Senate Elevates Bipartisan Calls for Revisions to Paycheck Protection Program
This week Senate Republicans and Democrats have underscored the need for a number of changes to the Paycheck Protection Program (PPP) established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These proposed changes include:
- Extending the program's eight-week covered period to deploy PPP funds and earn loan forgiveness to 16 weeks after the loan is disbursed for businesses whose revenues have declined by at least 25 percent
- Raising the PPP's non-payroll forgiveness cap from 25 percent to 50 percent
- Allowing small businesses to deduct expenses paid with a forgiven PPP loan from their taxes.
Sen. Michael Bennet (D-CO) and Sen. Todd Young (R-IN) announced proposals on Tuesday, May 5 to make enhancements to the PPP to support restaurants and other affected businesses. The proposal would extend the program's eight-week covered period to deploy PPP funds and earn loan forgiveness to 16 weeks. In addition, the pair proposed changing the eligibility criteria for loans by allowing small businesses to simply self-certify that they have suffered a 25 percent loss in revenue during the eight-week covered period, rather than compared to the eight-week period preceding February 15, 2020, or an eight-week period a year ago. The senators have also proposed creating the RESTART loan program, which would provide funding for the hardest-hit businesses through 2020, as well as loan forgiveness.
The following day, Sen. Bob Menendez (D-NJ) and Sen. John Cornyn (R-TX) led a bipartisan group of members in urging U.S. Treasury Secretary Steven Mnuchin and Small Business Administrator Jovita Carranza to raise the PPP's non-payroll forgiveness cap from 25 percent to 50 percent. This would allow small businesses to spend up to 50 percent of the loan proceeds on the statutorily allowed non-payroll expenses such as rent, utilities and mortgage interest payments.
Senate Finance Committee Chairman Chuck Grassley (R-IA), Senate Small Business Committee Chairman Marco Rubio (R-FL), Sen. John Cornyn, Sen. Ron Wyden (D-OR) and Sen. Tom Carper (D-DE) have also introduced a measure to make clarifications to the PPP to allow small businesses to deduct expenses paid with a forgiven PPP loan from their taxes. The measure follows guidance from the Internal Revenue Service (IRS) this week, which clarified that expenses associated with forgivable loans under the PPP are ineligible for tax deductions.
As public officials at all levels of government continue to escalate their responses to the pandemic, the latest actions and developments may be found below. Akin Gump will continue to provide regular policy developments related to COVID-19.
Potential Policy Items for Phase 4 of the Coronavirus Response
The House expects to return to Washington, D.C. in full the week of May 1, after delaying their return amid ongoing concerns about exposure to the virus. The Senate officially returned this week. As discussions for the next recovery package pick up over the next few weeks, lawmakers have outlined their positions for a Phase 4 bill, which they will have to balance with other essential matters unrelated to the COVID-19 pandemic.
Below is a list of each negotiator's policy priorities that will likely shape the Phase 4 package.
The White House
- Payroll Tax - President Donald Trump has repeatedly emphasized his support for a cut or suspension of payroll taxes, which already faces resistance from Congress. The White House is expected to release an official proposal regarding broader economic policies later this week.
- Incentives for Businesses - The Administration is also considering tax credits or other ways to incentivize businesses to move their manufacturing to the United States. President Trump's aides also have discussed including liability protections for businesses that bring their employees back to work. Other policy proposals coming out of the White House include expanding the business expense tax deduction to allow companies to write off new investments.
- Relief for Individuals - White House aides are also considering asking Congress for the authority to send an additional round of direct cash assistance to individual taxpayers, in addition to the $1,200 that many Americans received in recent weeks as part of the CARES Act.
- Infrastructure - President Trump has long expressed interest in including infrastructure spending in any future congressional recovery package, arguing that it would help stimulate the economy and create jobs.
House and Senate Republicans
- Liability Relief for Businesses - Senate Majority Leader Mitch McConnell (R-KY) has made the inclusion of provisions to limit businesses' legal liability from lawsuits by workers or consumers related to the spread of the coronavirus his top priority in the next recovery bill.
- Relief for the Oil and Gas Industry - Provide funding to purchase oil for the Strategic Petroleum Reserve for "necessary expenses related to the acquisition, transportation, and injection of domestic petroleum products," which was included in an earlier draft of the CARES Act.
- Aid to State and Local Governments - After receiving criticism for comments suggesting that some states declare bankruptcy, Leader McConnell has indicated that he would consider additional relief measures, stressing that the Senate would not look to address issues prior to the COVID-19 crisis.
House and Senate Democrats
Prior to the Senate passage of the CARES Act, House Speaker Nancy Pelosi (D-CA) released the Take Responsibility for Workers and Families Act, legislation that offered insight into House Democrats' priorities. The package was based on submissions from the chairs of all relevant House committees and represents a broad view of potential policy measures that will be refined further, based on changing circumstances related to COVID-19 and the overall economic outlook. Earlier this month, Democrats on the House Financial Services Committee released a $301 billion package of their priorities for Phase 4 of the COVID-19 response, aiming to provide targeted assistance and critical protections for individuals, families, renters and homeowners, students, small businesses and non-profits, municipal governments, global markets and developing countries.
- Aid to State and Local Governments - Provide up to $1 trillion in aid for state and local governments to strengthen COVID-19 response efforts and to counter the lost business revenues due to the economy closing.
- District of Columbia, U.S. Territories and Tribes - Direct the Federal Reserve to purchase bonds issued by tribes and territories; direct the Treasury Department to ensure that at least 10 percent of CARES Act funds support impoverished counties; provide $10 billion for the Community Development Block Grant; waive matching requirements for municipal governments to receive federal grants.
- Relief for Individuals - Include stronger worker protections, raise direct cash payments to Americans from $1,200 to $1,500, provide free testing and treatment, and increase Supplemental Nutrition Assistance Program (SNAP) by 15 percent.
- Infrastructure - In January, House Democrats released their five-year, $760 billion infrastructure framework (press release; framework; fact sheet) that will likely be the jumping-off point for many of their ideas. Speaker Pelosi has also endorsed a plan that would provide $80 billion for broadband deployment. Despite having support from the White House, Leader McConnell has rejected the Democrats' infrastructure package, according to lawmakers.
- Voting Provisions - Secure a federal mandate that would require states to provide remote voting options, including vote-by-mail, with funding for states to implement the measure, which would cost nearly $4 billion to implement.
- Amend the PPP - Expand funding for the PPP and make changes to both expand and limit eligibility.
- Energy - Implement clean energy or emissions conditions for commercial aviation and cruise ship industries; provide extensions for clean energy tax credits that had been left out of a year-end tax extenders package in December 2019.
Other Congressional Priorities
While COVID-related legislation remains a priority for Congress and the Administration, other issues are likely to be considered.
- Nominations - Leader McConnell has been vocal about prioritizing the confirmation of nominees to serve in the Trump Administration awaiting votes, including 15 District Court judges and picks for the U.S. Courts of Appeals for the Fifth and District of Columbia Circuits. He also announced that the Senate would work to fill key vacancies for national security positions and other posts related to combatting COVID-19.
- Foreign Intelligence Surveillance Act (FISA) - After managing to agree to a 77-day extension of the expiring authorities under FISA, Leader McConnell has indicated that he would consider the legislation (S. 3501) with amendments. The House has already passed its version (H.R. 6172) of the surveillance statute.
- Fiscal Year (FY) 2021 Spending Bills - According to House Majority Whip Steny Hoyer (D-MD), the House is still expected to consider regular appropriations bills for FY 2021 as early as June. It remains unclear whether the Senate holds any markups or takes up any spending bills, which signals that there will likely be a need for a continuing resolution to avoid a government shutdown later this fall.
- National Defense Authorization Act (NDAA) - Senate and House Armed Services Committees Chairmen Jim Inhofe (R-OK) and Adam Smith (D-WA) have announced plans to consider measures this summer to reauthorize the NDAA.
- Energy and Land Conservation Legislation - Prior to the disruption created by the COVID-19 outbreak, Leader McConnell expressed interest in considering a package of energy (S. 2657) and land conservation (S. 3422) bills.
- Remote Voting - Upon their return, the House is expected to vote on measures that would enable remote voting due to ongoing concerns of the virus spreading.
- Postal Service - In a letter to lawmakers last week, trade groups urged Congress to provide relief funding for the United States Postal Service, projecting a 50 percent or more decrease in revenues.
- Oil and Gas - Due to the sharp and rapid decrease in oil prices based on the lack of demand and turmoil between OPEC and non-OPEC countries over production, the industry will likely request a package of federal relief measures.
- Restaurants - Requesting the creation of a $120 billion fund to assist the industry that would exclude publicly traded companies, chains and franchises.
- Lenders - According to a letter sent to the SBA, lenders have asked the agency to strengthen its system for processing emergency small business loans.
- Medical Technology - Lift Section 301 tariffs on components for ventilators and medical imaging equipment subject to penalties from China.
- Hotels - In a letter sent to congressional leadership, the industry has asked for changes to the SBA's PPP program that would allow hotels to spend less of the money received on payroll.
- Broadcasters and newspapers - Amend the rules for the SBA programs to expand the number of TV stations, radio stations and newspapers with more than 500 employees to apply for loans.
- Housing - According to a letter sent to congressional leaders, many housing groups have requested rental assistance to avoid evictions.
More States Take First Steps to Reopen; Others Announce Extensions of Emergency Measures
A number of states have announced initials steps to reopen their economies in response to the three-phase guidelines issued by the Administration on April 16. In addition to the following recent state actions, a complete list of state status may be found at this link:
- Arkansas: Gov. Asa Hutchinson announced that, effective May 4, gyms, fitness centers, athletic clubs and weight rooms may reopen, provided they meet the requirements outlined in the order. Effective May 6, barber shops, body art establishments, cosmetology establishments, massage therapy clinics/spas and medical spas may reopen, provided they abide by the requirements outlined in the order. Effective May 11, restaurant dine-in operations may resume, provided seating is limited to 33 percent of total seating capacity and a number of other social distancing guidelines are followed.
- Illinois: Gov. J.B. Pritzker announced that effective May 1, the order more broadly defines essential businesses that are permitted to resume operations as well as allows non-essential businesses to reopen for the limited purposes of fulfilling minimum basic operations. In addition, all businesses that resume operations must follow social distancing requirements to ensure the health of employees and customers. Examples of businesses that may resume operations include grocery stores, and manufacturing, distribution and supply chain facilities for critical products and industries.
- Indiana: Gov. Eric Holcomb announced an executive order to begin reopening the state. The order outlines two stages of an early plan to reopen the state. Stage 1 spans from May 1 through May 3, while Stage 2 begins May 4 and lasts through May 23. The order outlines social distancing and health guidance that apply to all businesses. During Stage 2, all retail businesses, dine-in services and personal service businesses, such as barber shops and spas, will be allowed to open, provided that they comply with the regulations detailed in the order.
- Maryland: Gov. Larry Hogan extended the state of emergency and stay-at-home order on May 6. Gov. Hogan did not announce an end date for the order, but stated that if the number of positive cases began to decline then the state could begin to reopen as early as May 11. The order did loosen restrictions on elective surgeries and some outside activities.
- Michigan: Gov. Gretchen Whitmer issued new executive orders on April 30 that extended the state of emergency through May 28 and the stay-at-home order through May 15. Gov. Whitmer also signed an executive order keeping bars, gyms, casinos and theaters closed, and only allowing restaurants to do delivery or takeout service through May 28.
- Nevada: Gov. Steve Sisolak extended the stay-at-home order through May 15. Effective May 1, non-essential retail businesses identified in earlier directives may resume retail sales on a curbside or home delivery basis only. Businesses reopening under this provision must adopt measures to minimize the risk of spread of COVID-19, including social distancing and sanitation measures. Licensed cannabis dispensaries may engage in retail sales on a curbside pickup or home delivery basis.
- New Hampshire: Gov. Chris Sununu extended the stay-at-home order through May 31 and released the state's plan for reopening. Effective May 11, all retail establishments whose physical facilities were previously closed may open their facilities to workers, customers and the public if they operate in accordance with the guidelines outlined in the order. On May 11, barbers, hair salons and other cosmetology businesses may open, if they operate in accordance with the guidelines outlined in the order.
- New Mexico: Gov. Michelle Lujan Grisham extended the state's emergency public health order through May 15. Effective April 30, the order broadens the definition of an "essential business" to include retail spaces, manufacturing operations and other businesses. Essential businesses may remain open, provided they minimize their operations and staff to the greatest extent possible, and adhere to social distancing protocol.
- North Carolina: Gov. Roy Cooper signed a new executive order on May 5 to modify the stay-at-home order and begin the transition to Phase 1 of reopening the state. The order removed the distinction between essential and non-essential businesses, and allows retail businesses to open at 50 percent capacity. Bars, personal care shops, gyms and entertainment venues remain closed.
- North Dakota: Gov. Doug Burgum announced on April 29 that businesses may begin to reopen on May 1. Businesses closed under Executive Order 2020-06.3, and referenced in paragraphs 2-8 in the order, may reopen on May 1, 2020. In-house dining may also resume on May 1. The order also provides resources for additional guidance to which businesses must adhere upon reopening.
- South Dakota: Gov. Krisi Noem released the state's plan to reopen on April 28. The plan encourages retail and other businesses to resume operations in a manner that allows for reasonable physical distancing, good hygiene and appropriate sanitation.
- Utah: Gov. Gary Herbert released an updated version of Utah's plan to reopen. Effective May 1, the Utah COVID-19 Public Health Risk Status is moved from Red to Orange. Individuals and businesses in Utah shall comply with the Orange provisions of the Utah Leads Together Plan. Under the Orange status, limited businesses, such as retail establishments and restaurant dine-in services, will be allowed to resume operations, provided they follow strict guidelines for physical distancing and monitor employees for changes in health.
- Phase 2: Congressional Hispanic Caucus Letter on "Maintenance of Effort" (MOE) Protections
- Phase 3: SBA Inspector General Letter to Sen. Warren (D-MA) and House Small Business Chairwoman Velázquez (D-NY)
- Phase 3: Congressional Hispanic Caucus Private Equity Letter
- Phase 3: Treasury Paycheck Protection Program Frequently Asked Questions
- Phase 3: Treasury Coronavirus Relief Fund Frequently Asked Questions
- Phase 4: Financial Services Committee Majority Priorities for Phase 4
- Phase 4: Congressional Black Caucus Priorities for Phase 4
- Senate: Young, Bennet Announce Major New Proposals to Support Hardest-Hit Small and Mid-Sized Businesses
- Senate: Menendez, Cornyn, Colleagues Urge Trump Admin to Raise SBA's PPP Non-payroll Forgiveness Cap to 50%
- Senate: Grassley, Wyden, Neal Push Treasury to Allow Small Businesses to Deduct PPP Expenses
- House: Congressional Hispanic Caucus Letter on Meatpacking Working Conditions
- States: Updated Contact Information for FEMA Regional Offices
- States: The Wall Street Journal Guide to State Lockdowns
- States: National Governors Association (NGA) COVID-19 Resources
- States: Stateside Associates: New Executive, Legislative And Regulatory Actions Issued By State/Local Governments
Akin Gump Alerts and Other Resources
U.S. Department of Health and Human Services (HHS):
- Tweet at 12:19 PM, May 4,
- "COVID-19 funding is available to minority, rural and socially vulnerable communities for linkages to services, information and education. Read the full news release here.
- Tweet at 3:32 PM, May 5, 2020
- "The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency announce rule change to support the flow of credit to households and businesses: (Press Release)"
- Tweet at 5:02 PM, May 6, 2020
- "The Federal Reserve and Federal Deposit Insurance Corporation extend two resolution plan deadlines here."
U.S. Department of the Treasury:
- Tweet at 9:50 AM, May 5, 2020
- "Joint statement by Treasury Secretary Steven T. Mnuchin and Secretary of the Interior David L. Bernhardt on distribution of Coronavirus Relief Fund dollars to Native American tribes here."
Centers for Medicare & Medicaid Systems (CMS) Administrator Seema Verma:
- Tweet at 4:59 PM, May 5, 2020
- "Today, CMS released additional Medicaid & CHIP guidance to states to help combat the COVID19 pandemic. Topics covered include: eligibility & enrollment flexibilities, benefit flexibilities, financing flexibilities. Learn more here."
U.S. Small Business Administration (SBA) Administrator Jovita Carranza:
- Tweet at 7:03 PM, May 5, 2020
- "SBA requires all Paycheck Protection Program borrowers to certify that the PPP loan is necessary to support ongoing operations. SBA is extending the safe harbor deadline for borrowers who applied before April 24th to return PPP funds. The new deadline is 5/14/2020."
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