Proposed Coronavirus Aid Relief and Economic Security Act
Early this morning, the Senate reached agreement on a roughly $2 trillion stimulus package that provides financial assistance and relief to workers and businesses impacted by the coronavirus pandemic. This article provides a broad summary of the measures included in the proposed legislation, and a more detailed discussion of the proposed loan program for small businesses.
This is proposed legislation. The bill is still being drafted, so the specific terms are not yet available. A vote in the Senate is expected this afternoon, after which the House of Representatives will need to approve the legislation. The earliest that could happen is Thursday, March 26, 2020, but House Democrats have not provided a firm timeline for a vote by the House.
The $2 trillion stimulus package includes the following relief measures if the legislation is passed as currently written:
Loans for Distressed Industries
The bill authorizes more than $500 billion in loans and loan guarantees for distressed businesses, cities and states, including $150 billion for state and local emergency aid, more than $50 billion for airlines, and $17 billion for firms that are deemed important to national security. Lending decisions will be overseen by an independent inspector general and an oversight board, and the bill specifically provides that these loans cannot go to firms controlled by President Trump, other White House officials or members of Congress.
Small Business Loans
The bill would provide $300 billion to support guaranteed loans to eligible small businesses (those with 500 or fewer employees, including nonprofits) to cover payroll and debt obligations. These loans would be immediately available through existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and through additional lenders brought into the program by the SBA. Determinations on borrower eligibility will be made by local lenders, without going through all of the SBA’s channels.
The maximum loan amount would be $10 million through December 31, 2020, with the size of the loan based on an applicant’s average monthly payroll; mortgage, rent, and utility payments; and other debt obligations over the previous year. All loan fees would be waived.
Businesses that receive this loan would be eligible for loan forgiveness in an amount equal to the payroll cost and costs related to debt obligations for the period of March 1, 2020, through June 30, 2020. The amount of the loan eligible for forgiveness would be reduced proportionally by the number of employees laid off during this period relative to the borrower’s prior employment levels. For the purposes of determining forgiveness amounts, payroll costs will exclude the compensation of (i) employees in excess of $100,000 in annualized compensation and (ii) qualified sick leave and qualified family leave wages enacted by the Families First Coronavirus Response Act.
Borrowers who receive this loan for employee salaries, payroll support, mortgage payments, and other debt obligations may not also receive an SBA economic injury disaster loan (EIDL) for the same purpose.
Americans making up to $75,000/year would receive checks for $1,200. Couples making up to $150,000/year would receive $2,400, with an additional $500 per child. The payments would decrease for those making more than $75,000/year, with an income cap of $99,000/year per individual or $198,000/year for couples.
Expanded Unemployment Benefits
The legislation would significantly boost unemployment insurance benefits, expanding eligibility and offering workers an additional $600 a week for four months, on top of what state unemployment programs pay. Benefits would also be extended to workers who typically do not qualify, such as furloughed employees and freelancers.
Emergency Paid Sick Leave and Emergency Family/Medical Leave
Legislation signed into law last week provides additional assistance for eligible workers in the form of emergency paid sick leave and family leave starting April 2, 2020. That law, the Families First Coronavirus Response Act, allows employers to claim a tax credit against payroll taxes to reimburse them for 100% of the qualified payments made pursuant to the Act, up to the specified per diem and aggregate payment caps. See SMT’s March 19, 2020 Employment Law Bulletin for more information regarding the Families First Coronavirus Response Act, including employer obligations, eligible employees and the tax credit.
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