Federal government programs
Coronavirus emergency supplemental spending bill
The first of three federal packages, this $8.3 billion bill (signed into law on March 6, 2020) includes: $2.2 billion for health agencies to prepare for and prevent the spread of the virus as well as $3 billion for vaccine research.
The second federal package was signed into law on March 18, 2020. Provisions include:
- Paid sick leave — requires employers with <500 employees to provide two weeks' worth (or 80 hours) of paid sick leave if employees are unable to work because they're subject to quarantine or isolation, are experiencing symptoms of COVID–19, are caring for someone who is in quarantine or isolation, and/or have children in schools that have closed
- Paid sick leave wages are capped at $511 per day (up to a total of $5,110 per employee) or, if the employee's absence is necessitated by caring for others, the cap is $200 per day (up to $2,000 total); paid sick time does not carry over to the following year
- Self-employed workers will receive a tax credit equivalent to the sick leave amount
- Expires on December 31, 2020
- Paid family and medical leave — requires employers with <500 employees to provide up to 12 weeks of job-protected public health emergency leave, ten weeks of which must be paid leave, to employees unable to work (or telework) because he or she is caring for their minor child if the child's school closed or regular childcare provider is unavailable due to public health emergency
- Eligible to any employee employed for 30 or more days
- The first ten days (two weeks) is unpaid, but an employee may choose to apply PTO
- Paid leave wages for full-time employees is calculated as no less than 2/3 of regular pay and capped at $200 per day (up to a total of $10,000 per employee); pay for part-time employees is prorated based on average hours worked during the previous six months
- The Secretary of Labor is authorized to issue regulations that exempt businesses with <50 employees from paid family leave if providing it would jeopardize the viability of the business (however, currently there are no proposed regulations)
- Expires on December 31, 2020
- Tax write-offs — employers who are required to provide paid leave under this Act will receive a 100% credit against their quarterly payroll taxes
- Unemployment aid — emergency funding to states for increasing access to unemployment benefits, including: online applications, no more one-week waiting period, no provision that employees need to be actively searching for other employment, and employers will not be responsible for benefits paid resulting from these changes
- Health care worker protection — requires OSHA to develop and implement a comprehensive infectious disease exposure control plan to protect health care workers
- Free testing — provides wavers, funding, and coverage aimed at making testing for the coronavirus free to the public (without having to use deductibles or copayments)
- Food and nutrition assistance — includes: $900 million to fund food programs for low-income Americans (WIC & TEFAP); emergency SNAP expansion for children and low-income jobless workers; and $250 million for additional home-delivered meals to low-income seniors (ACL)
The third federal package was signed into law on March 27, 2020. This is the largest financial assistance bill ever with $2.2 trillion allocated for businesses, individuals, federal agencies, and state and local governments. It was designed to distribute capital quickly and broadly. Provisions include:
- Payment Protection Program — $349 billion to expand SBA 7(a) small business loans made between February 15 and June 30, 2020:
- Eligibility extended beyond businesses with <500 employees to sole proprietors, independent contractors, gig economy workers, and self-employed individuals as well as businesses with >500 employees in certain industries (use relevant NAICS code to determine eligibility)
- Amount equal to the lesser of (a) $10 million or (b) 2.5 times the average monthly payroll costs incurred during the prior one-year period, intending to cover any 8-week period between February 15 and June 30, 2020
- Forgiveness applies to portions used to cover payroll (incl. salaries up to $100K, wages, tips, paid leave, and health benefits) and existing interest payments on mortgage, rent, and utilities.
- The amount of forgiveness will be reduced proportionately if total payroll expenses (capping individual compensation at $100K) decreases by >25% (existing layoffs can be forgiveness if businesses rehire by June 30, 2020)
- Max terms of unforgiven loans are 10-year payout (incl. 6–12-month deferment) with 4% capped interest (although any forgiven portions are not charged interest) and 100% federal guarantee
- Note: There is a legal precedent for venture-backed startups being eligible for these PPP loans (more info available here and a checklist for affiliation here). While there are a lot of concerns about PPP's implementation (e.g. from banks), the general guidance is to seek legal counsel, to document a Board-level deliberation on the matter, and to apply to get into the PPP queue as soon as possible (either with your existing bank if it is an SBA preferred lender or via KYC process with one that is).
- Emergency Economic Injury Disaster Loan Grants — $10 billion to provide emergency advances of $10,000 to small businesses that apply for an SBA economic injury disaster loan (EIDL) within three days of application (more info on EIDLs below).
- Unemployment expansion ****— $250 billion to extend unemployment benefits to 39 weeks and contribute an additional $600 per week. Definition expanded to include furloughed employees and gig workers.
- Direct cash payments to individuals ****— equal to $600-$1,200 for Americans making <$100K in adjusted gross income plus $500 per child
- Tax relief provisions — provisions aimed at increasing liquidity and reducing costs of capital:
- Payroll tax credit for retaining employees equal to 50% of the first $10,000 in wages per employee (eligible to businesses that experienced full/partial closure due to gov't restrictions or a 50%+ YoY reduction in gross receipts; not eligible to employers receiving assistance through PPP loans)
- Deferral of Apr-Dec 2020 employer payroll taxes until 2021–2022
- Expanded ability to use 100% of net operating loss carryovers for offset in 2018, 2019 and 2020
- Acceleration of corporate alternative minimum tax (AMT) credits, which can be claimed immediately for additional cash flow
- Expansion of net interest deduction limit from 30% to 50% of EBITDA for 2019 and 2020 tax years
- Allowing immediate write off of qualified improvement property costs instead of depreciating over the 39-year life of the building
- Suspension of 2020 excise tax for alcohol used to produce hand sanitizer
- Allowing employers to provide student loan repayment benefit to employees tax-free, up to $5,250 annually