What's at Stake in the Stimulus Negotiations?
As of September 2, no progress has been made on a stimulus package. Congress returns from the Labor Day Recess on September 8.
Congress has been working on new COVID-19 relief provisions (Phase IV), but July ended with no agreement in sight. The negotiations continue Monday, August 3, with the House’s $3+ trillion HEROES Act (passed May 15), and the Senate Republican’s recently unveiled $1 trillion “HEALS Act” package forming the basis for negotiations. Below is a summary of key provisions in proposed Acts comprising the so-called HEALS Act released on July 27. Notes have been added to compare these proposals to provisions in the HEROES Act. We are watching to see what emerges.
Federal Pandemic Unemployment Compensation
Instead of the $600 per week supplemental payment provided by the CARES Act for unemployment compensation, this law would provide a supplemental payment of $200 per week through September. In October the payment would be in an amount to ensure that the state unemployment insurance payment, combined with the supplemental payment would replace 70 percent of prior wages. This payment could not exceed $500. States unable to provide the second payment based upon lost wages by October 5 could apply for a two-month waiver.
Note: The HEROES Act would extend the $600 supplemental payment through January 2021. This supplemental payment expired July 31.
Relief for Individuals and Families (Economic Impact Payments)
The law would provide an additional 2020 recovery rebate to individuals. The payment, like that in the CARES Act, would be $1,200 for those who are not dependents and have a work-eligible social security number and $500 for each dependent. Unlike the CARES Act, the $500 dependent payment would not be restricted to those dependents under 17 years of age. The payments would begin to phase out (as they did under the CARES Act) when adjusted gross income reaches $75,000 for singles and $150,000 for married filing jointly. Eligible individuals would include those “not deceased prior to January 1, 2020.”
Note: The HEROES Act would allow the $1,200 per non-dependent individual and up to $1,200 per child, with a maximum payment of $6,000 per household. The HEROES Act would also expand the earned income tax credit and the child tax credit and eliminate the state and local tax (SALT) deduction cap for tax years 2020 and 2021.
Enhanced Employee Hiring and Retention Payroll Tax Credit
This law would allow an employee retention credit up to $30,000 per employee for all calendar quarters in 2020 (the CARES Act set the limit at $10,000). The credit would be limited to $10,000 per employee per quarter. The law would also increase the applicable percentage of qualified wages reimbursed through the employee retention credit from 50 percent to 65 percent. The law would allow employers to be eligible for the credit if they had a 25 percent decline in gross receipts as compared to the prior year’s quarter (the CARES Act required a 50 percent decline). The gross receipts test would also be satisfied in the third and fourth quarters of 2020 if the preceding quarter’s gross receipts declined by at least 25 percent, as compared to the same quarter in the prior calendar year. The law would also allow businesses with 500 or fewer employers to claim the credit for employee wages, even when they are working. The CARES Act provided that businesses with more than 100 employees could only take the credit for employees that were not working, but were kept on the payroll. The law would also provide that “gross receipts” applies to tax exempt organizations.
The law would allow employers to be eligible for both the Paycheck Protection Program and the employee retention credit, but would deny a double benefit. The law would clarify that group health benefits are qualified wages, even when no other wages are paid.
Note: The HEROES Act would expand the employee retention tax credit by increasing the credit from 50% to 80% of qualified wages and increasing the wage limit per employee from $10,000 per year to $15,000 per quarter.
Work Opportunity Credit Expansion - Temporary
The Work Opportunity Credit would be available to employers hiring workers who fall into a new targeted group: 2020 qualified COVID-19 unemployment recipients. The credit for employees in this group would be increased to 50 percent of the first $10,000 of qualified first-year wages (up from a general $2,400 credit).
Safe and Healthy Workplace Tax Credit
The law creates a new refundable employment tax credit for each quarter (between March 13, 2020, and January 1, 2021) equal to 50 percent of the sum of qualified protection expenses (including testing, protective equipment, and cleaning supplies), qualified workplace reconfiguration expenses, and qualified workplace technology expenses paid or incurred by the employer during the calendar quarter. The credit is limited to $1,000 per employee for the first 500 employees, $750 for employees between 500 and 1,000, and $500 for each employee more than 1,000. The credit would be available to a self-employed individual, and expenses would be determined by treating the self-employed individual both as the employer and the employee. Any deductions allowed for the cost of the expenses generating the credit would be offset by the amount of the credit.
CARES Act Clarifications and Corrections
Retirement Plan Provision Clarifications
The law would clarify that money purchase plans are included in the retirement plans eligible for coronavirus-related distributions from retirement accounts.
The law would allow plans to rely on an employee self-certification that he or she meets the requirements for the increased limits on retirement plan loans under the CARES Act.
Farm Net Operating Loss Correction
This law would allow farmers who elected to waive the two-year carryback in 2018 and 2019 to revoke that waiver. While the CARES Act provides a five-year carryback to all taxpayers, it does not allow farmers to take advantage of this provision if they had previously elected to waive the two-year carryback allowed under the Tax Cuts & Jobs Act. The law would also allow farmers to elect to waive the CARES Act changes for NOLs arising in taxable years beginning in 2018, 2019, and 2020. For previously filed returns this election would be deemed to have been made unless the taxpayer modifies the return by the due date for the first return for the first taxable year ending after the date of the enactment of the law. This would allow farmers who had taken the two-year carryback to retain that carryback rather than adjusting the carryback to five years.
Note: The HEROES Act would modify the NOL provision in the CARES Act for all taxpayers, in particular disallowing carrybacks to any year beginning before January 1, 2018.
The law would simplify the forgiveness process for PPP loans by allowing borrowers with loans under $150,000 to receive automatic forgiveness upon making a good faith attestation that they complied with the rules. These borrowers would be required to maintain their records for three years. Other borrowers would not be required to provide payroll and expense documentation to their lenders, but would be required to certify that their application was correct and to keep their documents for three years.
The law would also expand the expenses that could be paid with PPP loans to include operating costs, property damage from 2020 public disturbances, covered supplier costs, and covered worker protection expenditures.
The law would allow self-employed farmers who file a Schedule F to recalculate their loan amount using their “gross income” reported on their 2019 Schedule F (up to $100,000). The amount would be divided by 12 and multiplied by 2.5 to calculate the new loan amount. Most farmers (with no employees) under this new calculation would receive a $20,833 loan, even if they had a loss on their Schedule F in 2019. The law would allow lenders to provide additional covered loan amounts to farmers, based upon the recalculation.
The law would also commit $190 billion to “PPP Second Draw Loans.” These loans (in an amount up to 2.5 times average monthly payroll) would apply to businesses with 300 or fewer workers who lost 50 percent of more in revenue in one of the first two quarters of 2020, as compared to 2019.
Note: The HEROES Act would allow expenses paid by forgiven PPP funds to be deductible, reversing IRS guidance provided in Notice 2020-32. The HEALS Act does not address deductibility. The Heroes Act also made a number of proposed changes to the PPP that were implemented by the Paycheck Protection Flexibility Act.
This Act would provide $306 billion in coronavirus-related funding to various federal agencies, $226.2 billion of which would go to labor, health, and human services, and education appropriations.
Additionally, $80 billion would fund other federal agencies, including $20 billion for agricultural programs to prevent, prepare for, and respond to coronavirus by providing support for agricultural producers, growers, and processors impacted by coronavirus.
Note: The HEROES Act would provide $16.5 billion in direct payments to agricultural producers whose commodities were impacted by market disruptions due to the COVID-19 emergency. The Act would also provide additional support for agriculture, such as funds for producers forced to depopulate livestock and expansion of the SHIPP cropland set-aside program.
New Exclusive Federal Causes of Action
This Act would create an exclusive federal cause of action for all “coronavirus exposure actions,” brought against businesses or individuals to recover damages for personal injury or the potential for personal injury because of exposure to coronavirus. It also creates an exclusive federal cause of action for “coronavirus-related medical liability actions” or civil actions alleging harm or damages related to a health care provider’s act or omission while providing coronavirus-related health care services. These causes of action would apply to claims arising between December 2019 and October 2024 or the end of the coronavirus emergency declaration, whichever comes later.
These new causes of action would preempt and supersede other federal and state laws governing recovering claims for coronavirus, unless those laws are stricter. The law would not preempt or supersede workers’ compensation laws.
Coronavirus Exposure Action
A “coronavirus exposure action” could be commenced in federal or state court, within one year of exposure to coronavirus. A “coronavirus-related medical liability action” could be commenced within one year of the date of the alleged harm, unless the statute of limitations is tolled for fraud or concealment. Actions brought in state court could be removed to federal court. Defendants would not be jointly and severally liable, but would be only responsible for their proportionate share of damage.
The law would provide liability protection for coronavirus exposure actions as follows:
No individual or entity engaged in businesses, services, activities, or accommodations shall be liable in any coronavirus exposure action unless the plaintiff can prove by clear and convincing evidence that the defendant (1) was not making reasonable efforts in light of the circumstances to comply with the applicable government standards and guidance in effect at the time of the actual, alleged, feared, or potential for exposure to coronavirus, (2) engaged in gross negligence or willful misconduct that caused exposure, and (3) the actual exposure to coronavirus caused the personal injury to the plaintiff.
Coronavirus-Related Medical Liability Action
The law would provide liability protection for coronavirus-related medical liability actions as follows:
No health care provider would be liable in a coronavirus-related medical liability action unless the plaintiff could provide by clear and convincing evidence that there was gross negligence or willful misconduct by the health care provider and that the harm resulted from the gross negligence or willful misconduct. Decisions, acts, or omissions resulting from a resource or staffing shortage would not be considered willful misconduct or gross negligence.
Limitations on Damages
If a plaintiff were successful in one of these new actions, the damages recoverable would generally be limited to economic losses. Noneconomic damages could be awarded only for willful misconduct, and punitive damages (in an amount not to exceed the compensatory damage amount) would be available if the plaintiff proves willful misconduct. Monetary damages would also be reduced by compensation the plaintiff receives from other sources, such as insurance.
Liability Limitations for Employers
In addition to the above causes of action, the law would relieve employers from liability or enforcement under labor and employment laws where the employer was relying on government standards and guidance, knew of its obligations under relevant provisions, and attempted to satisfy the obligations. The employers would also be relieved of liability for failure to provide reasonable accommodations under the Americans with Disabilities Act if the failure was because of coronavirus risk.
The law would also relieve employers from liability stemming from personal injuries resulting from coronavirus testing, unless the injuries were caused by gross negligence or intentional misconduct.
Note: The HEROES Act contains no provisions limiting liability for businesses and medical professionals.
This law would expand the current 50 percent deduction for business meals to 100 percent, where those meals are provided by a restaurant and incurred before January 1, 2021.
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.