May 14, 2020
By Mark Valentini, Director of Legislative Affairs
On Tuesday, May 12, 2020, Democratic leadership in the U.S. House of Representatives introduced “Phase 4” legislation in response to the COVID-19 pandemic.
H.R.6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, is a $3 trillion comprehensive spending package. The proposal includes $1 trillion in emergency relief for states to combat the outbreak, $200 billion in assistance for essential workers, and an additional round of relief payments to qualified individuals and couples.
The legislation would also loosen the criteria for Paycheck Protection Program loans, including:
- Reducing the 75% minimum threshold required for payroll expenses in order to have the loan forgiven, letting small businesses spend more on qualified overhead expenses such as rent, mortgage interest deduction, and utilities.
- Allowing businesses who have taken a PPP loan to defer payroll taxes for FY2020. Businesses that currently have a PPP loan are currently prohibited from deferring payroll taxes under the CARES Act.
- Ensuring forgiven portions of PPP loans are not taxed by any means. 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.
- Allowing any 501(c) with 500 or less employees to apply for a PPP loan. Under the CARES Act, only 501(c)3 organizations can apply for a PPP loan. By allowing any 501(c) to apply, 501(c)6 organizations, such as PHCC National, and many of its state and local chapters, would have the option to apply for a PPP, if necessary, in order to continue to serve its members during this difficult time.
The legislation also includes the following provisions:
- Increasing employee retention credit from 50% to 80%, further incentivizing small businesses to keep their employees on the payroll.
- Additional funds for workforce investment. The proposal would provide $2 billion through June 2021 to Workforce Investment and Opportunity Act (WIOA) grants to state and local workforce boards for employment training while expanding eligibility for participation in the program.
It is important to note that immediate action on this legislation is not likely. Furthermore, the 1,815 page legislation serves more as a list of policy priorities for the Democratic party, as well as a starting point for further negotiations on the next phase of COVID legislation. It is also worth noting that other than $10 billion in additional small business assistance, there is no proposed allocation in the HEROES Act to replenish the PPP program, which is expected to run out of money very soon.
In addition, Senate Republican leadership seems to have indicated a three-fold approach to the next phase of COVID legislation:
- Wait-and-see. Senate Majority Leader Mitch McConnell earlier this week stated that there is no sense of urgency to pass the next round of COVID relief. In fact, after passage of the CARES Act, Senator McConnell indicated that he would prefer to see what kind of an impact the $2.3 trillion economic assistance package has on the U.S. economy, and whether additional funding is necessary as states begin to reopen for business.
- We are running a large deficit. In the course of two months, the United States Congress has passed legislation worth close to $3 trillion, significantly increasing the national debt. Even if another round of economic assistance is necessary, there is little appetite to “go big” to the tune of an additional $3 trillion as House Democrats have proposed.
- Protecting hospitals and businesses from COVID-19 litigation is paramount. Senator McConnell has been steadfast in insisting that for any piece of legislation to move, it must include provisions that shield hospitals and businesses from lawsuits holding them liable for employees and other persons getting infected with COVID-19. Senator John Cornyn (R-TX) has been tasked with drafting legislation that will exempt small businesses from such litigation if those businesses have taken precautions outlined in federal, state and local guidelines protecting employees, such as provisions of personal protective equipment (PPE) and implementing social distancing policies. Businesses that have been negligent in this regard would not be immune from lawsuits.
While passage of H.R.6800 in the House is expected as soon as the end of this week, negotiations between the House and Senate on a final spending package they can send to the President will most likely not happen until well after Memorial Day.
PHCC’s government relations team will keep you posted. Contact Mark Valentini or Chuck White at [email protected] if we can be of any assistance.
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.