COVID-19: Legislative and Regulatory Updates

The pandemic has led to multiple new stimulus and aid packages and listed below is a summary of these programs.

CARES Act: The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on Friday, March 27th. Below is a summary of the major provisions effecting public entities and their employees:

1. Direct Payments to Americans: Direct payments of up to $1,200 each to Americans (individuals earning less than $75,000/year), with additional payments of $500 per child for individuals earning less than $75,000/year. Payments would be phased out for those earning more than $75,000 a year. Those earning more than $99,000 would not be eligible.
2. Enhanced Unemployment Aid: Payments for jobless workers would increase by $600 each. Laid-off workers would get those payments for up to four months. Regular benefits would be extended for an additional 13 weeks.
3. Funding for States, Health/Human Services, Hospitals and Education, etc.
- $150 billion for state, local and Native American tribal governments
- $100 billion for hospitals and other elements of the healthcare system
-$30 billion for education
-$25 billion for mass-transit systems
-$42 billion in additional spending for food stamps and child nutrition
-$12 billion for housing programs
-$45 billion for child and family services
4. Payroll Tax Deferment: Allows organizations to postpone paying the employer portion of Social Security payroll taxes that otherwise they would be required to pay between the enactment of the bill and January 1st, 2021 (Note that organizations receiving loan forgiveness under the Paycheck Protection Program or other Treasury programs are not eligible for Payroll Tax Deferment.)
5. Tax Credits:
-A refundable 50% credit for organizations affected by COVID-19, to encourage employee retention. The Act creates a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met.
- Loosened tax deductions for interest and operating losses.
- Suspension of penalties for people who tap their retirement funds early.
-Tax write-offs to encourage employers to help pay off student loans.
6. Self-Funded Nonprofits and Unemployment: This program reimburses self-funded nonprofits for half of the costs of benefits provided to their laid-off employees.
7. Charitable Giving Incentive: This program creates a new above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total charitable contributions of up to $300. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year. The law also removes the existing cap on annual contributions for those who itemize, raising it from 60% of adjusted gross income to 100%. For corporations, the law increases the annual limit from 10% to 25%. Food donations from corporations would be available to 25%, up from the current 15% cap.
8. Funding for Non-Profits: The CARES Act also provides financial assistance programs that non-profits can apply to for loans/grants.
-Payroll Protection Program Loans (Emergency SBA 7(a) Loans): This $349B emergency loan program provides loans of equal to the lesser of 2 and ½ months of average payroll or $10 million for eligible nonprofits. To be eligible, non-profits must be designated as 501(c)(3) or 501(c)(19) entities only. The loans will cover costs of payroll, operations, and debt service and will be forgiven in whole or in part under certain circumstances. These loans will be made by local and national lenders and can be covered to grants equal to the amount spent on payroll, rent, interest on mortgage, and utilities for the 8 weeks after origination. Loan forgiveness will be reduced proportionally if the employer reduces the number of full-time employees. Loan forgiveness will also be reduced if the employer reduces wages by more than 25%. Employers can avoid reductions in loan forgiveness if they bring back employees and restore wages generally within 30 days and maintain through June 30. Participants in this program cannot defer payroll taxes or claim the employee retention tax credit. More information on the Payroll Protection Program is available online (under assistance for small businesses).
-Economic Injury Disaster Loans (EIDL): This program creates emergency grants for eligible nonprofits with 500 or fewer employees enabling them to receive checks for up to $10,000 within three days. These loans offer up to $2 million in assistance and can provide vital economic support to non-profits to help overcome the temporary loss of revenue they are experiencing. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate for non-profits is 2.75%. SBA offers loans with long-term repayments up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. You can obtain information and loan applications by calling the SBA’s Customer Service Center at 1-800-659-2955 (1-800-877-8339 for the hearing impaired), or by e-mailing disastercustomerservice@sba.gov. Applicants may also apply online. Completed applications should be returned to the local DLOC or mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
-Economic Stabilization Fund: This Fund sets aside $454 billion for “eligible business” which is defined as “a United States business that has not otherwise received economic relief in the form of loans or loan guarantees provided under” the legislation. It is expected, but unclear, whether charitable nonprofits qualify under that definition for stabilization loans. Mid-sized nonprofits between 500 and 10,000 employees are expressly eligible for loans under this provision. Although there is no loan forgiveness provision in this section, the loans would be charged an interest rate of no higher than 2% and would not accrue interest or require repayments for the first six months. Nonprofits accepting these loans must retain at least 90% of their staff at full compensation and benefits until September 30.

Please refer to the SBA website for additional information on these programs.

Families First Coronavirus Response Act: The Families First Coronavirus Response Act (FFCRA) takes effect on April 1st and will be in effect until December 31, 2020. Note that there will be a temporary period of non-enforcement of the FFCRA for the period of March 18 through April 17, 2020, provided the employer can demonstrate they acted in good faith. The Act requires certain employers to provide employees with paid sick leave or Expanded Family and Medical Leave (EFML) for specified reasons related to COVID-19. The paid sick leave and expanded EFML provisions of the FFCRA apply to certain public employers and private employers with fewer than 500 employees. Under the Act, special rules apply to health care providers and emergency responders. Certain provisions may not apply to employers with fewer than 50 employees. All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19.

Listed below are the circumstances that determine eligibility for this program:

1. The employee is subject to a federal, state, or local quarantine or isolation due to COVID-19.
2. A health care provider advised the employee to self-quarantine due to concerns related to COVID-19.
3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
4. The employee is caring for an individual or family member in quarantine from COVID-19.
5. The employee is caring for the employee’s child whose school has been closed or place of care is unavailable due to COVID-19 precautions; or
6. The employee is experiencing any other substantially similar condition.

For qualifying reasons (1)-(4) and (6) above, a full-time employee is eligible for 80 hours of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period. For qualifying reason (5) above, a full-time employee is eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid expanded family & medical leave) at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.

Note that there is a separate method for calculating the benefit for part-time employees whose schedules change widely from week to week. For qualifying reasons 1, 2, and 3 (above), eligible employees will receive paid sick leave at their regular rate. However, in no event shall the amount paid exceed $511 per day and $5,110 in total. For qualifying reasons 4 and 6 (above), eligible employees will receive paid sick leave at two-thirds of their regular rate, except that in no event shall the amount paid exceed $200 per day and $2,000 total. For qualifying reason 5 (above), employees taking leave are entitled to pay at 2/3 their regular rate to $200 per day and $12,000 in the aggregate.

Employers must post a notice that advises employees of their rights under the Act. Under guidance that will be released soon, eligible employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

Please refer to additional guidance documents issued by the Department of Labor:

Field Assistance Bulletin 2020-1: Temporary Non-Enforcement Period Applicable to the Families First Coronavirus Response Act (FFCRA)
Question and Answer Document
Guidance on Employee Paid Leave Rights
Guidance on Employer Paid Leave Rights
Fair Labor Standards Act Questions and Answers
Family and Medical Leave Act Questions and Answers
Department of Labor News Releases