Congress Enacts Second Round of COVID-19 Stimulus
On December 27, 2020, President Trump signed the Consolidated Appropriations Act (the “Act”), funding the federal government for the 2021 fiscal year. Attached to the Act was an approximately $908 billion stimulus package (“December Stimulus”), which will extend unemployment insurance (“UI”), renew funding for the Paycheck Protection Program (“PPP”), and provide assistance to live venues, independent movie theaters and cultural institutions. The December Stimulus does not extend federal paid leave for workers impacted by COVID-19 but provides employers with payroll tax credits if they voluntarily provide such leave on or before March 31, 2021. Below is a summary of several of the key provisions in the December Stimulus for employers to consider.
Extension of UI by 11 Weeks
In March, Congress enacted the CARES Act in response to the novel coronavirus, which provided for three types of unemployment benefits: (1) Federal Pandemic Unemployment Compensation (“FPUC”), (2) Pandemic Emergency Unemployment Compensation (“PEUC”), and (3) Pandemic Unemployment Assistance (“PUA”). The December Stimulus extends each program by 11 weeks —providing federal assistance through the middle of March 2021 — and modifies the benefits available:
- FPUC —the CARES Act provided an additional $600 per week for those receiving unemployment benefits through July 31, 2020. The December Stimulus provides a $300 per week supplement for those receiving unemployment benefits beginning after December 26, 2020 and ending on or before March 14, 2021.
- PEUC —the CARES Act provided for 13 additional weeks of UI benefits for workers who exhausted UI benefits. The December Stimulus extends these benefits by an additional 11 weeks to March 14, 2021.
- PUA — under the CARES Act, self-employed workers, contract workers, and gig workers were newly eligible for UI benefits through the PUA. The December Stimulus extends these PUA benefits by 11 weeks to March 14, 2021.
Extension of PPP
The December Stimulus includes approximately $284 billion in additional funding for the PPP, which was initially established by the CARES Act. Below is a brief description of the PPP provisions included in the December Stimulus:
- Eligibility Rules.
- First-Time PPP recipients are subject to the PPP eligibility rules established by the CARES Act. Publicly traded companies and business that were not in operation as of February 15, 2020, are ineligible to receive PPP loans.
- Second-Time PPP recipients are subject to stricter criteria than under the CARES Act. To be eligible for a second-time loan of up to $2 million, a small business must (1) have fewer than 300 employees, (2) have used or will use the full amount of its prior PPP loan, and (3) be able to document quarterly revenue losses of at least 25% in one quarter of 2020 relative to the same quarter of 2019.
- By contrast, the CARES Act made loans available to businesses with up to 500 employees, did not require that a business demonstrate a decrease in gross receipts, and allowed loans of up to $10 million.
- Expenses are Tax Deductible.
- Borrowers that received PPP loans under the CARES Act or receive PPP loans under the December Stimulus are permitted to deduct expenses paid for by PPP loans on their taxes.
- Apply by March 31, 2021.
- In order to be eligible for assistance, PPP borrowers must apply for a loan by March 31, 2021.
Aid for Entertainment Venues
The December Stimulus also provides approximately $15 billion in relief for certain entertainment venues impacted by the coronavirus pandemic.
Entertainment businesses — including live performing arts operators, music venues, movie theaters, and museum operators — may apply for loans from the SBA to support payments to employees and costs including rent, utilities and maintenance. Venues may receive two-part grants equal to (1) as much as 45% of 2019 gross revenue (limited to $10 million), and (2) a supplemental grant of 50% of the initial grant.
In order to be eligible for a loan, the entity must (1) have been in operation as of February 29, 2020 and (2) demonstrate at least a 25% reduction in revenue in one quarter during 2020 relative to the same quarter in 2019.
Venues who experienced at least a 90% decline in revenue from April 1, 2020 – December 31, 2020 will be given first priority and are eligible to receive funds in the first 14 days that the SBA allocates funds. Venues who experienced at least a 70% decline in revenues are initially eligible to receive funds during the following 14 days. After that, all other eligible entities may apply.
The SBA is expected to release guidance shortly about the application process.
No Mandatory Paid Leave for COVID-19, But Tax Credits For Employers Who Voluntarily Provide Such Leave On or Before March 31, 2021
The Families First Coronavirus Response Act (“FFCRA”) provided up to two weeks (80 hours) of partially paid sick leave, as well as up to 10 days of unpaid family leave and up to 10 weeks of partially paid family leave, for certain workers affected by COVID-19.
The FFCRA expires on December 31, 2020, and, unless the FFCRA is extended, employers will not be required under federal law to provide this leave in 2021. However, employers who voluntarily provide such leave between January 1 – March 31, 2021 may claim a payroll tax credit.
President-elect Biden already indicated that he intends to pursue an additional stimulus package once in office. A Biden administration is also likely to pursue regulatory reforms at various agencies tasked with implementing federal law, which could impact employers’ settled expectations regarding existing law. Employers should continue to monitor these developments in the new year, in addition to any relevant changes in law at the state and local level.
Please do not hesitate to contact any of our attorneys if you have any questions or would like additional information.