Possible Action on Stimulus BillDecember 16, 2020
Following months of on-again, off-again negotiations among representatives of both parties, both chambers of Congress, the U.S. Treasury Department and the White House, it appears that another stimulus bill is on the horizon. Late last week, a bipartisan group of Senators and Representatives released a framework summary of the Bipartisan Emergency COVID Relief Act of 2020 which would address a wide array of stimulus-related provisions, including a re-thinking of the Paycheck Protection Program (PPP).
Among the PPP-specific provisions included in the bill:
- Deduction for Expenses That Result in PPP Loan Forgiveness. Expenses paid for with the proceeds of PPP loans would be tax deductible even though PPP forgiveness is already not taxable income. As we have previously discussed there is bipartisan support to reverse IRS rulings on this subject.
- Second PPP Loan. Funding is provided to allow the hardest-hit small businesses to receive a second forgivable PPP loan. Eligibility would be limited to small businesses with 300 or fewer employees that have sustained a 30 percent revenue loss in any quarter of 2020. Restaurants, hotels and travel industry participants have lobbied hard for additional relief given the impact of the pandemic on their businesses.
- Additional Non-Profits Eligible for PPP. Organizations described in Section 501(c)(6) of the Internal Revenue Code (but excluding lobbying organizations) will now be eligible for PPP loans if they have 150 or fewer employees. This provision will benefit many local chambers of commerce, economic development organizations and tourism offices.
- Expansion of PPP Forgiveness. PPP forgivable expenses would be expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely. At this time, it is unclear whether this expansion applies to all PPP loans (including those for which forgiveness may already be in process) or only for new PPP loans made after enactment.
- Simplified Forgiveness Process. The PPP loan forgiveness process would be simplified for borrowers with PPP loans of $150,000 or less. Lenders have been pushing for such simplification and the IRS has already provided some relief for PPP loans under $50,000.
- Special Help for Smaller Borrowers and Underserved Communities. New PPP funds would be dedicated for smaller borrowers and underserved communities, generally focused on (1) businesses with 10 or fewer employees and (2) loans made by small community lenders, including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs) and farm service lenders; and for the Minority Business Development Agency.
- Special Relief for Live Venue Operators. Funding would be expanded for independent live venue operators affected by COVID-19 stay-at-home orders, providing a badly-needed shot in the arm for the performing arts community. But it is unclear whether those organizations would be entitled to participate if they have already received a PPP loan.
- Extension of Certain Loan Programs. New funding is provided to extend Section 1112 of the CARES Act, which provides payment of principal, interest and associated fees on qualifying Small Business Administration (SBA) 7(a), 504 and microloans.
- Increased Funds for Certain Loan Programs. Funding would be added for SBA loan products to increase guarantees on SBA 7(a) loans and reduce fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; and provide Economic Injury Disaster Loan grant advances.
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The architects of the plan – including Sens. Mitt Romney (R-Utah), Susan Collins (R-Maine), Joe Manchin (D-W.Va.), and Finance Committee members Mark Warner (D-Va.), Maggie Hassan (D-N.H.), and Bill Cassidy (R-La.), along with a handful of House members – have left out some key details on what are likely to be make-or-break provisions in formal negotiations among congressional leaders.
Along with the PPP provisions for small business, the plan continues to call for roughly $160 billion in assistance to state and local governments (something supported by congressional Democrats but generally opposed by Republicans); however, the new outline offers no additional details, stating only that there is “an agreement in principle as the basis for good faith negotiations.” The plan also would provide support for airlines, live venue operators, student loan borrowers, schools, health care providers, vaccine development and distribution, and the Postal Service.
In a nod to Senate Majority Leader Mitch McConnell (R-Ky.) the plan would provide temporary protections for businesses from coronavirus-related lawsuits. In the last several months, McConnell has frequently referred to liability protections as a “red line” in negotiations over coronavirus relief legislation. But the new outline offers no specifics on what the liability shield would look like or how long those protections would be in place.
The plan would provide $300 in weekly unemployment insurance payments on top of state-level benefits for four months – a drop from the $600 per week Democrats had been pushing for and which had applied earlier in 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law last March. The new outline notes that the additional relief would apply “for 16 weeks, from the end of December into April 2021.” Other pandemic unemployment insurance programs, which are scheduled to expire in late December, likewise would be extended for 16 weeks.
Lawmakers hope to attach a COVID relief deal to a “must pass” omnibus appropriations package to fund the government for fiscal year 2021, which began on October 1. The government is currently operating under a continuing resolution (CR) that funds federal departments and agencies at the levels in place for fiscal year 2020.
House and Senate conferees who have been ironing out differences in their respective versions of the 12 spending bills needed to fund government agencies for this fiscal year had intended to lock in an agreement on a funding plan and bring it to a vote in the House and Senate before the current CR expired on December 11. But after it became apparent that negotiators would not make that deadline, lawmakers opted instead to move a second CR – running through December 18 – that would avert a partial government shutdown and provide a few extra days for negotiations on the full-year spending package to conclude. That measure (H.R. 8900) was approved in the House on December 9 and in the Senate on December 11.
The delay in finalizing a fiscal year 2021 spending pact likewise gives lawmakers additional time to strike a deal of some kind on coronavirus relief; however, Speaker Pelosi signaled that she believes Congress should stay in session if a relief package isn’t ready by the time lawmakers approve the omnibus appropriations bill.
NSBA has been outspoken in calling on policymakers to fix the deductibility of forgiven PPP expenses, and encourages ALL small businesses to contact their lawmakers and ensure deductibility is included in any final stimulus package.