The White House and Senate leaders reached a deal early Wednesday morning on a massive stimulus package they hope will keep the nation from falling into a deep recession because of the coronavirus crisis.
The revamped Senate proposal will inject approximately $2 trillion into the economy, providing tax rebates, four months expanded unemployment benefits and a slew of business tax-relief provisions aimed at shoring up individual, family and business finances.
The deal includes $500 billion for a major corporate liquidity program through the Federal Reserve, $377 billion in small business aid, $100 billion for hospitals and $150 billion for state and local governments.
It will also give a one-time check of $1,200 to Americans who make up to $75,000. Individuals with no or little tax liability would receive the same amount, unlike the initial GOP proposal that would have given them a minimum of $600.
The final vote could come later this week.
Here are some highlight of the bill:
Small Business Administration
The Small Business Administration is receiving an enormous amount of funding and significant program adjustments to help small businesses weather and survive the crisis. A sample of the numbers includes:
- $349 billion for loan guarantees,
- $675 million for Small Business Administration salaries and expenses,
- $240 million for small business development centers and women’s business centers for technical assistance for businesses,
- $10 billion for emergency EIDL grants,
- $17 billion for loan subsidies,
- $100 billion for secondary market guarantee sales
Programmatic changes appear to be primarily channeled through the 7(a) loan program. Keyprovisions include:
Paycheck Protection Program
- Creation of the Paycheck Protection Program (PPP)
- Helps small businesses, 501(c)(3)’s, 501(c)(19)’s, and 31(b)(2)(c)
- Limited to under 500 employees
- Includes independent contractors, sole proprietors and the self-employed
- Entities must have been operational by 2/15/20; had payroll, paid taxes
- Covered loan period is 2/25/20 through 6/30/20
- Maximum loan amount via 7(a) set to $10 million through 12/31/20
- 100% loan guarantee through 12/31/20
- Eligible expenses include payroll, insurance, rent, mortgage and utilities
- Borrower cannot apply/carry both PPP and Economic Injury Disaster Loan (EIDL) for COVID-19, but can carry previous, non-COVID-19 EIDL and participate in PPP
- Borrow must good-faith certify that funds are needed for COVID-19 related purposes, the funds will be used to retain workers, and that their request is not duplicative withother SBA funds for the same purpose
- Waives borrower and lender fees
- Waives credit elsewhere requirements
- Waives collateral and personal guarantees
- Sets maximum interest rate of 4%
- No prepayment fees
- Defers payments on PPP loan for 6-12 months
- Delegates authority to all existing 7(a) lenders to expedite approvals/distributions
- Authorizes bank and non-bank lenders to participate in PPP program
- New lenders in program can only participate in PPP and not other 7(a) loans
- Amount spent by borrower in the first 8 weeks from loan origination may be forgiven; amount reduced proportionate to reductions in workforce as compared to previous year; if rehires made during 8 week period, no penalty in reflection of possible layoffs early in the 8 week period
- Allows inclusion of additional money paid to tipped workers
- Anything not forgiven or repaid by 12/31/20 will convert to a max 10 year loan at a max 4% interest rate; loan will remain 100% guaranteed
Emergency Injury Disaster Loan (EIDL)
- Eligibility expanded to include tribal businesses, cooperatives, ESOP’s, individual contractors, sole proprietors, and private non-profits with less than 500 employees
- Waives credit elsewhere requirement for advances and loans below $200,000
- Waives personal guarantee for advances and loans below $200,000
- Waives 1-year-in-business requirement for advances and loans below $200,000
- SBA has greater flexibility in determining borrower eligibility
- Entities eligible to apply for EIDL may request an advance in the form of an emergency grant of up to $10,000
- SBA must distribute EIDL emergency grant within 3 days
- Applicants are not required to repay emergency grant, even if they are ultimately denied EIDL
The stimulus bill offers considerable resources related to unemployment insurance. At present, this section includes final sticking points that are delaying passage of the bill.
- Creates a temporary Pandemic Unemployment Assistance (PUA) program for those not traditionally covered by unemployment insurance (UI), including the self-employed, independent contractors, or those with limited work history
- Provides an additional $600 per week in recipients of UI and PUA for up to 4 months
- Provides an additional 13 weeks of UI after state UI expires
- Federal government will cover 100% of the cost of the first week of UI if states waive the 1 week waiting period to begin benefits
- Federal government will reimburse states for 50% of the costs incurred through 12/31/20 of unemployment benefits for state agencies and non-profits
- Federal government will pay 100% for ‘short-time’ programs in states with exiting programs in law and 50% of costs for states that begin ‘short-time’ programs during thecovered period
A series of tax credits to ease the burden of keeping staff on payroll.
- Employee retention benefit: 50% refundable payroll tax credit during COVID-19 crisis for businesses that either fully or partially shut down OR have a 50% decrease in receiptsversus the same quarter in the previous year and continue to pay employees.
- Based on qualified wages paid to employees during crisis, tied to number of employees (100+ full time employees = wages paid when they are not providing services due toCOVID-19 and less than 100 full time employees = wages paid regardless of business closure status)
- Covers up to $10,000 paid per employee, including benefits, for the period 3/13/20-12/31/20
- Payroll tax deferred, payments to be spread over 2 years
- Net operating losses (NOLs) modification: NOLs arising in FY’s ‘18, ‘19, and ‘20 can be carried back 5 years
- AMT credits available as refundable credits through 2021 can be claimed as a refund now
- Allowable deductible interest expenses are increased from 30% to 50% for 2019 and 2020.
Cash payments to U.S. residents
- All U.S. residents with an adjusted gross income of up to $75,000 for individuals and $150,000 for couples will receive a cash rebate of $1,200 (ind) or $2,400 (couples)
- Includes all taxpayers with work-eligible SSN, including those with low or no income
- Rebate amount decreases by $5 with for every $100 over the threshold, with individuals
- AGI over $99,000 completely phased out, $146,000 for head of household with at least1 child phased out, and $198,000 for couples phased out.
- An additional $500 will be given for each child per household