An Update on Federal Legislation Pertaining to the COVID-19 Response
This post will cover summaries for the four major pieces of legislation Congress has thus far passed to address the coronavirus pandemic:
- The Paycheck Protection Program and Health Care Enhancement Act (Passed 4/24/20)
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act (Passes 3/27/20)
- The Families First Coronavirus Response Act (Passed 3/18/20)
- The Coronavirus Preparedness and Response Supplemental Appropriations Act (Passed 3/6/20)
April 24. 2020 – The Paycheck Protection Program and Health Care Enhancement Act
Soon after Congress passed the CARES Act, the 3rd Coronavirus relief bill, which provided over $2 trillion of stimulus money, lawmakers returned to the negotiating table to replenish exhausted funds and fill in gaps. The bill includes $484 billion in new funding for existing programs that created under the CARES Act.
Small Business Administration Funds in “Phase 3.5”
The Paycheck Protection Program (PPP) was given an additional $320 billion, granting a lifeline to small businesses who haven’t yet received funds. This money is expected to be disbursed quickly, as many businesses have already applied for loans but haven’t received them yet due to a backlog of applications. Of that $320 billion, $30 billion will be set aside for financial institutions with between $10 billion and $50 billion in assets. Another $30 billion is set aside for institutions with less than $10 billion in assets. Those set asides were part of Democratic lawmakers’ demands that money be reserved for minority and women-owned businesses. On top of the $320 billion for the PPP, an additional $60 billion is provided for the Economic Injury Disaster Loan program. Small farms and ranches are also now eligible to apply for small business loans.
Healthcare Funding in “Phase 3.5”
The bill provides an additional $75 billion for hospitals, which are facing strenuous financial pressures as elective procedures are put on hold and costs of treating uninsured coronavirus patients mount. Previous legislation promised hospitals they would be reimbursed by the federal government for treating uninsured coronavirus patients, and those funds are now bolstered. The Kaiser Family Foundation estimated that up to 40% of the new hospital funds could be used to treat uninsured patients. A significant share of the $75 billion is set aside for rural hospitals. An additional $25 billion is marked for coronavirus testing. This includes $18 billion set aside for state and local governments, $1 billion for the CDC, and $1.8 billion for the NIH. Testing funds can be used for the manufacture and distribution of tests, development of rapid testing, procurement of personal protective equipment, and support for contract tracing efforts. According to Bloomberg Government, “Recipients would have to submit a testing plan to HHS that includes the number of tests needed, monthly estimates of lab and testing capacity, and information on how they will use testing to ease community mitigation policies.”
March 27, 2020 – The Coronavirus Aid, Relief, and Economic Security (CARES) Act
The CARES Act builds on the two former pieces of legislation by providing more robust support to both individuals and businesses, including changes to tax policy. The bill, estimated to cost over $2 trillion, includes:
- $349 billion allocated for Small Business Administration Loans, which are meant to help small businesses (fewer than 500 employees) impacted by the pandemic and economic turndown make payroll and cover other expenses. Notably, small businesses may take out loans up to $10 million and cover employees making up to $100,000 per year; loans taken for this purpose are forgiven after four months if the business does not lay off its employees (forgiveness is scaled down as layoffs rise).
- A Recovery Rebate for individual taxpayers. Taxpayers with $2,500 in qualified income (defined as earned income, income from Social Security and certain pension income for veterans) qualify for a minimum rebate of $600 for singles and $1,200 for taxpayers filing jointly. From there, the rebate increases dollar-for-dollar with tax liability before credits until it reaches its maximum at $1,200 for singles and $2,400 for taxpayers filing jointly (see Chart 1). This means that refundable credits like the Child Tax Credit (CTC) and Earned Income Tax credit (EITC) are not considered when determining tax liability for the credit.
- The rebate phases out at $75,000 for singles and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $98,000 for single taxpayers and $198,000 for joint taxpayers. Additionally, taxpayers making $2,500 in qualified income with children will receive a flat $500 for each child, though this amount is also subject to the phaseout.
- Creates a $300 above-the-line charitable contribution deduction for filers taking the standard deduction and expands the limit on charitable contributions for itemizers.
- Waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps.
A variety of business tax provisions:
- Corporations may delay making quarterly estimated payments until October 15, 2020.
- Employer-side Social Security payroll tax payments may be delayed until January 1, 2021. The Social Security Trust Fund will be backfilled by general revenue in the interim period.
- Firms may take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. The NOL limit of 80 percent of taxable income is also suspended, so firms may use NOLs they have to fully offset their taxable income.
- The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help businesses increase liquidity if they have debt or must take on more debt during the crisis.
- Technical corrections to the depreciation treatment of qualified improvement property (QIP) and the limitation on downward attribution of stock ownership, which affected foreign subsidiaries of U.S. firms to excessive tax and reporting requirements.
- Aviation excise taxes on kerosene are suspended until January 1, 2021.
In addition, the law provides:
- $500 billion in emergency relief to businesses such as airlines through loans and loan guarantees, of which $454 billion will support the Federal Reserve’s lending facilities.
- COVID-19 Testing and Treatment: the bill would require group health plans and health insurance issuers offering group or individual health insurance to cover preventive services for the virus. It would also require diagnostic test providers for COVID-19 to make the cash price for the test available to the public on the internet.
- Current Students: colleges and universities are allowed to award “emergency financial aid grants” without regard to the usual need calculation; the amount of the grant can’t exceed the applicable Pell grant for the same year. The bill would also allow some payments to be made to students with work-study arrangements if they weren’t able to finish their work during the year because of the virus (including virus-related closings).
- The bill also allows the Department of Education to exclude some loans for students who were unable to remain enrolled in school as a result of a qualifying emergency (exceptions apply). Waivers also apply to Pell Grant repayments under the same circumstances.
- Suspension of Student Loans. The bill also provides that payments due for student loans shall be suspended – without interest – for three months.
- Corrections and Modifications. The bill also offers revisions and modifications to existing paid leave bills, including the Family and Medical Leave Act and the spanking new Families First Coronavirus Response Act.
March 18, 2020 – The Families First Coronavirus Response Act
A second package, the Families First Coronavirus Response Act (Public Law No: 116-127), was passed on March 18, 2020. This law responds to the coronavirus outbreak by providing paid sick leave and free coronavirus testing, expanding food assistance and unemployment benefits, and requiring employers to provide additional protections for health care workers.
Specifically, the bill provides FY2020 supplemental appropriations to the Department of Agriculture (USDA) for nutrition and food assistance programs, including:
- the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC);
- the Emergency Food Assistance Program (TEFAP); and
- nutrition assistance grants for U.S. territories.
The bill also provides FY2020 appropriations to the Department of Health and Human Services for nutrition programs that assist the elderly.
The bill modifies USDA food assistance and nutrition programs to:
- allow certain waivers to requirements for the school meal programs,
- suspend the work requirements for the Supplemental Nutrition Assistance Program (SNAP, formerly known as the food stamp program), and
- allow states to request waivers to provide certain emergency SNAP benefits.
In addition, the bill requires the Occupational Safety and Health Administration to issue an emergency temporary standard that requires certain employers to develop and implement a comprehensive infectious disease exposure control plan to protect health care workers.
The bill also includes provisions that:
- establish a federal emergency paid leave benefits program to provide payments to employees taking unpaid leave due to the coronavirus outbreak,
- expand unemployment benefits and provide grants to states for processing and paying claims,
- require employers to provide paid sick leave to employees,
- establish requirements for providing coronavirus diagnostic testing at no cost to consumer
- treat personal respiratory protective devices as covered countermeasures that are eligible for certain liability protections, and
- temporarily increase the Medicaid federal medical assistance percentage (FMAP).
The first coronavirus response law (Public Law 116-123), the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 provided $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak.
The bill provides FY2020 supplemental appropriations for the Department of Health and Human Services (HHS), the State Department, and the Small Business Administration to respond to the coronavirus outbreak. Programs include:
- Developing, manufacturing, and procuring vaccines and other medical supplies;
- Grants for state, local, and tribal public health agencies and organizations;
- Loans for affected small businesses;
- Evacuations and emergency preparedness activities at U.S. embassies and other State Department facilities; and
- Humanitarian assistance and support for health systems in the affected countries.
Telehealth Services During Certain Emergency Periods Act of 2020:
- (Sec. 102) This section allow HHS to temporarily waive certain Medicare restrictions and requirements regarding telehealth services during the coronavirus public health emergency.
- (Sec. 103) This section exempts the budgetary effects of this division from (1) the Statutory Pay-As-You-Go (PAYGO) Act of 2010, (2) the Senate PAYGO rule, and (3) certain budget scorekeeping rules.