Overview of COVID-19 Legislation
Overview of COVID-19 Legislation
Congress has thus far enacted four measures to address the economic and public health impacts of the COVID-19 crisis:
- On March 6, President Trump signed into law the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6074). It gave billions in emergency funding to the CDC, FDA and other public health agencies.
- Next, on March 18, H.R. 6201 -- the "Families First Coronavirus Response Act" (FFCRA) -- became law. FFCRA provides support for the medical response and direct aid for those impacted by COVID-19.
- The third bill, S.3548 -- the "Coronavirus Aid, Relief, and Economic Security Act" (CARES Act) -- was signed into law on March 27 and provides economic relief to industries, businesses, and individuals impacted by the pandemic.
- "Paycheck Protection Program and Health Care Enhancement Act" (H.R. 266) provided another $484 billion in additional COVID-19 response to support small business loan programs, as well as emergency disaster grants, funding for hospitals and providers, and COVID testing.
Here is a brief overview of how the bills - especially FFCRA and CARES - address the various concerns of contractors and the union construction and maintenance industry.
Paid Sick and Family Leave Provision
The FFCRA includes a significant expansion of paid sick leave and family leave under the FMLA, which establishes:
- An emergency paid leave program requiring private sector employers with fewer than 500 workers to provide up to 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who are unable to work or telework because they have to care for a child younger than 18 whose school or day care has closed because of the coronavirus; and
- A requirement that private sector employers with fewer than 500 workers and government entities would have to provide employees who are unable to work or telework with immediate 80 hours of paid sick time off for full-time employees to:
- Comply with a federal, state, or local quarantine or isolation order
- Self-quarantine per a health-care provider's advice
- Obtain a medical diagnosis for coronavirus
- Care for an individual who is in quarantine or for a child whose school or day care has closed due to coronavirus
Additionally, the CARES Act amends Section 5102 of the Emergency Paid Sick Leave Act (Division E of the FFCRA) to limit the required employer contribution for paid sick leave. For employees unable to work because of government-sanctioned quarantine orders, medical professional-induced self-quarantine, or COVID-19 symptoms, employers must pay up to $511 per day and $5,110 in the aggregate in sick leave. For employees missing work to care for a family member impacted by COVID-19 or the previously designated quarantine, employers must provide up to $200 per day and $2,000 in the aggregate in sick leave.
DOL Leave Guidance and FAQs:
- Temporary Rule for Paid Leave under the Families First Coronavirus Response Act
- Families First Coronavirus Response Act FAQ
- COVID-19 and the Fair Labor Standards Act FAQ
- COVID-19 and the Family and Medical Leave Act FAQ
- Families First Coronavirus Response Act: Employee Paid Leave Rights
- Families First Coronavirus Response Act: Employer Paid Leave Requirements Fact Sheet
Tax Credit Provisions
The FFCRA provides a refundable tax credits to employers to cover wages paid to employees while they are taking time off under the bill's sick leave and family leave programs. It also included new tax credits for employers of fewer than 500 individuals to cover the costs associated with providing such leave to their workers.
IRS Leave Tax Credit Guidance and FAQs:
- Tax Credits for Small and Midsize Businesses FAQs
- Amount of the Tax Credit for Qualified Sick Leave Wages
- Amount of the Tax Credit for Qualified Family Leave
- Determining the Amount of Allocable Qualified Health Plan Expenses
- How Should an Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages
- Credit Availability Timeline
- Taxation and Deductibility of Tax Credits
- Interaction of FFCRA Tax Credits with Other Tax Credits
- Use of Third-Party Payers
The CARES Act also includes various tax provisions:
- The option for businesses and self-employed workers to defer payment of the employer share of Social Security tax through December 31, 2020. Deferred taxes would have to be repaid over the following two years, with 50% of the deferred amount due on December 31, 2021, and the remaining 50% due by December 31, 2022. Firms that utilize SBA loans for payroll purposes cannot use this credit.
- An employee retention tax credit provision allows for 50% of qualified wages, with a maximum value of $10,000, to serve as a refundable tax credit against payroll tax liability. Employers whose operations are completely or partially suspended through government orders and firms with a greater than 50% reduction of quarterly receipts, on a year-over-year basis, are eligible for this credit. Employee wages of furloughed or reduced hour workers are eligible. However, for employers with 100 or fewer fulltime employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. Wages used for payroll credits for required paid family or sick leave are ineligible.
IRS Employee Retention Credit Guidance and FAQs
Small Business Loan Provisions
The CARES Act provides $377 billion in zero-interest loans to subsidize small businesses, which are firms employing up to 500 employees. Meanwhile, $350 billion of the small business assistance funds create the Paycheck Protection Program (PPP). The PPP allows eligible firms to access zero-interest loans of up to $10 million to maintain workforces and operations, including paid sick leave. Small businesses can forgo eight weeks of payroll cost repayment if they retain workers at current salaries.
SBA and Treasury Guidance for the PPP:
- SBA's Paycheck Protection Program Page
- Treasury's Assistance for Small Businesses Page
- Interim Final Rule on the Paycheck Protection Program
The legislation also allocates $17 billion to alleviate six months of principal, interest, and fee payments for businesses with existing SBA 7(a), 504, or microloans. New SBA borrowers can also utilize this benefit. The measure facilitates bank lending to small businesses by allowing extensions for existing loans. Additionally, eligible firms can also utilize PPP funds, but SBA loan repayment relief cannot fund PPP payments.
The legislation provides $10 billion to fund Economic Injury Disaster Loans (EIDL) loans of $10,000 for eligible small businesses withing three days of application. To qualify, firms must have been operating on January 31, 2020. The maximum principal for EIDL loans is $2 million, with interest rates up to 3.75% for companies and up to 2.75% for nonprofits. Borrowers can defer principal and interest for up to 4 years. Small businesses can utilize EIDL loan funds to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, and to pay debts, rent and mortgage obligations. This funding source is available to small businesses, tribal businesses, private nonprofits, sole proprietors, and independent contractors.
SBA Application for the EIDL Loans:
The Federal Reserve's Main Street Lending Program
On Thursday, April 9, the Federal Reserve announced a bevy of emergency measures that created or expanded nine programs to provide up to $2.3 trillion in loans to support the economy during the Coronavirus pandemic. Principal among these is the Main Street Lending Program, which establishes two different lending facilities, one for new loans and one for existing loans. Firms can only utilize one of the two facilities. These facilities are called the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF).
The Main Street Lending Program creates borrowing opportunities for small and mid-sized businesses by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. These loans must mature in four years, and creditors must use the adjustable Secured Overnight Financing Rate plus 2.5 to 4 percentage points, with an upfront origination fee of 1 percentage point, to determine the interest rate. Loans can be paid off early without a penalty and can be deferred for one year. Borrowers must commit to making reasonable efforts to maintain payroll and retain workers and face the executive compensation, stock buyback, and dividend restrictions that apply to direct loan programs under the CARES Act.
The maximum loan through the MSNLF is $25 million or an amount that, when added to the borrower's existing outstanding and committed but undrawn debt, doesn't exceed four times the borrower's 2019 earnings before amortization, depreciation, interest, and taxes. The maximum loan through the MSELF is $150 million; or 30% of the borrower's existing outstanding and committed but undrawn bank debt; or an amount that, when added to the borrower's existing outstanding and committed but undrawn debt, doesn't exceed six times the borrower's 2019 earnings before amortization, depreciation, interest, and taxes. PPP participation does not preclude Main Street Loan Program utilization.
On April 30, the Federal Reserve expanded eligibility for the Main Street Loan Program by allowing businesses with up to 15,000 employees or up to $5 billion in annual revenue to use the program. The minimum loan size for the MSNLF was lowered from $1 million to $500,000.
Additionally, the Federal Reserve created the Main Street Priority Loan Facility (MSPLF) to provide increased risk-sharing by lenders for borrowers with greater leverage. Lenders would retain a 15 percent share on loans that, when added to existing debt, do not exceed six times a borrower's income, adjusted for depreciation, interest payments, and taxes, and other appropriate adjustments through the MSPLF.
The table below provides a succinct outline of the three loan options below:
Updated Federal Reserve Term Sheets:
- Main Street New Loan Facility (MSNLF)
- Main Street Priority Loan Facility (MSPLF)
- Main Street Expanded Loan Facility (MSELF)
Federal Reserve Main Street Program FAQ:
Federal Reserve Press Release with Eligibility Chart: