June 25, 2020
By Mark Valentini, Director of Legislative Affairs
In our last report, Congress was expected to prepare passage of a fourth comprehensive COVID-19 relief package to be voted on by the July 4 holiday. However, Congress will need to debate and pass law enforcement reform legislation which is scheduled to pass by the end of the month. Additionally, policymakers continue to monitor the economic recovery to determine how much relief may be needed in the next package.
With the House of Representatives having passed the HEROES Act last month, the ball is now in the Senate’s court to propose a package that will likely include many of the small business provisions in the House-passed bill. The proposals in play on which PHCC is focused include:
- Ensuring no forgivable portions of a Paycheck Protection Program (PPP) loan used for qualified expenses are subject to any form of taxation. According to guidance released by the IRS on April 30, forgiven portions of the loan are not taxable as business income, but expenses paid with non-taxable forgiven revenue are not deductible expenses effectively, acting as a tax on the loan. Congress failed to address this in the PPP Flexibility Act, which did however allow businesses to defer payroll taxes for up to two years.
- Ensuring businesses that follow federal, state, and local guidelines for protecting employees and customers are shielded from COVID-19 related litigation. Senator John Cornyn (R-TX) has taken the lead on the issue and will propose legislation to address this. Senate Majority Leader Mitch McConnell (R-KY) has held firm that no bill will pass without this provision.
- Extending the June 30 expiration date for the PPP program through the end of the year. While we do see signs of recovery as states slowly continue to open up their economies in phases, there is the risk of having to shut down again if there is a severe uptick in COVID cases. Continuing the PPP program will allow businesses who were able to weather the first storm without assistance the option of applying for a PPP loan after June 30 should it be necessary.
- Allocating additional funds for the PPP. With approximately $100 billion left in the PPP program, the potential need for businesses to apply for assistance, and the potential for eligibility to be expanded to 501(c)6 organizations, another tranche of funds for the PPP will be necessary. Estimates for what the additional allocation will be are not currently available.
When the topic of a final round of COVID relief was first floated, Republican leadership insisted the legislation should not exceed $1 trillion in cost, while the HEROES Act, a partisan bill proposed by House Democrats has a $3 trillion cost. The Trump administration wants to see a bill not to exceed $2 trillion, therefore it is likely that this is the number the Senate will fall on.
Potential obstacles to passage include issues surrounding unemployment insurance. The Families First Coronavirus Relief Act (FFCRA), the second comprehensive COVID relief bill with a $200 billion price tag, included provisions allowing Americans on unemployment as a result of COVID-19 a $600 federal supplement per week in addition to state benefits. That program is set to expire at the end of July. Congressional Democrats are pushing to extend benefits past July 31. However, with unemployment benefits in some cases exceeding previous income, many Americans are reportedly hesitant to report back to work. Republicans are offering an “employment benefits” proposal that would instead pay people to return to work. Even then, there may be hesitancy as people have concerns about exposure to COVID-19 if they return to work.
Another obstacle will be the proposed liability shield for businesses reopening their shops. Democrats are adamantly opposed to this proposal. However, Republicans had to swallow a pretty hefty pill on the paid family and medical leave and unemployment provisions under the FFCRA, therefore Democrats will be expected to reciprocate. A potential deal could be reached where Democrats accept the liability proposals in exchange for either extended unemployment benefits, and/or an additional round of economic stimulus similar to what was extended under the CARES Act. It all depends on how much pressure is put on Congress to act. With unemployment hovering around 15%, jobless claims continuing to be filed in the millions on a weekly basis, and the potential for a “second wave” of coronavirus cases, that pressure is expected to increase.
Congress is expected to have the next round of COVID-19 relief passed by August recess. Your government affairs team at PHCC will continue to keep you updated and advocate vigorously so that we continue to have a seat at the table alongside other business stakeholders during negotiations.
Mark Valentini is the Director of Legislative Affairs for PHCC—National Association. A seasoned professional with more than 20 years of experience on Capitol Hill and with several national trade associations, Valentini applies his expertise in public policy, workforce and training, and insurance and tax matters to advocate on behalf of all PHCC members.