March 1, 2021
House approves COVID relief reconciliation bill
The House on February 27 approved 219-212 a budget reconciliation bill (H.R. 1319) reflecting President Biden’s $1.9 trillion COVID relief plan, sending the bill to the Senate for consideration. The American Rescue Plan Act would provide direct payments, a child tax credit expansion in the form of direct payments, an international tax change, extended unemployment benefits, COBRA subsidies and ACA tax credit enhancements, relief for pension plans, state & local funding, and other provisions. Two Democrats voted against the bill (Reps. Golden D-ME and Schrader D-OR) and no Republicans voted in favor.
The House bill includes a minimum wage increase to $15/hour, but the Senate Parliamentarian’s ruling that the provision violates budget reconciliation rules means it is likely to be stripped out by the Senate, where Democratic leaders are considering alternatives like imposing a tax penalty for corporations that don’t pay $15/hour or another amount. Other provisions being evaluated for compliance with budget reconciliation rules include COBRA subsidies and multiemployer pension provisions, and language on child tax credit payments to be sent out by the IRS was changed to comply with the rules.
If the House bill is changed by the Senate, a conference process to resolve differences may be necessary or, at the very least, another House vote on the final version will be required before the President’s signature. Other potential changes include steering more of the House bill’s $350 billion in state and local government funding toward broadband investment, as some Senate Democrats want. Democrats want the bill enacted before pandemic UI programs expire March 14, after which President Biden is set to outline his next major bill with infrastructure as the focus.
The Congressional Budget Office has confirmed in a letter to House Minority Leader Kevin McCarthy (R-CA) that the relief package would trigger mandatory cuts to Medicare of $36 billion and as much as $90 billion in other programs due to statutory Pay-As-You-Go (PAYGO) requirements. The cuts would take effect within 15 days of the end of the Congressional session barring the enactment of subsequent legislation that would offset the deficit increase, waive the bill’s effect on the PAYGO scorecard, or otherwise mitigate or eliminate the PAYGO requirements.
Some provisions of the House bill are described in brief below.
HHS pandemic-related funding:
ACA tax credits and COBRA coverage
Other provisions: TANF, Childcare, other HHS programs
Paycheck Protection Program: The bill increases the PPP’s lending authority by $7.25 billion, to $813.7 billion, and appropriates the same amount for the Small Business Administration (SBA) to guarantee additional loans.
Restaurant Assistance: $25 billion for a Restaurant Revitalization Fund administered by the SBA. Eligible recipients would include restaurants, bars, food trucks and caterers. For 60 days after enactment, $5 billion would be set aside for eligible entities that had gross revenue of $500,000 or less in 2019.
Disaster Loans: $15 billion for additional Economic Injury Disaster Loan (EIDL) advance payments, with applications processed by the SBA on a staggered schedule: 1) Within 14 days of enactment, businesses with 300 or fewer employees and losses of at least 30% over eight weeks compared with a similar period before the pandemic. 2) 28 days from enactment, businesses with 10 or fewer employees that had losses of more than 50% during the covered period. 3) 42 days from enactment, businesses with 10 or fewer employees that did not previously qualify.
$10 billion in Defense Production Act spending, allowing the president to increase production of essential materials, including helping private-sector entities expand production lines to fulfill U.S. national security needs.
$25 billion in emergency rental assistance, including assistance targeted to specific populations:
$5 billion for homelessness funding, to allow state and local governments to finance supportive services, affordable housing, and the acquisition of non-congregate shelter (such as hotels) for people currently experiencing homelessness.
More than $10 billion in homeowner assistance funding, including $9.96 billion to states, territories and tribes to provide direct assistance with mortgage payments, property taxes, property insurance, utilities and other costs for homeowners struggling due, directly or indirectly, to the impacts of the pandemic (section 4207) and $39 million for the Department of Agriculture (USDA) to continue providing Section 502 and 504 home loans to low-income borrowers in rural areas as well as existing USDA borrowers.
$10 billion for the State Small Business Credit Initiative, supporting up to $100 billion in small-business financing through state government programs, including up to $2.5 billion to support businesses owned by socially and economically disadvantaged individuals, including minorities.
$15 billion in airline industry assistance, extending the Payroll Support Program (PSP3) for airline workers and related contract workers through September 30, 2021. PSP3 would provide $14 billion to support eligible air carrier workers and $1 billion for workers of eligible contractors.
Multiemployer pension support – The bill would create a special financial assistance program under which cash payments would be made by the PBGC to troubled multiemployer plans. Assistance to plans would be provided in a lump sum that would be sufficient to pay all benefits due under the plan through 2051. Plans would have to apply for assistance by December 31, 2025. Eligible plans would be those in critical and declining status, plans with significant underfunding and more retirees than active employees, and plans that suspended benefits and certain insolvent plans.
Single employer defined benefit plan funding relief – The bill would extend the current seven-year amortization period for funding shortfalls to fifteen years for all plan years beginning after 2019. It would also provide further interest rate stabilization – the current 10% corridor would be narrowed to 5% for 2020 and remain at 5% until 2026. The bill would also establish a 5% floor under the 25-year average used to calculate the interest rate.
Community Newspaper Funding relief – The SECURE Act enacted into law in December 2019 provided relief to certain community newspapers by increasing the interest rate used to calculate their funding obligations and extending their amortization period. The bill would extend the relief provided by SECURE to additional newspapers.
Cost of Living Adjustment Freeze – To offset out-year revenue losses generated by the single-employer pension funding relief, the bill would freeze certain pension-related limits that normally are inflation-adjusted. The three limits affected are the compensation limit, the defined contribution limit, and the defined benefit limit. All would be frozen for calendar years beginning in 2030.
JCT’s “Estimated Revenue Effects Of H.R. 1319” is available here.
All other materials are available here.