Small Business Loan/Grant Support working its way through Congress

Negotiations ongoing for currently proposed US$350 Billion in loans as part of the Third Economic Relief Bill

  • Who – US small businesses and certain other organizations who employ no more than 500 employees. Also independent contractors and self-employed individuals.
  • What – Forgivable loans up to 2.5 times monthly payroll expenses, capped at $10 million
  • When – Bill signing expected before March 27, 2020 with funds available TBD in April
  • Where – Anywhere in the United States
  • Why – To support small businesses, non-profits, veterans organizations, independent contractors and self-employed individuals through the COVID-19 crisis.
  • For What – Funds to be used to retain workers, maintain payrolls and/or make mortgage, lease and utility payments.
  • Loan Forgiveness – Up to 100% of the loaned amount may be forgiven under certain circumstances if workers are retained through June 30, 2020

Executive Summary

The coronavirus outbreak and resulting quarantine measures have led to widespread business disruptions in the United States. As part of the federal response, the Congress is expected to approve this week a bill that would provide relief of up to $350 billion in forgivable loans to small business concerns, non-profit and veterans organizations and self-employed individuals to cover their expenses during the crisis.

This alert is based on draft legislative language as of March 22, 2020 and remains subject to revisions during the legislative process. There will most certainly be changes and revisions to the current proposal, as negotiations are ongoing with respect to, among other things, size and scope, before the Congress considers and passes the third economic relief bill.

Stay tuned for further developments.  We will be hosting a briefing call
Thursday, March 26, 2020 at 2 p.m. EST. Please RSVP here.

As soon as the bill becomes law, we can work with you to identify SBA-approved lenders and assist in the preparation and submission of a business interruption loan application. It is critical to leverage our experienced public policy experts in D.C. to best position applications for success, including guiding them through the approval process, given the expected intense competition for limited resources, as well as working with you to sort through the interplay with business interruption insurance, existing credit arrangements and other related complexities. We will keep you posted as the bill moves through the Senate, the House and then as it is signed into law, and provide further details so you may access the program, if you are eligible.

Details

Eligibility

Any small business concern, non-profit organization or veterans organization1 is eligible provided that it employs no more than 500 employees and was in operation on February 15, 2020.2 In addition, any applicant that meets certain size standards established by the SBA may be eligible. All prospective borrowers are presumed to have been adversely impacted by COVID-19.

Self-employed individuals, sole proprietors and independent contractors are also eligible if they have documented payroll tax filings with the IRS. In addition, business concerns with more than one (1) physical location are eligible if they employ not more than 500 employees per physical location and they operate in the hotel, restaurant and/or bar sectors.3

Maximum Amount

The maximum loan amount to be guaranteed is an amount equal to two and a half (2.5) times the borrower’s total monthly payments for payroll (calculated as an average per month over the 12 months prior to the date of the applicable loan)4, capped at $10,000,000.00 per borrower. The SBA will waive all fees or reduce fees to the maximum extent possible.

Payroll costs are defined as the sum of all payments for compensation, including salary, wage, cash tips, paid time off (vacation, parental, sick leave), severance, health care benefits, state or local taxes. For sole proprietors or independent contractors, payroll costs are defined as the sum of all compensation payments including wages, commissions or similar compensation capped at $100,000 per year. Payroll costs shall not include compensation of any individual employee in excess of $100,000, any compensation of an employee whose principal place of residence is outside the United States, or any sick leave or family leave covered under the Families First Coronavirus Response Act.

Use of Proceeds

The loan proceeds can be used to provide payroll support, including paid sick leave, group health care benefits, employee salaries, mortgage payments, rents, utilities and payments on other debt obligations. The SBA will require lenders to provide complete payment deferment relief for a period of not more than 1 year.5 The program covers the period from February 15, 2020 through June 30, 2020.

Other Matters

The proposed bill provides other details, including with respect to loan forgiveness, an increase in SBA guarantee to 100% until January 1, 2021 and eligibility details.

In order to qualify for full loan forgiveness, a borrower must maintain, during a period beginning on February 15, 2020 and ending on June 30, 2020 an average monthly number of employees that is not less than the average monthly number of employees for the same period in 2019.

The bill is still under negotiation and this summary does not describe all of the details that may be applicable to any specific borrower. Please reach out to your Dentons contact for information specific to your circumstances.

Illustrative Example

By way of illustration, a company applies for a loan with fewer than 500 employees, $200,000 in monthly payroll and $100,000 in monthly rent and utilities. Its total loan may be for 2.5 times the company’s payroll, or in this instance, $500,000. If workers are retained, lender will be required to forgive an amount determined pursuant to a formula that takes into account the number of employees retained, equal to up to eight weeks of the companies expenses, including payroll, rent, mortgage and/or utilities (approximately $600,000). By retaining employees, the company would not have to repay the loan and the lender will be covered by the SBA’s guarantee.


1 As defined in Section 501(c)(19) of the Internal Revenue Code.

2 A small business is ineligible under this program if it already receives assistance under section 7(b)(2) of the Small Business Act relating to COVID-19. A non-profit organization is ineligible if it qualifies under Medicaid for payments for certain items and services furnished under a State plan.

3 Business concerns are eligible if they are assigned a North American Industry Classification System code beginning with 72 at the time of disbursal. https://www.bls.gov/iag/tgs/iag72.htm

4 Seasonal employers will average payroll expenses by month over the period from February 15, 2019 or March 1, 2019 through June 30, 2019.

5 Subject to guidance from the SBA to be drafted no later than 30 days after passage of this legislation.

US Federal Coronavirus Update Administration Blueprint for Third Economic Relief Package

On March 18, the Department of the Treasury released a term sheet describing key terms of a proposed coronavirus economic relief package. The blueprint is broad by design, leaving considerable room for Congress to make changes.

For its part, Congress continues to speed forward in response to the pandemic with the Senate passing the Families Coronavirus Relief Act and Senate Leader McConnell announcing that the Senate will not leave Washington until it has finished work on the next package.

To that end, Leader McConnell announced the formation of three republican task forces to examine major aspects of any economic relief legislation and draft a bill that can then be negotiated with Senate democrats and the House.

Treasury Term Sheet

  1. $200 billion for the Treasury Department’s Exchange Stabilization Fund
    • $50 billion for an Airline Industry Secured Lending Facility for U.S. passenger and cargo air carriers at a private interest rate and other terms and conditions determined by the Treasury Department
    • $150 billion for secured lending or loan guarantees to assist other critical sectors of the US economy experiencing severe financial distress due to the COVID-19 outbreak.
  2. Temporary Permission to Use The Treasury Exchange Stabilization Fund to Guarantee Money Market Mutual Funds
    • The proposal would temporarily suspend the statutory limitation on the use of the Exchange Stabilization Fund for guarantee programs for the United States money market mutual fund industry with a sunset on the authority to establish any new money market mutual fund guarantee program upon the conclusion of the March 13th Coronavirus National Emergency declaration
  3. 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.
    • Payment amounts would be fixed and tiered based on income level and family size.
      • $250 billion to be issued beginning April 6
      • $250 billion to be issued beginning May 18
    • Each round of payments would be identical in amount.
  4. A $300 Billion Appropriation for a Small Business Interruption Loan Program
    • 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 US 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: US 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

House and Senate pass Families First Coronavirus Response Act with broad bipartisan support

President’s signature expected shortly

At about 12:45 a.m. on Saturday, March 14, the US House of Representatives, by a vote of 363-40, with 26 members not voting and with a two-thirds vote required under suspension of the rules, passed a revised version of HR 6201, the Families First Coronavirus Response Act, as amendedEvery one of the 223 Democrats who voted cast their vote for the bill. They were joined by 140 Republicans, while 40 House Republicans broke ranks with the majority of their party and voted against the bill, and the House’s lone independent voted present. 

On Monday evening, March 16, after very extensive negotiations that occurred since House passage of H.R. 6201 early on Saturday morning, H. Res. 904 was adopted by unanimous consent making significant technical  corrections in the engrossment of H.R. 6201, the Families First Coronavirus Response Act.

House passage followed extensive negotiations between Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on behalf of the White House, which led to a number of material changes in the text of the bill as originally introduced by House Democrats.

Despite the reservations of some Republican Senators, at the urging of Leader Mitch McConnell, the Senate just now passed the bill as revised sending it on to the President who has indicated that he will sign it.

Highlights of the bill

So what does the bill do? It includes provisions for

  • Paid sick leave
  • Paid family and medical leave
  • Enhanced unemployment insurance
  • Tax credits for small business to encourage them to provide paid leave
  • Food security initiatives, including (i) various waivers to ensure that children who normally receive free or reduced-fee lunches will continue to be fed even if the schools close and that low-income seniors also will continue to receive their meals; and (ii) increased SNAP program funding and the temporary waiver of certain of its work requirements
  • A temporary 6.2 percent increase in Medicaid FMAP funding for the duration of the coronavirus crisis
  • Language and funds to help states and territories meet their Medicaid funding requirements; and
  • A clear emphasis on free and widespread coronavirus testing to ensure that all who need it, including the uninsured, are tested as soon as possible.

The biggest changes made by H.Res. 904 are in the paid leave provisions which have been scaled back considerably.  As corrected by H.Res 904 on Monday night, HR 6201 would still provide two weeks of sick leave to workers affected by the pandemic, including those who are in quarantine, caring for family members with COVID-19, and those who have children whose schools or day-care centers have closed.  These provisions apply only to companies with fewer than 500 employees, and set up a means for the federal government to reimburse through a tax credit employers who pay workers’ wages while they are absent.

But for the next 10 weeks, after two weeks of sick leave, paid leave would be limited only to workers caring for a child whose school or day care had been shut.  Health-care providers and emergency responders, as well as workers who had been in quarantine or caring for a family member affected by the virus wouldn’t be eligible for the additional 10 weeks of paid leave.

In the original version of HR 6201, all the workers who received paid sick time would be eligible for another 10 weeks of paid leave at two-thirds pay.  This would have been represented a major expansion of the Family and Medical Leave Act, a 1993 law that provides 12 weeks of unpaid leave to workers at larger companies.

The bill as corrected still permits small businesses with fewer than 50 workers to win exemptions under rules to be developed by the Labor Department. To be exempted, a business must demonstrate that compliance with the paid leave provisions would threaten their ability to continue in business as a going concern.  Small businesses with less than 25 employees would be relieved of the obligation to offer positions at a later date to employees who lose their jobs as a result of the coronavirus crisis

Here is a link to a summary of the technical corrections made by H.Res. 904. 

Below is a section-by-section summary of the bill provided by the House Democratic Appropriations Committee.

DIVISION A – Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020

Prepared by the Democratic staff of the House Committee on Appropriations and the House Committee on Education and Labor

Title I – Agriculture, Rural Development, Food and Drug Administration, and Related Agencies

Food and Nutrition Service – Includes funding to ensure the domestic nutrition assistance programs have adequate resources to help those impacted by the COVID 19 public health emergency. Funding is provided for:

  • The Special Supplemental Nutrition Program for Women Infants and Children (WIC) – $500 million to provide access to nutritious foods to low-income pregnant women or mothers with young children who lose their jobs or are laid off due to the COVID-19 emergency.
  • The Emergency Food Assistance Program (TEFAP) – $400 million to assist local food banks to meet increased demand for low-income Americans during the emergency. Of the total, $300 million is for the purchase of nutritious foods and $100 million is to support the storage and distribution of the foods.

In addition, the legislation includes:

  • EBT food assistance – A general provision allowing the US Department of Agriculture (USDA) to approve state plans to provide Electronic Benefit Transfer food assistance to households with children who would otherwise receive free or reduced-price meals if not for their schools being closed due to the COVID-19 emergency. In order to be eligible, the child’s school must be closed for no less than five consecutive days.
  • Nutrition Assistance for U.S. Territories – $100 million for USDA to provide nutrition assistance grants to Puerto Rico, American Samoa and the Commonwealth of the Northern Mariana Islands in response to the COVID-19 public health emergency.

Title II – Defense

Coverage of Testing for COVID-19 through the DoD – Includes $82 million for the Department of Defense to cover the costs of COVID-19 diagnostic testing for beneficiaries receiving care through the Defense Health Program.

Title III – Financial Services and General Government

Implementation of Tax Credits – Includes $15 million for the Internal Revenue Service to implement tax credits for paid sick leave and paid family and medical leave.

Title IV – Interior, Environment, and Related Agencies

Coverage of Testing for COVID-19 through the Indian Health Service – Includes $64 million for the Indian Health Service to cover the costs of COVID-19 diagnostic testing for Indians receiving care through the Indian Health Service or through an Urban Indian Health Organization.

Title V – Labor, Health and Human Services, Education, and Related Agencies

Senior Nutrition Program – Includes $250 million for the Senior Nutrition program in the Administration for Community Living (ACL) to provide approximately 25 million additional home-delivered and pre-packaged meals to low-income seniors who depend on the Senior Nutrition programs in their communities.

This funding will provide meals to low-income seniors who are homebound, have disabilities, or have multiple chronic illnesses, as well as to caregivers for homebound seniors.

ACL’s Senior Nutrition grants are provided to states, territories and eligible tribal organizations, and serve more than 2.4 million individuals annually. Nearly two-thirds of recipients of home-delivered meals report that these meals constitute more than half of their daily food intake.

Reimbursement for Diagnostic Testing and Services for COVID-19 in Uninsured Individuals – Includes $1 billion for the National Disaster Medical System to reimburse the costs of COVID-19 diagnostic testing and services provided to individuals without health insurance.

Title VI – Military Construction, Veterans Affairs, and Related Agencies

Coverage of Testing for COVID-19 through the Veterans Health Administration – Includes $60 million for the Department of Veterans Affairs to cover the costs of COVID-19 diagnostic testing for veterans receiving care through Medical Services or through Medical Community Care.

Title VII – General Provisions

Technical budgetary provisions.

In addition –

  • Ensures State Emergency Operations Centers receive regular and real-time reporting on aggregate testing and case data from health departments and share that data with the Centers for Disease Control and Prevention (CDC).

DIVISION B – Nutrition Waivers

Prepared by the Democratic staff of the House Committee on Agriculture and the House Committee on Education and Labor

Title I – Maintaining Essential Access to Lunch for Students Act

Section 2101
Short Title

The short title for the bill is the Maintaining Essential Access to Lunch for Students Act or the MEALS Act.

Section 2102
Waiver Exception for School Closures Due to COVID-19

Provides the Secretary of Agriculture the authority to issue waivers for state plans that increase costs to the federal government.

Title II – COVID-19 Child Nutrition Response Act

Section 2201
Short Title

The short title for the bill is the COVID-19 Child Nutrition Response Act.

Section 2202
National School Lunch Program Requirement Waivers Addressing COVID-19

Allows all child and adult care centers to operate as non-congregate (i.e. allows them to take food to go). Allows the Secretary of Agriculture to waive meal pattern requirements in child nutrition programs if there is a disruption to the food supply as a result of the COVID-19 emergency. Provides the Secretary of Agriculture the authority to issue nationwide school meal waivers during the COVID-19 emergency, which will eliminate paperwork for states and help more schools quickly adopt and utilize flexibilities.

Section 2203
Physical Presence Waiver Under WIC During Certain Public Health Emergencies

Provides the Secretary of Agriculture with the authority to grant waivers to allow participants to be certified for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) without being physically present at the WIC clinic.

Sec. 2204
Administrative Requirements Waiver Under WIC

This section provides the Secretary of Agriculture with the authority to waive administrative requirements that are barriers to serving WIC participants during the coronavirus outbreak.

Title III – SNAP COVID-19 Response Waivers

Section 2301
SNAP Flexibility for Low-Income Jobless Workers

Suspends the work and work training requirements for SNAP during this crisis.

Section 2302
Additional SNAP Flexibilities in a Public Health Emergency

Allows states to request special waivers from the Secretary to provide temporary, emergency CR-SNAP benefits to existing SNAP households up to the maximum monthly allotment, as well as give the Secretary broad discretion to provide much more flexibility for States in managing SNAP caseloads. Additionally, this language requires the Secretary to make State requests for waivers and the USDA response, as well as any USDA guidance on State flexibilities, publicly available online.

DIVISION C – Emergency Family and Medical Leave Expansion Act

Prepared by the Democratic staff of the House Committee on Education and Labor

Section 3101
Short Title

The short title for the bill is the Emergency Family and Medical Leave Expansion Act.

Section 3102
Amendments to the Family and Medical Leave Act of 1993

This section provides employees of employers with fewer than 500 employees and government employers, who have been on the job for at least 30 days, with the right take up to 12 weeks of job-protected leave under the Family and Medical Leave Act to be used for any of the following reasons:

  • 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.

After the two weeks of paid leave, a more limited universe of employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.

Section 3103
Employment Under Multi-Employer Bargaining Agreements

The bill ensures employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave.

Section 3104
Effective Date

This Act takes effect not later than 15 days after the date of bill’s enactment.

DIVISION D – Emergency Unemployment Insurance Stabilization and Access Act of 2020

Prepared by the Democratic staff of the House Committee on Ways and Means

Section 4101
Short Title

The short title for the division is the Emergency Unemployment Insurance Stabilization and Access Act of 2020.

Section 4102
Emergency Transfers for Unemployment Compensation Administration

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 met basic requirements about ensuring access to earned benefits for eligible workers. Those requirements are:

  • Require employers to provide notification of potential UI eligibility to laid-off workers
  • Ensure that workers have at least two ways (for example, online and phone) to apply for benefits
  • Notify applicants when an application is received and being processed and if the application cannot be processed, provide information to the applicant about how to ensure successful processing.

States would be required to report on the share of eligible individuals who received UI benefits and the state’s efforts to ensure access within one year of receiving the funding. The funding would be distributed in the same proportions as regular UI administrative funding provided through annual appropriations.

$500 million would be reserved for emergency grants to states which experienced at least a 10 percent increase in unemployment. Those states would be eligible to receive an additional grant, in the same amount as the initial grant, to assist with costs related to the unemployment spike, and would also be required to take steps to temporarily ease eligibility requirements that are limiting access to UI during the COVID-19 outbreak, like work search requirements, required waiting periods, and requirements to increase employer UI taxes if they have high layoff rates. Depending on the state, those actions might require changes in state law, or might just require changes in state policy. This section also provides temporary federal flexibility regarding those UI restrictions which are also in federal law.

Section 4103
Temporary Assistance for States with Advances

This section provides states with access to interest-free loans to help pay regular UI benefits through December 31, 2020, if needed.

Section 4104
Technical Assistance and Guidance for Short-Time Compensation Programs

This section requires the Secretary of Labor to provide technical assistance to states that want to set up work-sharing programs, in which employers reduce hours instead of laying employees off, and then employees receive partial unemployment benefits to offset the wage loss

Section 4105
Full Federal Funding of Extended Unemployment Compensation for a Limited Period

For states that experience an increase of 10 percent or more in their unemployment rate (over the previous year) and comply with all the beneficiary access provisions in section 102, this section provides 100 percent federal funding for Extended Benefits, which normally require 50 percent of funding to come from states. Extended Benefits (EB) are triggered when unemployment is high in a state and provide up to an additional 26 weeks after regular UI benefits (usually 26 weeks) are exhausted. This section also suspends the financial penalty within EB for states that waive the usual one-week waiting period for benefits.

DIVISION E – Emergency Paid Sick Leave Act

Prepared by the Democratic staff of the House Committee on Education and Labor

Section 5101
Short Title

The Emergency Paid Sick Leave Act.

Section 5102
The Emergency Paid Sick Leave Act

This section 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; or paid at two-thirds the employee’s regular rate to care for a family member for such purposes or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus.

  • Full-time employees are entitled to 2 weeks (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 ensures employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave.

The Act, and the requirements under the Act, expire on December 31, 2020.

DIVISION F – Health Provisions

Prepared by the Democratic staff of the Committees on Energy and Commerce, Ways and Means, and Education and Labor

Section 6001
Coverage of Testing for COVID-19

This section requires private health plans to provide coverage for COVID-19 diagnostic testing, including the cost of a provider, urgent care center and emergency room visits in order to receive testing. Coverage must be provided at no cost to the consumer.

Section 6002
Waiving Cost Sharing Under the Medicare Program for Certain Visits Relating To Testing For COVID-19

This section requires Medicare Part B to cover beneficiary cost-sharing for provider visits during which a COVID-19 diagnostic test is administered or ordered. Medicare Part B currently covers the COVID-19 diagnostic test with no beneficiary cost-sharing.

Section 6003
Waiving Cost Sharing Under the Medicare Advantage Program for Certain Visits Relating to Testing for COVID-19

This section requires Medicare Advantage to provide coverage for COVID-19 diagnostic testing, including the associated cost of the visit in order to receive testing. Coverage must be provided at no cost to the beneficiary.

Section 6004
Coverage at No Cost Sharing of COVID-19 Testing Under Medicaid and CHIP

This section requires Medicaid to provide coverage for COVID-19 diagnostic testing, including the cost of a provider visit in order to receive testing. Coverage must be provided at no cost to the beneficiary. It would also provide states with the option to extend Medicaid eligibility to uninsured populations for the purposes of COVID-19 diagnostic testing. State expenditures for medical and administrative costs would be matched by the federal government at 100 percent.

Section 6005
Treatment of Personal Respiratory Protective Devices as Covered Countermeasures

This section requires certain personal respiratory protective devices to be treated as covered countermeasures under the PREP Act Declaration for the purposes of emergency use during the COVID-19 outbreak and ending October 1, 2024.

Section 6006
Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians

This section ensures that individuals enrolled in TRICARE, covered veterans, and federal workers have coverage for COVID-19 diagnostic testing without cost-sharing.

Section 6007
Coverage of Testing for COVID-19 At No Cost Sharing for Indians Receiving Contract Health Services

This section ensures that American Indians and Alaskan Natives do not experience cost sharing for COVID-19 testing, including those referred for care away from an Indian Health Service or tribal health care facility.

Section 6008
Emergency FMAP Increase

This section provides a temporary increase to states’ federal medical assistance percentage for the duration of the public health emergency for COVID-19. It requires states to maintain eligibility standards that are no less restrictive than the date of enactment.

Section 6009
Increase in Medicaid Allotments for Territories

This section provides an increase to the territories’ Medicaid allotments for 2020 and 2021. It will ensure that territories that receive an FMAP increase under the previous section will have the necessary additional federal funds for their Medicaid programs.

Section 6010
Clarification Relating to Secretarial Authority Regarding Medicare Telehealth Services Furnished During COVID-19 Emergency Period

This section makes a technical change to the Medicare telehealth provision of the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123) to ensure that new Medicare beneficiaries are able to access telehealth services under the emergency authority granted to the Secretary.

DIVISION G – Tax Credits For Paid Sick And Paid Family And Medical Leave

Prepared by the Democratic staff of the House Committee on Ways and Means

Section 7001
Payroll Credit for Required Paid Sick Leave.

This section provides a refundable tax credit equal to 100 percent of qualified paid sick leave wages paid by an employer for each calendar quarter.

The tax credit is allowed against the tax imposed by section 3111(a) (the employer portion of Social Security taxes) and by section 3221 (a). Qualified sick leave wages are wages required to be paid by the Emergency Paid Sick Leave Act.

The section makes a distinction between qualified sick leave wages paid with respect to employees who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation with respect to coronavirus. For amounts paid to those employees, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day. For amounts paid to employees caring for a family member or for a child whose school or place of care has been closed, the amount of qualified sick leave wages taken into account for each employee is capped at $200 per day. The aggregate number of days taken into account per employee may not exceed the excess of 10 over the aggregate number of days taken into account for all preceding calendar quarters.

If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer. Employers may elect to not have the credit apply. To prevent a double benefit, no deduction is allowed for the amount of the credit. In addition, no credit is allowed with respect to wages for which a credit is allowed under section 45S.

The Secretary of the Treasury is given broad authority to issue regulations and guidance necessary to carry out the purposes of the section, including regulations and guidance related to avoidance, penalty waivers with respect to deposit amounts, compliance and record-keeping relief, and benefit recapture. The Social Security OASDI trust funds are held harmless by transferring funds from the General Fund. The section applies only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury (or the Secretary’s delegate) which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020.

Section 7002
Credit for Sick Leave for Certain Self-Employed Individuals

This section provides a refundable tax credit equal to 100 percent of a qualified sick leave equivalent amount for eligible self-employed individuals who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation with respect to coronavirus. For eligible self-employed individuals caring for a family member or for a child whose school or place of care has been closed due to coronavirus, the section provides a refundable tax credit equal to 67 percent of a qualified sick leave equivalent amount.

The credit is allowed against income taxes and is refundable. Eligible self-employed individuals are individuals who would be entitled to receive paid leave pursuant to the Emergency Paid Sick Leave Act if the individual was an employee of an employer (other than himself or herself). For eligible self-employed individuals who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation, the qualified sick leave equivalent amount is capped at the lesser of $511 per day or the average daily self-employment income for the taxable year per day. For eligible self-employed individuals caring for a family member or for a child whose school or place of care has been closed due to coronavirus, the qualified sick leave equivalent amount is capped at the lesser of $200 per day or the average daily self-employment income for the taxable year per day.

In calculating the qualified sick leave equivalent amount, an eligible self-employed individual may only take into account those days that the individual is unable to work for reasons that would entitle the individual to receive paid leave pursuant to the Emergency Paid Sick Leave Act.

A self-employed individual must maintain documentation prescribed by the Secretary of the Treasury to establish his or her eligibility for the credit. To prevent a double benefit, the qualified sick leave equivalent amount is proportionately reduced for any days that the individual also receives qualified sick leave wages from an employer. The section contains rules to ensure that self-employed individuals in U.S. territories may claim the credit.

The Secretary of the Treasury is given broad authority to issue regulations and guidance necessary to carry out the purposes of the section, including regulations and guidance related to avoidance and compliance and record-keeping relief. The section applies only to days occurring during the period beginning on a date selected by the Secretary of the Treasury which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020.

Section 7003
Payroll Credit for Required Paid Family Leave

This section provides a refundable tax credit equal to 100 percent of qualified family leave wages paid by an employer for each calendar quarter.

The tax credit is allowed against the tax imposed by section 3111(a) (the employer portion of Social Security taxes) and section 3221(a). Qualified family leave wages are wages required to be paid by the Emergency Family and Medical Leave Expansion Act.

The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer.

Employers may elect to not have the credit apply. To prevent a double benefit, no deduction is allowed for the amount of the credit. In addition, no credit is allowed with respect to wages for which a credit is allowed under section 45S.

The Secretary of the Treasury is given broad authority to issue regulations and guidance necessary to carry out the purposes of the section, including regulations and guidance related to avoidance, compliance and record-keeping relief, and benefit recapture. The Social Security OASDI trust funds are held harmless by transferring funds from the General Fund. The section applies only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020.

Section 7004
Credit for Family Leave for Certain Self-Employed Individuals

This section provides a refundable tax credit equal to 100 percent of a qualified family leave equivalent amount for eligible self-employed individuals.

The credit is allowed against income taxes and is refundable. Eligible self-employed individuals are individuals who would be entitled to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act if the individual was an employee of an employer (other than himself or herself). The qualified family leave equivalent amount is capped at the lesser $200 per day or the average daily self-employment income for the taxable year per day. In calculating the qualified family leave equivalent amount, an eligible self-employed individual may only take into account those days that the individual is unable to work for reasons that would entitle the individual to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act.

A self-employed individual must maintain documentation prescribed by the Secretary of the Treasury to establish his or her eligibility for the credit. To prevent a double benefit, the qualified sick leave equivalent amount is proportionately reduced for any days that the individual also receives qualified sick leave wages from an employer. The section contains rules to ensure that self-employed individuals in U.S. territories may claim the credit.

The Secretary of the Treasury is given broad authority to issue regulations and guidance necessary to carry out the purposes of the section, including regulations and guidance related to avoidance and compliance and record-keeping relief. The section applies only to days occurring during the period beginning on a date selected by the Secretary of the Treasury which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020.

Section 7005
Special Rule Related to Tax on Employers

This section ensures that any wages required to be paid by reason of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act will not be considered wages for purposes of section 3111(a) and section 3221 (a). The Social Security OASDI trust funds are held harmless by transferring funds from the General Fund.

DIVISION H – Budgetary Effects

Technical budgetary provisions.

The need for bipartisan solutions in a time of crisis produced this bill

House Republican support for HR 6201 had been uncertain until the evening of March 13 when President Trump tweeted his support for the revised bill after having harshly criticized an earlier version of the bill at a late afternoon press conference during which he declared a national emergency. While House Democrats could have passed the original version of their bill without House Republican support, such a bill would have never passed the Senate and reached the President’s desk.

House passage followed a very brief debate in which only the Chairs and Ranking Members of the House Appropriations Committee and the Ways & Means Committee spoke about the revised bill. The Chairman of the Ways & Means Committee, Richard Neal of Massachusetts, emphasized what was in the revised bill while the Ways & Means Committee Ranking Member Kevin Brady of Texas focused on how the bill had changed from its original version and argued that the extended negotiations had made the bill much more friendly to small businesses and also resulted in the removal of what he termed extraneous provisions unrelated to the coronavirus emergency.

Shortly before the bill was debated, Speaker Pelosi and Majority Leader Hoyer held a press conference outside the House Chamber to discuss the revised bill. They were joined by Congresswoman Susie Lee of Nevada, Congresswoman Abigail Spanberger of Virginia, Congressman Gil Cisneros of California and Congresswoman Lizzie Fletcher of Texas who each spoke about different elements of the bill. Despite repeated press questioning,  the Speaker refused to get drawn into a discussion of what led to the delays in reaching a deal and she was very reluctant to indicate what provisions didn’t make it into the revised bill.  She said that some issues that could not get resolved would be picked up in a third bill that the committees of jurisdiction would begin working on next week during the recess. Speaker Pelosi also confirmed that she and the President did not speak at any time in connection with the negotiations. She dealt solely with Treasury Secretary Mnuchin. 

The Speaker did indicate that an OSHA worker protection regulation from the Obama administration that the Trump White House has refused to enforce that Democrats had wanted to expand and turn into a law did not make it into the bill because of the complexity of its technical provisions but stated that it would be a part of the next bill.  She also alluded to some changes made in the scope of the sick leave provisions. 

Next steps in our continuing coverage of coronavirus response legislation

In addition to the matters discussed in this document, we are now turning our attention to a detailed comparison of the bill as corrected and passed by the House and Senate compared to the original bill as introduced to identify with precision what was added to and what was removed from the original bill before its passage. Our next step is to monitor and report on the third legislative package that Speaker Pelosi, Leader McConnell, Minority Leader Schumer and President Trump have all promised as that legislation takes shape and moves forward quickly.

All of us are available to assist you  and your colleagues as you work your way through the many legislative and policy issues raised by the coronavirus crisis.  Please contact us if you have questions or want to discuss any of the subjects referenced in this alert. 

Stay up-to-date with all of our insights and guidance by visiting our US COVID-19 hub here.

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

US Policy Scan 2020

Policy Scan 2020 booklet

The Dentons US Public Policy Team is pleased to release its annual Policy Scan, our comprehensive overview of the policy and political landscape in 2020. We look to highlight movements across the spectrum of policy areas in the coming year. With our team’s unmatched reach, we not only look at issues in our nation’s capital but in every state capital in the union as well. We review the US Supreme Court docket and briefly profile the major cases of the term, both those still to be argued and those already argued with decisions pending. We look at trends across the globe and their impact on US policy. Finally, we delve into Election 2020 at the presidential, congressional, gubernatorial and state AG levels.

US Policy Scan 2020 takes deep dives into the turbulent political and policy waters swirling around health care, including drug pricing; energy and climate change; financial services regulation; tax cuts; foreign relations; trade; immigration; telecommunications, transportation and infrastructure; defense and homeland security; privacy; and other hotly-debated areas of government regulation and policy.

Other features include:

  • Year In Review
  • 2020 Congressional Calendars
  • Policy Review
  • A view from the water’s edge
  • Campaign 2020

And as in years past, we also include a review of state legislative activity in 2019, and an overview of pending legislation and the policy drivers that will shape state legislative and executive branch activity in 2020.

We hope that Policy Scan gives you the foundation to tackle obstacles and succeed in what is sure to be a chaotic and unprecedented year ahead.

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

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