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GR Today - CARE Act Issue
PPAI continues to closely monitor developments in Washington, D.C. PPAI’s government relations manager, Maurice Norris, D.C. based lobbyist and our legal counsel continue to study the recent U.S. legislation aimed at providing relief to businesses and individuals affected by the Coronavirus pandemic. Look for further updates to follow in the days ahead. To keep up with these updates, please subscribe to GR Today here and follow this and related news at pubs.ppai.org.
H.R. 748, named the Coronavirus Aid, Relief, and Economic Security (CARES) Act, modifies elements of the Tax Reform Act of 1986 to help businesses mitigate their Coronavirus-related losses. With a total value of $2 trillion, the legislation authorizes federal funding for states, companies, individuals, and other entities adversely affected by the Coronavirus pandemic, and expands the eligibility criteria for the relief programs.
This law has significant implications for the promotional products industry. It provides disaster relief for industry companies, including deferred tax payments, loans with forgiveness options, and direct payments to businesses and individuals.
Last updated 3/28/2020
Disclaimer: As always, it is important to check with your accountants, bankers or lawyers for definitive information as to eligibility for benefits.
This summary report of recent laws is not, and should not be construed as, legal or tax advice, and the summary report should not be relied upon as such. Each reviewer is encouraged to consult independent legal and tax counsel before making any decisions concerning the matters in this communication.
First, the CARES Act provides $350 billion for paycheck protection loans to small businesses and non-profits to help them maintain their workforce. There are options for these loans to be forgiven if the employer maintains their payroll throughout the public health crisis.
The amount of the loan is 2.5 times the average monthly expenses for payroll from March 2019-February 2020, with a cap of $10,000,000. The loan proceeds can be used to pay payroll, benefits, rent or mortgage payments, utilities, and interest on pre-existing loans. The loan will be forgiven to the extent the borrower maintains its payroll from March 15-June 30, with compensation capped at $100,000 for any individual employee. There is no loan forgiveness for mandated sick pay or new FMLA paid leave. The changes in full-time equivalent employees will adjust the amount of loan forgiveness.
Employers may delay the payment of employer portion of FICA payroll taxes until December 31, 2021, if they do not qualify for the loan forgiveness. The employer may pay 50% of payroll taxes on December 31, 2021, and the remaining 50% by December 31, 2022.
Particularly significant for the promotional products industry is that this law expands eligibility for this program to include independent contractors, sole proprietors, and some self-employed individuals. The paycheck protection program will be administered by the SBA. Those interested may contact the SBA to investigate applying for loans. This provision is retroactive to February 15, so it may include coverage for employees who have already been laid off, and remains effective until June 30.
The legislation creates a pandemic unemployment assistance program for several categories of workers, including people who may not typically be eligible for unemployment benefits.
- This unemployment assistance is now available for self-employed and part-time workers as well as independent contractors so long as the covered individual meets the certification requirements.
- Former employees whose employers did not subscribe to state unemployment are eligible for unemployment compensation under the CARES Act.
- The criteria is basically as follows: The individual is able and available for work, except the individual is unemployed, partially unemployed, or unable or unavailable to work because of the effects of COVID-19 on the individual, the individual’s family member or the individual’s employer.
- An individual will not qualify if:
- The individual has the ability to telework with pay; or is receiving paid sick leave or other paid leave benefits, regardless of whether the individual meets the certification criteria.
- This unemployment relief also includes a temporary emergency increase of $600 per week to individuals who receive pandemic unemployment assistance or unemployment insurance.
- Unemployed workers may connect with local and state unemployment insurance resources and monitor future announcements from federal and state governments.
The CARES Act expands the funding issued through small business loans. The CARES Act relaxes some existing Small Business Administration (SBA) restrictions, so recipients may be eligible to receive loan forgiveness for some payroll costs, including mortgage interest payments, rent, and utilities.
The CARES Act also expands the availability of these loans to include public and private entities with up to 500 employees.
The law also provides funding for the Small Business Administration to help companies cover six months of payments for businesses that already have SBA loans.
The CARES Act provides funding for the SBA’s Economic Injury Disaster Loan (EIDL) program. Small business owners in all U.S. states, Washington, D.C., and territories are now eligible to apply for a long-term, low-interest loan due to COVID-19. The SBA’s EIDL program can provide small businesses with working capital loans of up to $2 million to overcome the temporary loss of revenue they are experiencing.
The CARES Act also allows the SBA to offer businesses emergency grants up to $10,000 to cover operating costs. Under the terms of the CARE Act, the SBA can expedite grants to give companies access to a portion of the loan funds to pay for a variety of debt obligations, including sick leave and payroll.
Under the 2020 Recovery Rebate for Individuals, the CARES Act provides recovery checks to most taxpayers, consisting of up to $1,200 for individuals, $2,400 for married couples filing jointly, and $500 for children. The relief assistance payments will be means-tested, and the eligibility for the assistance will decrease incrementally at incomes above $75,000.
The CARES Act also extends the individual tax filing deadline from April 15 to July 15. Corporations may postpone estimated tax payments due after the date of enactment until October 15, 2020.
Under the Family First Coronavirus Response Act passed on March 20, 2020, which was modified by the CARES Act, employers with fewer than 500 employees to provide two weeks’ worth of paid sick leave (80 hours for full-time; 2, weeks average for part-time). Employees qualify if they have 30 days or more tenure with the employer. If an employee is unable to work due to quarantine or isolation; is experiencing symptoms of COVID-19; or is caring for someone who is in quarantine or isolation or has a child or children in schools that have closed due to COVID-19. Employers themselves will receive tax credits to offset the costs of providing this paid leave.
In addition, the Family Medical Leave Act now includes Public Health Emergency Leave. This paid leave must arise from the same reasons as the paid sick leave. This new portion of FMLA applies to employers with more than one employee. After the two weeks paid sick leave or two weeks paid leave under an employer’s existing policies, the employee may take up to twelve weeks of paid family medical leave at two-thirds of their compensation.
The Secretary of Labor has the authority to issue regulations to exempt small businesses (those with fewer than 50 employees) from the requirements of the emergency paid leave and emergency FMLA when the imposition of such requirements would jeopardize the viability of the business as a going concern. Regulations in this regard have yet to be issued (as of March 31, 2020).
The CARES Act amends the Families First Coronavirus Response Act to limit employers’ obligations regarding emergency paid sick leave. Under the CARES Act provisions, obligations for employers is limited to $511 per day and $5,110 overall, or $200 per day and $2,000 overall, depending on the circumstances surrounding the employee’s paid leave. Simply put, the compensation obligations are equal to the credit permitted under each of the Acts (Emergency Paid Sick Leave Act and Emergency FMLA).
Some obligations for businesses affected by the coronavirus pandemic will be relaxed through deferred payments on estimated taxes, increased deductibility for interest expenses, and some delayed payments for payroll taxes, as noted above. In addition, the CARES Act contains the following:
- Every taxpayer will be allowed to take up to $300 as a charitable contribution without itemizing deductions.
- The cap on charitable contribution deductions is suspended for 2020.
- The corporate charitable donation limit is increased to 25% from 10%.
- The Department of Education will suspend payments for student loans without penalty through September 30.
Go to https://ppai.org/coronavirus-information/ for a full list of industry information and resources.
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GR Today: 2020 Issues
Congress, White House Extend Paycheck Protection Program
President Signs Paycheck Protection Program Reform Legislation
The president has signed H.R. 7010, the Paycheck Protection Program Flexibility Act, which provides modifications to the CARES Act and the Small Business Act. The CARES Act initially established the temporary Paycheck Protection Program (PPP), which offers low-interest loans for small businesses, nonprofits and individuals to get help through the Small Business Administration’s (SBA) section 7(a) program during the public health crisis. The loans can be forgiven for eligible payroll and other expenses. However, there were numerous requests from some of the businesses who had taken the loans regarding some the eligible uses for the loan funds, and now Congress has responded.
The Paycheck Protection Program Flexibility Act allows companies more time to spend PPP loan funds, rehire workers, defer payroll taxes and repay the loans. For example, under the Flexibility Act, the eight-week covered period provided in the CARES Act for using PPP funds is extended to 24 weeks. Also, the safe harbor date for rehiring employees is extended from June 30 to December 31, 2020. Another significant provision from the Flexibility Act is the modified percentage of the loan funds that must be used on payroll. Under the CARES Act, 75 percent of PPP loan funds must be spent on payroll to qualify for full loan forgiveness. The Flexibility Act eases that requirement to 60 percent of loan funds that must be spent on payroll, allowing the other 40 percent to be spent on eligible nonpayroll costs, such as rent, utilities and interest on qualified mortgage obligations.
Since the CARES Act was signed into law, SBA has released multiple forms of guidance regarding eligibility and forgiveness for the loans. According to SBA reporting, there is still over $100 billion of funds available in the Paycheck Protection Program. Anyone interested in applying for a PPP loan can access the application here.
Senate Considering Tax Reform For Paycheck Protection Program Borrowers
The U.S. Senate is currently considering legislation that would give PPP borrowers a tax benefit related to PPP loan funds. S. 3612, named the Small Business Expense Protection Act, would allow businesses that took PPP loans to deduct business expenses to which PPP loan funds were applied. Currently, the CARES Act, which initially authorized the Paycheck Protection Program, does not allow for such deductions involving PPP loan funds. S. 3612 was introduced by a bipartisan group of Senators in May, just over a month after the CARES Act passed. S. 3612’s key sponsor announced in early June that Senate leadership was trying to get the measure passed via a unanimous consent vote, which is a fast-track method used for passing legislation when no senator objects to the proposal.
Federal Reserve Prepares To Roll Out Main Street Lending Program
The Federal Reserve has established the Main Street Lending Program, set up to help with lending to small and medium-sized companies with fewer than 15,000 employees or less than $5 billion in annual revenue that were negatively affected by the coronavirus pandemic. The Program will be implemented through three facilities. The first facility established by the Federal reserve is for companies seeking new loans. There is another facility that is designated for businesses that are increasing existing debt. The Federal Reserve has also set up a facility for more heavily leveraged borrowers. Each category offers loans that carry four-year payment terms. The Federal Reserve has provided multiple forms of guidance, including a Frequently Asked Questions sheet as well as separate term sheets for each lending facility under the Main Street Lending Program.
Small Business Administration Posts Interim Final Rule on Paycheck Protection Program
The Small Business Administration (SBA) posted an Interim Final Rule (IFR) providing guidance on the Paycheck Protection Program. The CARES Act established the temporary Paycheck Protection Program, which offers a payroll loan for small businesses, nonprofits, and individuals to get help through the Small Business Administration’s section 7(a) loan program. The new rule supplements prior guidance from the SBA regarding the Paycheck Protection Program. The IFR became effective on April 28, 2020 and was the latest in several pieces of guidance provided by the Treasury Department and the SBA.
The rule clarifies eligibility requirements for Paycheck Protection Program loans and provides answers to some of the questions SBA has been frequently receiving about the loan program. The U.S. Treasury Department has also provided an FAQ Sheet regarding the loan program, covering topics such as eligibility requirements, approved business expenses, and application options.
Trade Report Fuels Calls For More Coronavirus Relief
The International Trade Commission (ITC) has published a report identifying imported products that are subject to tariffs while also being used in the national coronavirus response.
The study, which was conducted upon request by members of both chambers of Congress, includes ten-digit Harmonized Tariff Schedule numbers for the products and information about the countries of origin for the named products. The ITC also established a database that allows users to search the listed products according to their ten-digit HTS codes, descriptions, countries of origin, and other categories. There is also a subscription service for anyone who wants to be notified when the database is updated.
United States Trade Representative Considers Extension of Tariff Exclusions
The USTR has issued a Federal Register notice seeking comments on its latest consideration of a possible extension of exclusions for tariffs on some products that were named in the third tariff action under the Section 301 investigation. This tariff list is valued at $200 billion worth of products imported from China, and names several items that are prevalent in the promotional products industry. The request for comments outlines the procedures for commenting on the potential extensions. The public commenting portal at https://comments.USTR.gov opened on May 1, 2020 and closes on June 8, 2020. The Federal Register notice also provides an Exclusion Extension Comment Form for companies seeking extensions to complete. The current exclusions are scheduled to expire on August 7, 2020, and extensions, if granted, may last for up to twelve months.
Last updated 3/23/2020
Congress Passes Coronavirus Aid
Congress and the White House have implemented numerous legislative measures to address the coronavirus pandemic from a variety of perspectives. The first piece of legislation, the Coronavirus Preparedness and Response Supplemental Appropriations Act, provides $8 billion for health programs, as well as $7 billion in small business loans. A second measure, named the Families First Coronavirus Response Act, provides paid leave, tax credits, expanded unemployment and nutrition assistance, and free coronavirus testing.
Both measures have been signed by the president. A third legislative response is being negotiated by Congress and the White House that could include tax breaks or other financial aid for industries affected by the coronavirus pandemic, cash to Americans, and further small business support.
Small Business Association (SBA) Disaster Loans
The SBA’s Economic Injury Disaster Loan program offers low-interest loans to businesses and non-profit organizations, as well as homeowners and renters. The disaster loans can be used to replace or repair various items that are damaged in a declared disaster, for example, real estate, personal property, machinery, equipment, inventory, and other business assets.
Currently, there are two components to qualify for an SBA loan. First, counties must meet an economic impact threshold for businesses within those counties to become eligible for disaster loans. After a county has been certified by SBA, businesses located in that county can become eligible for disaster loans. To determine eligibility or apply for an SBA disaster loan, click here. For more information and small business guidance regarding the coronavirus from the SBA, click here.
PPAI Joins Coalition Partners On Tariff Relief Letter
PPAI recently signed onto a letter that was sent by a free trade coalition consisting of over 160 business associations, representing hundreds of thousands of workers, to the White House. The letter requested a suspension of the tariffs enforced on imported products under the administration’s Section 301 and Section 232 investigations. The letter cited research from the Trade Partnership Worldwide LLC that shows a suspension of the tariffs on imports from China, and a suspension of China’s retaliatory tariffs, would return over $75 billion to American consumers, thus providing a boost of that same amount to the U.S. economy. PPAI is on the record opposing any import tariffs, because tariffs are essentially taxes that are paid by American consumers.
The letter also stated that since the tariffs were implemented unilaterally by the executive branch, they could also be suspended without any collaboration from Congress, and the results could take effect quickly. The tariff relief was requested in conjunction with a variety of measures being considered by the White House and Congress to help Americans cope with the economic impacts of the current public health emergency.
S.2722 Passes Senate Committee
Senate Bill 2722, also named the Stop Wasteful Advertising by the Government (SWAG) Act, passed through the Senate Committee on Homeland Security and Governmental Affairs recently. As originally introduced in October 2019, the proposed legislation would have prohibited federal agencies from procurements of promotional products that promote the agencies and their programs. The bill’s limits on promotional spending are included in a larger effort to reduce spending on public relations and advertising by federal agencies and departments.
Since the bill’s initial introduction in the U.S. Senate, PPAI staff have regularly met in-person and communicated electronically with congressional staffers regarding S. 2722, resulting in an amended version of the bill which was passed by the Senate committee on March 11. The ongoing conversations between congressional staffers and PPAI have resulted in amendments to S. 2722 that are beneficial to the promotional products industry, for example, the current version of this legislation includes a requirement for federal agencies to create annual budget justifications that include the identification of a return on investment regarding requested expenditures for promotional products.
GovPredict.com has developed a resource site to track and compare every state's bills in response to the coronavirus.
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The WPA establishes privacy as a right afforded to consumers. The legislation would apply to companies that do business in Washington and companies that market services or products to Washington residents. Other qualifications for applicability under the WPA include an organization controlling the personal data of at least 100,000 consumers, or drawing more than 50 percent of their gross revenue from the sale of personal data. The proposed legislation also outlines a variety of rights granted to consumers, including the right to opt-out and the right to deletion, among others.