New COVID-19 Stimulus Bill Extends Unemployment Insurance and Small Business Assistance Programs
On December 27, President Trump signed an additional round of COVID-19 relief legislation into law. The bill was part of a larger legislative package that funded the government through September 30, 2021, and is the first COVID-19 bill enacted since the March 2020 CARES Act. Many provisions in the new bill extend and modify unemployment insurance (UI) and small business assistance programs that were created by the CARES Act and other laws previously passed in response to the pandemic. More information on the new bill’s key HR-related provisions are highlighted below.
Under the new COVID-19 stimulus bill, state UI agencies will provide UI recipients with an additional $300 per week through March 14, 2021. The federal government is providing states with the funding for the new benefit. The $300 per week is half of what Congress approved in March 2020 under the CARES Act, which provided an extra $600 per week to UI recipients. However, the CARES Act benefit expired at end of July 2020.
In addition to the increase in federal benefits, the new bill also extends the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs, which were set to end on December 31, 2020. The PUA allows self-employed, gig workers and other non-traditional workers to receive UI coverage, and the PEUC program provided additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state unemployment benefits. The stimulus bill increases the maximum number of weeks an individual can claim benefits through the regular UI and PEUC programs combined, or the PUA program, to 50 weeks. Previously, the PEUC and PUA programs only allowed recipients to claim benefits for up to 39 weeks. Both of these programs are now available through March 13, 2021.
Direct Stimulus Payments
The legislation provides a second round of direct payments of $600 to individuals who make up to $75,000 per year and $1,200 for couples making up to $150,000 per year, plus an additional $600 for each child claimed as a dependent for tax purposes.
Paycheck Protection Program (PPP)
The new bill allows eligible small businesses to receive a second round of PPP loans. To be eligible for a second round of PPP loans, a business or organization must have no more than 300 employees and demonstrate at least a 25 percent reduction in gross revenues between comparable quarters in 2019 and 2020. Most businesses are eligible to receive up to 2.5 times their average monthly payroll costs, while industries with NAICS codes beginning with 72 (accommodation, food service and similar businesses) may receive up to 3.5 times their average monthly payroll costs, and all businesses have a maximum loan limit of $2 million. In addition to this, second-draw PPP businesses will be eligible to receive full loan forgiveness if they use at least 60 percent of their second-draw loan on payroll costs over a time period of their choosing between eight and 24 weeks.
The legislation also made changes to the existing PPP, allowing for full deductibility of business expenses on forgiven PPP loans for both first- and second-draw loans and expanding PPP allowable and forgivable expenses to include supplier costs and purchase orders. The legislation also simplifies the loan forgiveness application process for smaller loans that amount up to $150,000 and provides the Small Business Administration with greater authority to audit and review forgiven loans.
Employee Retention Tax Credit
Several tax provisions were included in the COVID-19 stimulus bill, including the employee retention tax credit and the payroll tax credit for providing paid sick and family leave. Under the new law, businesses may be eligible for an enhanced employee retention tax credit that was originally included in the CARES Act to provide a 50 percent tax credit to businesses that continue paying their employees and avoid potential layoffs during a full or partial COVID-related lockdown or when 2020 quarterly gross receipts are down compared to the same quarter from 2019. The tax credit is increased in the new stimulus bill to cover 70 percent of qualified wages, including the cost to continue providing health benefits, and businesses are eligible to receive this benefit if their operations are fully or partially suspended, or if 2020 quarterly gross receipts are down compared to the same quarter in 2019.
FFCRA Paid Leave and Tax Credit
One notable provision that was excluded from the final bill was the extension of the FFCRA leave requirements that were adopted in early 2020. Employers with fewer than 500 employees will no longer be required to provide paid leave as mandated under the FFCRA (Families First Coronavirus Response Act) since the provisions expired on December 31, 2020. Instead, the new bill contains provisions that would extend the FFCRA payroll tax credit offered to covered employers who voluntarily provide paid sick leave and paid family leave to their employees. Under the new law, covered employers can receive the dollar-for-dollar tax credits on wages paid to employees taking leave if the employer’s paid leave benefits are available to employees as “would be so required to be paid if [the FFCRA] were applied.” These tax credits are available to eligible employers through March 31, 2021.
State Funding and Liability Protections Excluded
Additionally, the bill excludes partisan provisions that were prioritized throughout the year by Democrats and Republicans as must-haves in the next stimulus bill. Specifically, the bill leaves out significant funding for states to help them manage COVID-19-related budget troubles, which Democrats highly prioritized during their negotiations in 2020. The bill also excludes provisions to provide COVID-19 liability protections for employers, an issue that was championed by congressional Republicans.
Likely Next Round
With Democratic wins in the Georgia Senate runoffs on January 5, control of the Senate is an even split 50-50. This means that control of the chamber will flip to Democrats on January 20, due to Vice President-elect Kamala Harris’s ability to cast tie-breaking votes in the chamber once she is inaugurated, and Democrats will control both Chambers of Congress. As such, it is likely that we will see an additional round of COVID relief as soon as President Biden is sworn in.