Throughout the month of March, lawmakers in Washington, D.C. have reacted to the rapid development of the novel coronavirus COVID-19. Through three phases, Congress has begun to offer aid to individuals, businesses, and communities to help combat the virus and to stymie the impact the virus is having on our local, state, and national economies.
Phase one, which was approved by Congress and signed by the president on March 6th, was an $8.3 billion supplemental appropriation providing assistance to state and local governments, small businesses, and support for vaccine development. Missouri and Illinois received at least $13 million and $14.6 million, respectively.
Illinois Governor J.B. Pritzker has already made use of the federal funding by purchasing personal protective equipment (PPE), ventilators, and other necessary equipment to combat the virus.
In order for Missouri to spend those federal funds, the General Assembly will have to grant Governor Mike Parson the authority to do so. The Missouri House passed a supplemental appropriation along with the federal spending authority on March 19th, but the Missouri Senate has not yet convened to send the package to the governor’s desk.
Phase two was signed into law on March 18th and expands access to benefits including unemployment compensation, emergency paid sick leave, emergency paid family leave, and nutrition programs. The bill also includes provisions for diagnostics testing, health services, medical devices liability, and small business liquidity. Phase two goes into effect on April 2nd, but small businesses still have many questions, especially surrounding paid leave portions.
Eligibility for emergency paid sick leave includes employees at companies with fewer than 500 employees, government employees, and employees who work under a multiemployer collective agreement. Full-time employees are “entitled to two weeks (80 hours) of paid time off (up to $511 per day) to self-quarantine, seek a diagnosis or preventive care, or receive treatment for COVID-19.” Part-time employees who qualify will be able to access the same benefits equal to the number of hours they typically work.
Employers are required to foot the bill for emergency paid sick leave, but the federal government will reimburse those employers within at least three months. According to the bill’s summary:
- Reimbursement will cover both the wages paid and the employer’s contribution to employee health insurance premiums during the period of leave.
- Employers will be reimbursed through a refundable tax credit that counts against employers’ payroll tax, which all employers pay regardless of non-profit/for-profit status.
- Employers will submit emergency paid sick leave expenses as part of their estimated quarterly tax payments. If employer’s costs more than offset their tax liability, they will get a refund from the IRS.
The next paid leave provision of phase two is the emergency paid family leave. The same qualifications apply to this section as the emergency paid sick leave and employers will also be responsible for the upfront cost. Under this section, both full-time and part-time employees are entitled to 12 weeks of job-protected leave (two weeks of unpaid leave, followed by 10 weeks of paid leave) “to take care for their children in the event of a school closure or their child care provider is unavailable due to COVID-19.”
Phase three was agreed upon in principle on March 24th by the White House, Senate Majority Leader Mitch McConnell (R-KY), and Senate Minority Leader Chuck Schumer (D-NY). The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, includes $340 billion in emergency supplemental appropriations and roughly $1.7 trillion in budget authority to combat the coronavirus and address its economic impact.
According to Senate Appropriations Chairman Richard Shelby (R-AL), “The emergency supplemental appropriations portion of the legislation brings to bear the full resources of the federal government, including $117 billion for hospitals and veterans’ health care; $11 billion for vaccines, therapeutics, diagnostics, and other preparedness needs; $4.3 billion for the Centers for Disease Control; $16 billion for the Strategic National Stockpile; and $45 billion for FEMA disaster relief fund, among other things.”
Perhaps the most critical pieces of the CARES Act include economic relief to distressed sectors of the economy, payroll tax deferment and loans for small businesses, and direct payments to American families.
The CARES Act provides $500 billion to the Treasury’s Exchange Stabilization Fund to provide loans, loan guarantees, and other investments to economically distressed sectors of the economy. Specifically, $25 billion in direct lending to passenger air cargo, $4 billion to cargo air carriers, and $17 billion for “businesses important to maintaining national security” (like Boeing and General Electric). The rest of the $500 billion will go towards loans, loan guarantees, and investments to eligible businesses, states, and municipalities.
Loans specifically for small businesses amount to about $350 billion. While details are still coming out, it seems that most loans will be forgiven if they are used by businesses for payroll, rent or mortgage payments, utilities, and/or debt service payments. According to the bill, businesses can receive a maximum of $10 million, but forgiveness would be based on how many employees the employer retained compared to their pre-pandemic levels.
The CARES Act also helps small businesses by delaying payment of employer payroll taxes. The provision allows employers and self-employed individuals to defer paying their share of Social Security tax. The deferred employment tax may be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
Finally, perhaps the section of the bill that will have the biggest impact on the American public is the “recovery rebates for individuals.” As the bill stands now, U.S. residents with an adjusted gross income of up to $75,000 ($150,000 if married), are eligible for a full $1,200 ($2,400 if married) rebate. They are also eligible for an additional $500 per child. The amount will be reduced by $5 for every $100 a taxpayer exceeds the income amount and phases out entirely at $99,000 for individuals, $146,500 for head-of-household filers with one child, and $198,000 for joint filers with no children.
As new information is released concerning each phase, the Regional Chamber will be prepared to educate our members and investors. If you would like to read the summaries of each phase, please visit our blog regarding Public Policy actions around COVID-19.