On Sunday night, President Trump signed into law the $2.3 trillion Omnibus Spending Bill, which includes $900 billion in funding for COVID-19 relief. The massive bill encompasses various Acts including (1) the Continued Assistance to Unemployed Workers Act, (2) the Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act, (3) the Taxpayer Certainty and Disaster Relief Act of 2020, and (4) the No Surprises Act. These Acts are summarized below.
The Continued Assistance to Unemployed Workers Act (CAUWA)
The CAUWA provides for an extension of the federal unemployment benefits originally provided under the CARES Act. It includes direct stimulus payments, amends the Families First Coronavirus Relief Act (FFCRA), and provides clarification on the tax implications associated with PPP forgiveness.
- Unemployment Benefits
The CARES Act of March 2020 included the following federal unemployment benefits:
- The Pandemic Unemployment Assistance (PUA), which provided relief to those who are not typically qualified to receive state unemployment benefits,
- The Federal Pandemic Unemployment Compensation (FPUC), which provided federal unemployment dollars over and above state provided benefits, and
- The Pandemic Emergency Unemployment Compensation (PEUC), which provided benefits to those who have utilized all available state unemployment benefits.
These programs have now been extended through March 14, 2021. In certain circumstances, eligible individuals may be able to extend their benefits through April 5, 2021.
Notable changes include the reduction in FPUC from the $600 weekly federal benefit provided under the CARES Act to a $300 weekly federal benefit. Also, CAUWA requires that unemployment applicants and recipients provide supporting documentation of their need for assistance. States utilizing the federal funding must implement a system to identify and address employees refusing to return to work without good cause.
- Stimulus Payments
CAUWA provides a federal stimulus direct payment of $600 to each eligible individual and $600 for each qualifying child. Individuals with an adjusted gross income of $75,000 or less are generally qualified to receive the entire benefit amount.
- PPP Taxation
CAUWA clarifies that business expenses, claimed as “eligible expenditures” for PPP forgiveness, are also eligible to be written off as business expenses for tax purposes.
FFCRA, originally set to expire Thursday, required certain entities provide employees with up to 80 hours of paid sick leave and up to 10 weeks of paid family medical leave for qualifying reasons. Covered employers were eligible for a dollar for dollar tax credit for any paid sick or family medical leave paid under FFCRA. CAUWA extends the federal dollar for dollar tax credit to March 31, 2021 for benefits paid in accordance with the structure of the FFCRA program, but no longer requires that employers provide FFCRA benefits. Employees who have exhausted FFCRA benefits will not be eligible for additional FFCRA benefits.
The Economic Aid to Hard Hit Small Businesses, Nonprofits, and Venues Act
The Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act (the “Economic Aid Act”) expands eligible PPP expenditures, creates a simplified forgiveness application for PPP loans under $150,000, clarifies eligible PPP payroll costs, creates the Second Draw Program, reauthorizes the PPP loan program, and extends federal payments on certain SBA loans.
- Expansion of PPP Eligible Expenditures
The Economic Aid Act expands the list of eligible expenditures that will qualify for PPP forgiveness. Newly eligible expenses under PPP now include: (1) operations expenses such as business software, cloud computing costs, payroll expenses, billing costs, inventory costs, etc.; (2) property damage caused by vandalism and looting that is not covered by insurance; (3) essential supplier costs that were contracted for prior to the covered loan period (or if for fresh produce contracted for during the covered loan period); and (4) PPE including creation of physical barriers, vent systems, expansion of indoor/outdoor business space, and offsite health screenings.
- Simplified Loan Forgiveness
An entity receiving a loan of $150,000 or less will now be eligible to use a one page simplified forgiveness application. However, such entities are still subject to audit and are required to keep documentation on payroll expenses and employee counts for four years and other eligible expenses for three years after submission of the forgiveness application.
- Clarification of PPP “Group Health Care Benefits”
The Economic Aid Act also clarifies that PPP payroll costs for “group health care benefits” include group life, disability, vision and dental insurance benefits.
- Second Draw Program
The Economic Aid Act creates the Second Draw Program, a new funding resource for businesses that (1) used, or will use, all of their PPP funds, (2) employ less than 300 employees, and (3) experienced at least a 25% reduction in gross receipts in any 2020 quarter as compared with the same 2019 quarter. This program has further limitations over and above employee count and reduced gross receipts, including a prohibition on funding for think tanks, businesses created in China, or businesses with a Chinese citizen on its Board of Directors, among other limitations.
The maximum loan amount available under the Second Draw Program is generally calculated at the lesser of 2.5 times the monthly payroll costs or $2,000,000. Specific funding rules and limitations apply for various employer types, such as seasonal employers and NAICS code 72 employers (restaurants and hospitality) among others. The Economic Aid Act also creates a simplified lending process for those entities seeking a Second Draw loan of $150,000 or less.
- Expansion of the PPP program
The Economic Aid Act addresses the situation where businesses initially applied for, or received less, than the maximum loan they were qualified to receive. Under the Economic Aid Act, certain entities who have not yet sought forgiveness, are able to apply for additional monies to make up the difference between what the entity was initially granted and the maximum available.
Additionally, the Economic Aid Act reauthorizes the PPP program by providing $35 billion for first time PPP borrowers and $15 billion for first time PPP borrowers (1) with 10 employees or less or (2) located in low-income or moderate-income neighborhoods and seeking loans of $250,000 or less, among other funding.
- Debt Relief Expansion
The Economic Aid Act expands federal payments towards qualifying SBA loans. Businesses with current, eligible SBA loans will receive an additional three months of principal, interest and costs paid by the federal government beginning on February 1, 2021. Businesses with eligible SBA loans in deferment will receive an additional three months of principal, interest and costs paid by the federal government after deferment ends. Businesses that receive a new eligible SBA loan between February 1, 2021 and September 30, 2021 will receive the first six months of principal, interest and costs paid by the federal government. The Economic Aid Act does provide some limitations, including that only one qualifying loan per entity is eligible for the payments and the principal, interest, and costs payment may not exceed $9,000.00 per month.
Certain NAICS code entities may be eligible for an additional five months of principal, interest, and costs payments after the completion of the respective three or six month period concludes. Eligible NAICS codes include: 61 (education), 71 (performing arts), 72 (restaurants and hospitality) , 213 (mining and drilling) , 315 (textile and apparel production), 448 (apparel stores), 451 (hobby stores), 481 (air transportation), 485 (transportation), 487 (scenic and sightseeing), 511 (publishing), 512 (Motion Pictures/Music) , 515 (broadcasting) , 532 (rental and leasing), and 812 (personal care services).
The Taxpayer Certainty and Disaster Tax Relief Act of 2020
Among the tax and benefit provisions in The Taxpayer Certainty and Disaster Relief Act of 2020 is an extension of The Employee Retention and Rehiring Tax Credit in the CARES Act to cover qualified wages up to July 1, 2021. There are also provisions allowing for greater flexibility for dependent care and health flexible spending accounts-with 12 month grace periods and carryover of unused amounts for 2020 and 2021 years.
The No Surprises Act
The No Surprises Act prohibits “Surprise Medical Billing” by health plans and doctors for out of network and other situations where surprise billing often occurs.
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