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July 28, 2020

Senate Republicans unveil coronavirus proposal

Senate Republicans July 27 released a series of bills comprising their Health, Economic Assistance, Liability Protection and Schools ("HEALS") Act proposal for the next coronavirus bill, including health, tax, and liability protection components. The proposal is intended to be a counteroffer to the $3 trillion House-passed HEROES Act and will allow bipartisan negotiations to begin in earnest, with lawmakers facing a July 31 expiration of expanded unemployment benefits.

On that issue, the Senate GOP unemployment proposal would continue add-on payments of $200 per week through September, to be replaced in October with a payment (up to $500) that, when combined with the state UI payment, would replace 70% of lost wages. Payments to states to reimburse nonprofits, government agencies, and Indian tribes for costs they incur through December 31, 2020 to pay unemployment benefits would be increased from 50% to 75%.


The Senate Finance Committee portion of the plan includes a 'mobile workforce' proposal from second-ranking Senate Republican John Thune (R-SD), who has partnered on the issue with Senator Sherrod Brown (D-OH). The proposal in HEALS creates uniform rules for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders due to the COVID-19 pandemic and extends through 2024. The provision sets a 30-day threshold before a state, other than an employee's resident state, can assert taxing rights over an employee's income. During 2020, the threshold is extended to 90 days if the work is being performed outside the resident state as a result of COVID-19. Also for 2020, employers may treat wages of employees as earned at their pre-pandemic work location (instead of a remote location), unless the employer elects to treat the wages as earned in the remote location. This provision would apply on the date employees began working remotely and end on the earlier of when the employees return to their primary work location or the end of the calendar year.

The Finance package also includes a proposal by Senator Rob Portman (R-OH) to provide a refundable tax credit against payroll taxes for 50% of the costs incurred by the business for COVID-19 testing, personal protection equipment (PPE), disinfecting, extra cleaning, and reconfiguring workspaces. The Safe and Healthy Workplace Tax Credit has per-employee dollar limits of $1,000 for each of the first 500 employees, plus $750 for each employee 500-1000, and $500 for each employee over 1,000.

Additional stimulus checks are proposed at the same amount as under the CARES Act — $1,200 per individual, $2,400 for couples and $500 for each qualifying dependent.

With regard to the employee retention tax credit (ERTC) — a refundable payroll tax credit created in the CARES Act — the applicable percentage of qualified wages reimbursed would be increased from 50% to 65%, and eligibility would be extended to employers who experience a 25% decline in gross receipts compared to the same calendar quarter in the previous year (down from 50%), with gross receipts of tax-exempt organizations included. The limitation on per-employee qualified wages would be increased from $10,000 per year to $10,000 per quarter (limited to $30,000 for the calendar year).

The work opportunity tax credit (WOTC) would be expanded with a qualified COVID-19 component for those unemployed and who gain employment before January 1, 2021, upping the maximum credit for employers hiring this new WOTC group from 40% of the first $6,000 of qualified first-year wages to 50% of the first $10,000.

The Finance Committee package also includes some technical CARES Act fixes and permits states and tribal and local governments more flexibility in using Coronavirus Relief Fund payments.

A separate Restoring Critical Supply Chains and Intellectual Property Act bill from Senator Lindsey Graham (R-SC) would provide:

  • a $7.5 billion Qualified Investment Tax Credit program permitting qualifying personal protective equipment manufacturers to receive a credit of 30% of a qualified investment for PPE production, with those selected providing the greatest domestic job creation and retention and the largest amount of needed medical PPE to the Strategic National Stockpile;
  • eligible US manufacturers a 30% credit, modeled after the 48C Advanced Manufacturing Tax Credit, against equipment costs associated with PPE manufacturing; and
  • taxpayers that receive the credit the ability to bring intangible property used in connection with the production of PPE back to the US without taxable gain.

Another separate bill by Senator Tim Scott (R-SC) would provide a full deduction for business meals prior to January 1, 2021, but this bill was not included in the Senate Republican package released on July 27.


Health provisions from the Senate Health, Education, Labor & Pensions (HELP) Committee would require the HHS, FDA, and CDC to improve earlier access to diagnostic tests and clarify that CDC can enter into agreements with public and private entities to assist in the immediate and rapid development, validation, and dissemination of diagnostic tests.

The emergency supplemental package crafted by the Appropriations Committee contains $25 billion in additional funds for health care providers, $105 billion to help schools adapt and provide a safe path for children to return to the classroom; $16 billion in grants to states for testing, contact tracing, and surveillance; $20 billion for vaccine, therapeutic and diagnostic development; $20 billion to assist America's farmers and ranchers who have suffered as a result of the pandemic; and nearly $30 billion to protect the military and defense industrial base. The bill would also permit providers to delay repaying Advanced Medicare payments until January 2021

The legislation would retain the telehealth regulatory flexibilities, including payment rates, made available during the public health emergency through the length of the public health emergency, or December 31, 2021, whichever is later. It also requires Medicare Payment Advisory Commission report to Congress on the impact of telehealth flexibilities on access, quality, and cost by July 1, 2021.

The legislation does not include any health care coverage provisions, but the bill would permit employers to offer telehealth as an excepted benefit to employees who are not full-time or do not qualify for their employer's coverage and would permit employees to roll-over their flexible spending account balances.

Liability provisions include protection for employers from liability under federal labor and employment laws, including the Occupational Safety and Health Act (OSHA) and Fair Labor Standards Act (FLSA), for actions taken to comply with coronavirus-related public-health guidance and regulations.


The HEALS Act bill devoted to small-business loans, the "Continuing Small Business Recovery and Paycheck Protection Program Act," was drafted by Senate Small Business Committee Chairman Marco Rubio (R-FL) and is made up of four main components. The part devoted to "second draw" PPP loans provides an additional $190 billion for new and follow-on loans. Businesses eligible for a second PPP loan would be limited to those that have no more than 300 employees, meet the Small Business Administration's (SBA) standards for revenue size, and can show at least a 50% reduction in gross revenue, according to a Senate staff summary. $25 billion would be set aside for companies with 10 or fewer workers, and $10 billion reserved for loans by community lenders. The maximum loan size would be 2.5 times the company's average total monthly payroll costs, capped at $2 million. Businesses could not receive a second PPP loan that aggregates to more than $10 million. Companies would still have to maintain the PPP's 60/40 allocation of payroll/non-payroll costs to get full loan forgiveness, as established by the PPP Flexibility Act signed by the president in June.

The bill's second component would make a number of other changes to the PPP, including expanding forgivable expenses to include specified "covered supplier costs, covered worker protection expenditures and covered operations expenditures." Borrowers could choose whichever eight-week period in 2020 they want to use the forgivable funds for. The bill simplifies the forgiveness application for smaller loans (less than $150,000), and for loans between $150,00 and $2 million, borrowers would no longer have to submit the lender documents required by section 1106(e) of the CARES Act. This section of the bill also expands eligibility for the PPP to include certain 501(c)(6) organizations, including local Chambers of Commerce and Destination Marketing Organizations with 300 or fewer employees, though the funds can't be used for lobbying. The bill also creates a new PPP loan calculation for farmers and ranchers.

Notably, a third component of this bill authorizes $100 billion for long-term, low-cost 7(a) loans to "recovery sector businesses," including seasonal businesses and those in low-income census tracts that have fewer than 500 employees and can demonstrate at least a 50% reduction in gross revenue. These loans could amount to up to twice the borrower's annual revenue, capped at $10 million, with a 100% SBA guarantee and a 20-year term at a fixed rate of 1%. Payments could be deferred for the first two years. These new 7(a) loans could be used for "working capital, acquisition of fixed assets and refinancing existing indebtedness," according to the Senate summary. The final component of the bill would establish a "Small Business Growth and Domestic Production Investment Facility" that would provide $10 billion in long-term debt with equity features to registered SBA Small Business Investment Companies (SBICs) that invest in small businesses with major revenue losses from the pandemic, "manufacturing startups in the domestic supply chain," and low-income communities.


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