, wanted the Senate to conduct the final vote last Friday evening, which would have allowed the President to address the nation on the State of the Union on Tuesday without a cloud hanging over his head. However, other Republicans, and the Democrats, wanted an opportunity to make floor speeches about the impeachment trial. McConnell reached a deal with Senate Minority Leader Chuck Schumer to hold the final vote this afternoon. The President, for his part, did not mention the impeachment trial during Tuesday night’s SOTU address, and other news events, including the Super Bowl and the Iowa Democratic Caucus, prevented the impeachment trial from receiving much media attention over the last few days.

Senator Joe Machin (D-WV) has drafted a Senate resolution to censure the President, and has suggested that consideration of such a resolution would garner bipartisan support by giving Senators who don’t believe the President’s conduct warrants removal from office a formal opportunity to condemn the President’s actions. While both moderate Democrats and Republicans might like the opportunity to vote on such a resolution, it seems unlikely that the Republican leadership in the Senate will allow such a resolution to come to a vote. McConnell has said that he wants to move on after the acquittal, and various Republicans in the Senate have suggested that if the Democrats wanted a censure vote, they should have pursued such a vote in lieu of impeachment.

When Alexander Hamilton wrote in Federalist 65 that impeachment would “seldom fail to agitate the passions of the whole community, and to divide it into parties more or less friendly or inimical to the accused,” he correctly forecast the dynamics that have played out over the past few months. As Senator Murkowski said in her statement last Friday night, “It is sad for me to admit that, as an institution, the Congress has failed. We are sadly at a low point of division in this country.”

Impeachment on a Page – Week of January 20, 2020

Impeachment on a Page – Week of December 9, 2019

As developments in the Trump impeachment inquiry continue to unfold, Dentons’ Public Policy group has created a quick reference guide to the current status of this fast-moving process. Enclosed please find “Impeachment on a Page” for the week of December 9, 2019.

Previous Updates

Trump Impeachment Inquiry Alerts

Click here to subscribe and receive email updates directly to your inbox on the impeachment drama on Capitol Hill, including highlights of key testimony and documentary evidence, the White House’s response and the latest impeachment polls.

Impeachment on a Page – Week of December 3, 2019

As developments in the Trump impeachment inquiry continue to unfold, Dentons’ Public Policy group has created a quick reference guide to the current status of this fast-moving process. Enclosed please find “Impeachment on a Page” for the week of December 3, 2019.

Previous Updates

Impeachment on a Page – Week of November 25, 2019

As developments in the Trump impeachment inquiry continue to unfold, Dentons’ Public Policy group has created a quick reference guide to the current status of this fast-moving process. Enclosed please find “Impeachment on a Page” for the week of November 25, 2019.

Previous Updates

Impeachment on a Page – Week of November 11, 2019

Impeachment on a Page – Week of November 4, 2019

Impeachment on a Page – Week of October 29, 2019

Impeachment on a Page – Week of October 22, 2019

Impeachment on a Page – Week of October 16, 2019