A 2 Trillion Dollar Aid Package to Combat Coronoavirus and its Economic Impact
Thursday, March 26, 2020
Posted by: Annette Ferri
A 2 Trillion Dollar Aid Package to Combat Coronoavirus and its Economic Impact
The Senate late Wednesday (March 25, 2020) unanimously approved on a vote of 96-0, a $2 trillion emergency package intended to stave off economic collapse in the wake of the coronavirus crisis, bringing an end to more than five days of negotiations between senators and the Trump administration.
The measure — which comes after hours of delays over a dispute on jobless benefits — is the biggest economic rescue package in U.S. history. It includes direct checks to many Americans, a massive fund for beleaguered industries, immediate aid for hospitals and back-up cash for state and local governments.
House Majority Leader Steny Hoyer said the chamber will send the bill to President Trump’s desk on Friday by voice vote. The bill is comparable in size only to annual appropriations and encompasses policy proposals ranging from cash for individuals to aid for hospitals to loans for businesses both large and small.
THE TOP LINES
- $250 billion to make unemployment insurance available to more categories of workers and to extend the duration of benefits to 39 weeks from the 26 weeks typical in most states. It would also provide an extra $600 a week for four months.
- $301 billion in direct payments to households.
- $349 billion in loans to small businesses, with the amount spent on payroll, rent or utilities converting into grants that don’t have to be repaid.
- $500 billion for loans, loan guarantees or other aid to businesses, states and municipalities—including the possibility that the government will take direct equity stakes in distressed companies. Of the total, $29 billion is set aside for cargo and passenger airlines, and $17 billion is for businesses deemed critical to national security. The remaining $454 billion would go to backstop losses in lending facilities established or expanded by the Federal Reserve.
- $32 billion in grants to cover wages at passenger air carriers, cargo air carriers and contractors.
- $150 billion in direct aid to states, distributed according to population size.
- $221 billion in a variety of tax benefits for businesses, including allowing businesses to defer payroll taxes, which finance Medicare and Social Security, for the rest of the year. It would also temporarily allow businesses to claim deductions using today’s losses against past profits to claim quick refunds for cash infusions.
- $340 billion in supplemental spending, which includes $117 billion for hospitals and veterans’ care. It also includes $25 billion mostly for public transit to make up for revenue lost because of dwindling ridership.
Direct Payments for Citizens:
- Individuals -- receive $1,200
- Married couples -- receive $2,400; plus $500 per child younger than the age of 17.
- Distribution Restrictions -- payments phase out for individuals with adjusted gross incomes over $75,000 ($150,000 for couples). Anyone making over $99,000 would not get a payment ($198,000 for couples). Money is expected to go out by April 6.
- Unemployed People -- would get an extra $600 per week for up to four months, on top of state unemployment benefits to make up for 100 percent of lost wages. The final agreement provides an extra month of unemployment benefits
- IRA Withdrawals -- Consistent with previous disaster-related relief, the provision waives the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus related purposes made on or after January 1, 2020.
- Refundable Payroll Tax Credit -- authorizes a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances.
- Net Operating Losses -- relaxes the limitations on a company’s use of losses from prior years. The Tax Cuts and Jobs Act had eliminated for most taxpayers the use of so-called net operating loss carrybacks. Package would allow losses from 2018, 2019, or 2020 to be carried back five years. The provision also temporarily removes the taxable income limitation to allow net operating losses to fully offset income.
- Deferred Social Security Tax Payment -- allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2% Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Corporate AMT Credits -- The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
- Business Interest Limitation — temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30% limitation to 50% of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.
- S-Corp and Pass Throughs — language modifies the limitation on losses for taxpayers other than corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
Small Business Provisions
- Authorizes the secretary of the Treasury to make loans, loan guarantees and other investments in support of eligible businesses, states and municipalities that do not, in the aggregate, exceed $500 billion.
- $10 billion for Small Business Administration (SBA) emergency grants of up to $10,000 to provide immediate relief for operating costs.
- $17 billion for the SBA to cover six months of payments for small businesses with existing SBA loans. Rent, mortgage and utility costs now eligible for SBA loan forgiveness.
- Establishes the maximum 7(a) loan (7a refers to section of Small Business Act that authorizes loans to small businesses) amount to $10 million through December 31, 2020 and provides a formula by which the loan amount is tied to payroll costs incurred by the business to determine the size of the loan.
- Increases the government guarantee of 7(a) loans to 100% through December 31, 2020, at which point guarantee percentages will return to 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.
- Allows complete deferment of 7(a) loan payments for at least six months and not more than a year.
- Loans may be forgiven. The amount of the forgiveness is equal to the amounts spent by the borrower during the eight weeks from loan origination on payroll costs (up to $100,000 in wages), mortgage interest, rent or utilities (subject to certain restrictions).
- The forgiveness amount is reduced by layoffs (though employer may rehire workers to mitigate this reduction) or pay reductions in excess of 25%. Amounts forgiven are not treated as taxable income to the borrower.
- Loan amounts may be used for payroll, mortgages, rent, insurance premiums and utility payments.
- Funds the program at $349 billion for the 7(a) program through December 31, 2020.
Next Steps, Future Aid Packages
Delivery of the next package is possible, but not for a month. Senate Majority Leader Mitch McConnell said Wednesday night the body will not vote again until April 20. But the Senate will be able to pass legislation by unanimous consent during its usual pro forma sessions.
“Of course, during this unprecedented time for our country, the Senate is going to stay nimble,” McConnell said.
That echoes the House’s perspective. In a caucus-wide call to Democratic members Tuesday, Hoyer said there would likely be another aid bill, and perhaps a fifth. Members whose provisions didn’t make it into the current bill will have other opportunities.
Resources compiled by NWPCA from the Forest Resources and National Conference of State Legislatures on March 25, 2020.
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