On January 14, President-Elect Biden unveiled a $1.9 trillion COVID-19 plan with a goal of administering 100 million vaccines by the 100 day of his administration. One trillion dollars of that plan is attributed to direct aid, which includes $1,400 checks, rental assistance, food assistance, childcare funds, and utility assistance. $440 billion is allocated for community support and includes first responders, other essential workers, and addition to grants for small businesses. $440 billion is allocated to expand vaccinations, testing, and to get schools reopened by spring. $10 billion is set aside to beef up the nation’s cybersecurity infrastructure in light of recent attacks. The plan also includes a bunch of Democrat’s long-term priorities such as raising the minimum wage to $15 an hour, expanding paid leave for workers, and increasing tax credits for families with children. The Association will be tracking any legislative developments that arise from this proposal.
Supplemental I – Coronavirus Preparedness and Response Supplemental Appropriations Act (Enacted March 6)
The first supplemental legislation was signed by the President on March 6. This bill provides $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak, including supplemental appropriations for the Food and Drug Administration, the Centers for Diseases Control and Prevention, the National Institutes of Health and other agencies.
The President signed the second supplemental bill on March 18, after the Senate passed a modified version of the House bill (HR 6201). Text is available here, a factsheet is available here, and a section-by-section is available here. A summary of paid leave provisions, incorporating changes made by technical correction, is here.
In addition to offering free testing for COVID-19, a few highlights of the legislation:
Mandates Emergency Paid Sick Leave
Employers with less than 500 employees are required to provide two weeks of paid sick leave to an employee that:
Expands Family and Medical Leave Act (FMLA)
The Family and Medical Leave Act (FMLA) is expanded to include leave needed to care for an employee’s child whose school or care provider is closed due to COVID-19. This leave can be used by employees who have been employed by their current employer for at least 30 days. This applies to any private sector employer with less than 500 employees.
Business Tax Credits for Emergency Leave
The bill creats a refundable tax credit equal to 100 percent of paid family or medical leave wages paid by the small business each quarter. The credit can be used against the employer’s social security taxes and applies to amounts paid to employees who are sick or quarantined. A smaller credit applies to amounts paid to employees caring for a family member or for a child whose school or place of care has been closed.
Emergency Unemployment Stabilization
Emergency grants totalling $1 billion available to states for activities related to processing and paying unemployment insurance benefits.
The Senate passed an amended version of the CARES Act by a vote of 96-0 on March 25. Text available here (Democratic summary here, Republican section-by-section here). The House passed the CARES Act by voice vote on March 27. The president signed the legistlation later that same day. A few highlights from the legislation:
$350 billion for new Paycheck Protection Program, which would provide small businesses eight weeks of cashflow assistance. The portion of the loan used for payroll support (employee salaries, paid sick or medical leave, and other overhead like mortgage interest, rent, and utility payments) would be forgiven if employees (and salaries) are retained.
Business Tax Relief (Title II) – Summary here
Economic Stabilization (Title IV) – Summary here
The Treasury Department will create a Federal Reserve lending program to provide liquidity for industry in the form of loans, loan guarantees, and other investments. Procedures and regulations due no more than 10 days after enactment.
$500 billion in Treasury-administered loans:
Terms and Conditions on loan recipients include:
The Congressional Oversight Commission is established to oversee the economic stabilization loan and grant programs.
Coronavirus Relief Fund (Sec. 5001): $150 billion reserved for payments to state governments, local governments, and tribes, at least $3 billion of which is reserved for DC and $8 billion of which is reserved for tribal governments.
Air Carrier Worker Support: $32 billion in grants to be used for employee wages, salaries, and benefits.
Unemployment Insurance (Title II, Subtitle A): Several expansions to UI, including but not limited to:
Paycheck Protection Program (PPP): Appropriates an additional $321 billion in funding for SBA’s Paycheck Protection Program.
Disaster Loans Program: Appropriates an additional $50 billion for the Disaster Loans Program and an additional $10 billion for Emergency Economic Injury Disaster Loan (EIDL) Grants.
HHS Hospital and Provider Grants: Provides an additional $75 billion to support the need for COVID-19 related expenses and lost revenue due to coronavirus.
Testing: Provides $25 billion for the HHS Public Health and Social Services Emergency Fund for necessary expenses to research, develop, validate, manufacture, purchase, administer and expand capacity for COVID-19 tests. Requires the Administration to create a national strategy to provide assistance to states for testing and increasing testing capacity.
The House and Senate approved the Consolidated Appropriations Act of 2021 (text here) as an amendment to H.R. 133. The $1.4 trillion omnibus spending bill contained all 12 FY21 appropriations bills, paired with over $900 Billion in COVID-19 relief and additional authorizations. A division-by-division summary of the appropriations provisions is here. A division-by-division summary of the coronavirus relief provisions is here. A division-by-division summary of the authorizing matters is here. Below is a summary of major COVID-19 provisions that affect our industry.
PPP Deductibility for Loan Forgiveness: Clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program (PPP) loan. This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness. The provision is effective as of the date of enactment of the CARES Act.
PPP Second Draw & Eligible Expense: Creates a second loan from the Paycheck Protection Program, called a “PPP second draw” loan for smaller and harder-hit businesses, with a maximum amount of $2 million. To apply for the second draw a business must:
Loans may be made up to 2.5 times the average monthly payroll costs in the one year prior to the loan, but not more than $2 million. Loans may be forgiven equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs and covered worker protection expenditures incurred during the covered period. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.
The CAA expands eligible expenses covered by PPP to include payment for any software, cloud computing and other human resource or accounting needs; costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance; expenditures to a supplier pursuant to a contract, purchase order or order for goods in effect prior to taking out the loan that was essential to the recipient’s operations at the time at which the expenditure was made; and PPE or other investments purchased to comply with federal or state guideline between March 1, 2020, and the end of the national emergency declaration.
Employee Retention Tax Credit (ERTC) Extended: The ERTC has been extended through July 1, 2021. CCA increases the refundable payroll tax credit from a maximum of $5,000 to $14,000 by changing the calculation from 50 percent of wages paid up to $10,000 to 70 percent of wages paid up to $10,000 for any quarter. The bill clarifies that businesses will now be able to take the Employee Retention Tax Credit AND participate in the PPP.
EIDL Deductibility for Loan Forgiveness: Gross income does not include forgiveness of certain loans, emergency EIDL grants and certain loan repayment assistance, each as provided by the CARES Act. Deductions are now allowed for otherwise deductible expenses paid with the amounts not included in income by this section and that tax basis and other attributes will not be reduced as a result of those amounts being excluded from gross income. The provision is effective for tax years ending after the date of enactment of the CARES Act. The provision provides similar treatment for Targeted EIDL advances and Grants for Shuttered Venue Operators, effective for tax years ending after the date of enactment of the provision.
Extension of Certain Deferred Payroll Taxes: Extends the repayment period for the deferred payroll taxes from President Trump's August 8th EO through December 31, 2021. Penalties and interest on deferred unpaid tax liability will not begin to accrue until January 1, 2022.
Extension of Credits for Paid Sick and Family Leave: Extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, through the end of March 2021. It also modifies the tax credits so that they apply as if the corresponding employer mandates were extended through the end of March 2021. This provision is effective as if included in FFCRA.
Other COVID-19 Relief: Provides $600 direct payment checks for every adult and child earning up to $75,000. Individuals earning between $75,000 and $99,000 would get smaller checks, and the benefit cuts out entirely for individuals earning over $99,000. A $300 per week unemployment bonus will be extended until mid-March. SNAP and rental assistance are also augmented by CAA. The CAA appropriates funds for vaccine dissemination, increased broadband access, aid to schools and universities, transportation aid and aid to farmers. The Child Tax Credit and the Earned Income Tax Credit have been made more flexible. There are new requirements on cost estimates for medical billing and a provision that re-institutes meal deductions for businesses in an effort to aid the ailing restaurant industry.
The Association will be further examining the 5,593 page bill in the coming days for additional insight into the COVID relief programs.
President Trump signed on March 18 an Executive Order to invoke the Defense Production Act (DPA). As background, the law permits the federal government to impose some control over private-sector industry to ensure the production of material that is deemed necessary for national defense, and it was reauthorized last year through 2025. Under DPA, the government canalter the order in which companies fulfill their contractual obligations by telling them to prioritize some existing contracts ahead of others (but it seems unclear if the government could use the law to force a company to accept a new contract for a product that it does not already make). More context for the DPA here.
On March 27, President Trump signed an Executive Order on Delegating Additional Authority Under the DPA with Respect to Health and Medical Resources (HERE) and a Memorandum on Order Under the Defense Production Act Regarding General Motors Company (Text, Statement).
On April 10, using authority from the Defense Production Act, FEMA plans to issue a temporary final rule to require that five types of personal protective equipment only be used domestically. In other words, under the rule, all exports of specified PPE will require explicit approval by FEMA. The rule instructs that exports of such PPE will be detained by Customs and Border Protection (CBP) for FEMA inspection. FEMA will determine whether to return the PPE to domestic use, issue a prioritized order for the goods or allow the shipment to move forward. The rule includes an exemption for U.S. manufacturers with contracts in place before Jan. 1, 2020, if 80% of their domestic production was distributed within the United States in the preceding 12 months. The FEMA administrator will consider additional exemptions as necessary.
In December 2020 the Senate voted 84-13 in favor of the $731.6 billion National Defense Authorization Act (NDAA) conference report, following approval in the House. The conference report adopted the Aluminum Association’s recommendations to include a provision and drop a new domestic sourcing requirement that we were concerned about. Specifically, the bill will require the Department of Defense to add a section to its national technology and industrial base report on “how authorities under the Defense Production Act of 1950 could be used to provide incentives to increase activities relating to refining aluminum and the development of processing and manufacturing capabilities for aluminum; and (2) whether a new initiative would further the development of such processing and manufacturing capabilities for aluminum.” The Aluminum Association is pleased the House and Senate Armed Services Committees adopted these recommendations, and we are grateful to Sen. Maria Cantwell (D-WA) and Rep. Suzan DelBene (D-WA) for their support of the new provision. President Trump has promised to veto the bill but has not yet followed through. It is expected that the bill will be enacted even if there is a veto.
On August 8, 2020, the President of the United States issued an executive order directing the Secretary of the Treasury to defer the withholding, deposit, and payment of certain payroll tax obligations. By August 28, 2020, the IRS issued Notice 2020-65 concerning the implementation of this order.
President Trump issued four executive orders on payroll tax defferal, student loan relief, consideration of an eviction moratorium, and a redirection of funds to state unemployment insurance programs.
Main Street Lending: Eligibility for the Main Street Lending Program is not restricted based on credit rating (as the recent Primary and Secondary Market Corporate Credit Facilities were). The Association had previously sought this flexibility, sending a letter to Secretary Mnuchin and Chairman Powell and enlisting members of the Aluminum Caucus to weigh in on the issue with the Administration. A few key points about the Main Street Lending Program:
The June 8 press release states the Federal Reserve will be retaining more of the risk on these loans after complaints from the banking industry. As of July 6, the Main Street Lending Program, is fully operational with the Federal Reserve Bank of Boston purchasing loans made to buisnesses from local lenders. You can find a list of lenders by state here.