President Trump officially signed the $2 Trillion Coronavirus Stimulus Package into law. This bill is the largest emergency aid package in US history and the most notable legislative action taken to tackle the coronavirus pandemic that has taken a toll on humans and the economy.Main components of the proposal include, $250 billion set aside for direct payments to individuals and families, $350 billion in small business loans, $250 billion in unemployment insurance benefits and $500 billion in loans for distressed companies. Further breakdown of stimulus package provisions below.
Direct payments to individuals. One of the most significant and overall beneficial components of the package is the direct payments individuals will receive. Single Americans with adjusted gross incomes up to $75,000 ($150,000 for married couples) will get a $1,200 ($2,400 for couples) payment. Additionally, individuals will receive $500 per child under the age of 17.For individuals with adjusted gross incomes of more than $75,000 the payments start to phase out and individuals making more than $99,000 will not qualify at all. The threshold is doubled for couples.As of now there is only one payment but future bills could order additional payments.
Student loan payments suspended. The Department of Education will suspend payments on student loan borrowers without penalty through September 30, according to the bill.
Historic boost for unemployment benefits. The federal government will give jobless workers an extra $600 a week for four months on top of their state unemployment benefits. Benefits range, depending on the state. The extra amount is to help make up for the 100 percent of lost wages during this pandemic.Additionally, lawmakers will add 13 weeks of extended benefits, which would be fully covered by the federal government. This is on top of what the state currently provides.The deal will put in place a pandemic unemployment assistance program, which would provide jobless benefits to those who don’t typically qualify for traditional benefits. This includes, unemployed, partially unemployed or those unable to work due to the virus and don’t qualify for traditional benefits. Also including independent contractors and the self-employed, and gig economy workers, who aren’t eligible in many states.
$500 billion lending program. The Treasury Department can provide $500 billion in loans, loan guarantees and investments.Within the $500 billion, $25 billion will go to passenger air carriers, $4 billion for cargo air carriers and $17 billion for businesses that work in national security. The rest of the funds, $454 billion, are given wide latitude to provide loans to struggling businesses, states and municipalities.Loan Amount/ForgivenessThe loan maturity is to not exceed 5 years. The Secretary is given similar discretion on determining the terms related to rates, underwriting and terms & conditions. These loans are not forgivable.CompensationIf a business receives a loan or guarantee under this provision then it will be required to agree to certain limits on compensations and severance pay for employees whose compensation is greater than $425,000 in the 2019 calendar year. Those employees whose compensation exceeds $425,000 will not be eligible for higher pay and any severance pay cannot exceed twice the maximum compensation received in 2019. If an officer or employee earned more than $3 million in 2019 annual salary, then their compensation would be capped at $3 million plus 50% of the amount exceeding $3 million in 2019.These caps will remain in place for the period while the loan is outstanding on top of an additional 12 months.Buybacks & DividendsCompanies may not conduct stock buybacks, provide dividends or capital distributions to investors while the loan is outstanding plus an additional 12 monthsEmployment LevelsThese companies will be required to maintain levels of employment as of March 24, 2020 to the extent that is practicable and in no condition is the company allowed to reduce employment by more than 10%. This remains in effect until September 2020.
Prize for retaining payroll. The plan implements an incentive for businesses to keep idled workers on the payroll. If a business does this, they would receive a tax credit. Businesses would get a refund for half of what they spend on wages, up to $5,000 per worker. In order to qualify, businesses have to prove they took a 50 percent loss compared to the same quarter in years past.
Small Business Administration LoanThe measure includes $350 billion for the Small Business Administration.Eligible small businesses include sole prop, self-employed, nonprofits except those with Medicaid funds and businesses with few than 500 employees or those that meet the Small Business Administration’s industry-based “size-standard” requirements for the applicable NAICS code (based on either on number of employees or annual receipts).These businesses must have been substantially affected by COVID-19 which can be described as, supply chain disruptions, staffing challenges, a decrease in sales or customers, or a shuttered business.These loans have a maximum maturity of 10 years, the amount is to be less than (a) $10 million or (b) 2.5 multiplied by the average total monthly payments by the applicant for payroll, mortgage payments, rent payments and payments on any other debt obligations incurred during the 1 year period before the date on which the loan is made. If a business is new or has seasonal employees, then (b) will not remain the same.Allowable Use:What can the businesses do with these loans? Companies can use payroll support on annual salaries up to $100K. This includes paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those paid leave. They can also use the loan on employee salaries, mortgage payments, rent, utilities and any other debt obligations that were incurred before the covered period.Forgiveness:Eligible businesses should be eligible for forgiveness of indebtedness in an amount equal to the cost of maintaining payroll continuity and other allowable costs during the covered period (8 weeks from loan origination). The borrower should submit to the lender an application, which should include documentation verifying the number of full-time equivalent employees on payroll and other costs included in “Allowable Use.”If a business reduces the number of employees or reduces employee wages (exceeding 25% for any employee) during the covered period then the amount of loan forgiveness will be reduced.
Trump businesses can’t get money. President Trump, his family members’ businesses, Vice President Mike Pence, heads of executive departments, members of Congress and their family members will not receive emergency tax payer relief.The legislation prohibits federally elected officials and their immediate relatives from obtaining funds from the $500 billion program.Businesses that are owned or partly owned by “the President, the Vice President, the head of an Executive department, or a Member of Congress; and the spouse, child, son-in-law, or daughter-in-law” will be barred. The provision applies to anyone with 20% or greater stake in a business.
No money for border wall. The Defense Department will get $1.2 billion for the National Guard’s coronavirus response. Over 10,000 National Guard members to date have been activated.An additional $1 billion is available for Defense Purchases Act purchases. The Pentagon will allow the money to be transferred to other “applicable” accounts but will not allow any of the funds to be transferred to the country-drug account, which has been used to fund President Trump’s border wall.
Airlines and airport get 32 billion. The package includes $32 billion in grants for wages and benefits to restore the airline industry. This includes $25 billion for passenger airlines, $4 billion for cargo airlines, and $3 billion for industry contractors, such as those who handle catering, baggage, ticketing, and aircraft cleaning.Companies who receive assistance are prohibited from making furloughs, pay cuts, or stock buybacks, and from issuing dividends to investors, through September. There would also be restrictions on executive compensation.Airlines may also be required to operate routes they have been more inclined to cancel due to low ridership or profitability. This will not only help the needs of small remote communities but it will also provide a way to maintain well-functioning health care and pharmaceutical supply chains.
Hospitals get 100 billion. The stimulus package will provide $100 billion for hospitals.It needs the funds to make up for dollars lost due to delayed elective surgeries and other procedures to focus on the pandemic. Additionally, hospitals will receive a 20% bump in Medicare payments for treating patients with the virus. About $65 billion will go to hospitals, with the rest funneled to doctors, nurses, suppliers and others, the association said.
Employers and self-employed individuals. Employers and self-employed individuals get to postpone the 6.2 percent tax they pay on wages that is used to fund Social Security. This deferred tax would be required to be paid in two halves over the following two years: half by Dec. 31, 2021, and the other half by Dec. 31, 2022.
Contractors and ‘gig’ workers. Independent contractors and gig workers will be eligible to receive federal aid. This would help provide assurance to millions of part-time workers such as people who drive for Uber or deliver for Amazon. This is in response to a request by tech execs including Uber CEO Dara Khosrowshahi, to President Trump, “My goal in writing to you is not to ask for a bailout for Uber, but rather for support for independent contractors and, once we move past the immediate crisis, the opportunity to legally provide them with a real safety net going forward,” Khosrowshahi wrote.
Protections against foreclosures and evictions. This bill will protect against foreclosures on mortgages and evictions for renters. Anyone who is facing financial hardship from the virus would be given a forbearance on a federally backed mortgage loan of up to 60 days, and can be extended up up to another four months (Four thirty day extensions)Additionally, all fees, penalties and/or additional interest should be waived as a result of delayed payments. This also extends to multifamily federal mortgage loans, they are able to receive a 30-day and up to two 30-day extensions. Those with federally backed mortgage loans who have tenants would not be allowed to evict tenants based on the failure to pay rent for a 120-day period.
$25 million for the Kennedy Center. The bill contains $25 million to support the John F. Kennedy Center for the Performing Arts in Washington, DC. Due to the cancellation of performances, they have no revenue and had to lay off close to a thousand workers. The funds will prevent the center from closing down for good.Additionally, the package includes $75 million for the National Endowment for the Arts.
REAL ID deadline extendedThe deadline to obtain a REAL ID, federally mandated identification that will be needed for passengers to board aircraft, will be extended until at least September 2021 which is a year past the current deadline, according to a draft version of the Senate stimulus bill obtained by CNN.
More funding for food assistance.
The package provides $450 million for The Emergency Food Assistance Program, which supplies food banks. $350 million would buy additional food, and $100 million would be used for distribution. Additionally, there would be $200 million for food assistance in Puerto Rico and other US territories, as well as $100 million for food distribution on American Indian reservations.There will be billions provided to the Supplemental Nutrition Assistance Program and Child Nutrition program. Although, it would not expand its eligibility or benefits.
Evacuations of Americans
The bill includes $324 million for the State Department, with money specifically for evacuations expenses.
Peace Corps, diplomatic programs and refugees.
The bill includes $88 million for the Peace Corps, an independent US government agency that sends American volunteers abroad. Last week, the Peace Corps had to suspend all operations and evacuate its volunteers. Until conditions are safe, they will remain closed.In addition, the measure provides an additional $324 million for diplomatic programs, $258 million for international disaster assistance, $350 million for migration and refugee assistance and $95 million for USAID operating expenses.This will allow for the agencies to administer oaths of office remotely, but they must submit a report to the relevant committees “describing the process and procedures for administering such oaths, including appropriate verification.”
Charities. The bill will allow for a new deduction available for up to $300 in annual charitable contributions. This will only be available for people who do not itemize their deductions, this is calculated by subtracting the amount you give from your gross income.
Conclusion. While it remains a bit unclear how quickly and effectively President Trump will execute these programs, this is an incredible step in the right direction and we are confident that the federal government will help ensure these programs are put into place the way they were drafted to, to help the American people.