As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.
US Government Stimulus Plan Expanding – Here’s the Latest
The US Congress is adding to the COVID-19 government stimulus package with massive amounts of tax incentives, loans and direct payments. While the coronavirus outbreak continues to spread across the United States and forces many Americans to stay at home, lawmakers in Washington DC have been busy crafting relief bills to respond to the crisis.
The CARES Act, the coronavirus bill passed last week, was the culmination of Phase 3 of President Donald Trump’s and the federal government’s bipartisan government stimulus response to the COVID-19 pandemic. The bill included lots of critical items including expanded unemployment benefits, direct payments to Americans, loan programs for small businesses, and numerous tax cuts and credits.
Though the bill was a bold and unprecedented measure to respond to the current public health crisis, lawmakers on Capitol Hill are already thinking about the next phase of the response. Further stimulus packages are in the works to bolster the American economy and help small business owners.
We’ve outlined the four most important things small business owners should know about government stimulus funds in their response to the coronavirus pandemic.
Facilitating Phase 3: Guidance and Clarification
Though this isn’t explicitly part of a fourth bill (Phase 4) to respond to the COVID-19 crisis, lawmakers and the Trump administration have taken steps to facilitate the distribution of benefits extended by the CARES Act and the Families First Coronavirus Response Act (FFCRA).
Treasury Guidelines on the Payroll Protection Program (PPP)
The Payroll Protection Program (PPP) is a key component of the Phase 3 coronavirus relief package, designed to make $349 billion of low-interest loans available through the Small Business Administration (SBA). These loans are designed to keep workers paid during the crisis to reduce pressure on employees, employers, and other government relief programs. Businesses that take out loans may be eligible for loan forgiveness.
The Treasury Department issued guidance to help small business owners navigate the process of applying for and securing loans covering eligibility requirements, how to apply for the loan, what the cash can be used for, the interest rate charged, and details of forgiveness and repayment.
What This Means For Small Business Owners: These loans can be used to cover payroll, group healthcare benefits, rent for physical locations, and other expenses, and are designed to help small businesses continue operating with reduced revenues due to social distancing and other efforts to curb the pandemic. Check out our previous article for a more detailed overview of the PPP.
Taxes in the Time of COVID-19
The IRS has issued additional information regarding provisions of the CARES Act and FFCRA that will affect taxes for employers.
- Tax Credits for Paid Leave: The FFCRA included tax credits for businesses with less than 500 employees to reimburse employers for payroll expenses to cover paid sick, medical, and family leave for employees who are caring for themselves or their family. The IRS has released detailed instructions for claiming the credits on this page.
- Employee Retention Credits: This is the formal name of the payroll tax credit discussed in detail below. These credits are not available to businesses that take advantage of PPP loans.
What This Means For Small Business Owners: You should be aware of the benefits available to your business if you meet the requirements for these tax credits, as well as how they may conflict with other credits and relief programs.
Bolstering and Replenishing CARES Act SBA Loan Programs
One of the key pillars of the CARES Act was the $349 billion dollars made available to small business owners. This relief, in the form of loans and loan guarantees through the SBA 7(a) loan program, was designed for small business owners especially affected by the COVID-19 crisis who need assistance with covering operating costs and keeping their doors open.
But there have been a number of issues in the rollout of this relief. The system buckled and experienced glitches as business owners scrambled to apply for credit. Banks have been frustrated with inadequate guidance from the SBA about the distribution of these funds. Another principle issue is the worry that the allocated funds won’t be enough.
Senator Marco Rubio, the Chairman of the Senate Committee on Small Business and architect of the existing expansion in SBA lending, has indicated that he doesn’t think the existing allocations will be enough. He told CNBC that Congress is going to have to go back and address problems that have emerged since the passage of the CARES act including “replenishing the funds on the small business loan program. Because I believe that those funds, given the demand, will not reach June 30.”
On April 7th, Senate Majority Leader Mitch McConnell, in concert with Minority Leader Chuck Schumer, committed to approving further funding for small business relief as soon as possible. This extra funding would bolster the existing programs under the CARES Act, but lawmakers want to go further.
House Speaker Nancy Pelosi and other House Democrats have indicated that additional small business loan programs are expected to be included in the “Phase 4” coronavirus relief package.
What This Means for Small Business Owners: Despite a jumbled rollout, eligible small business owners should be confident in their ability to access credit through expanded SBA loan programs.
Expansion of OSHA Regulations to Protect Healthcare and Essential Workers
In the negotiations over the CARES Act, Democratic House representatives had included a provision that would have required that Occupational Safety and Health Administration (OSHA) expand its regulations to protect healthcare workers and essential workers who are unable to work from home.
OSHA has already released extensive guidelines for small business owners. These regulations would be legal requirements on top of those guidelines that would force health care facilities, retail locations, and other businesses to take the necessary steps to protect workers on the front lines of the crisis.
This was ultimately not included in the passed version of the CARES Act, but it’s expected to show up again in negotiations over the next round of coronavirus legislation. Small business owners should expect additional requirements related to workplace sanitation, distribution of applicable personal protective equipment (PPE), and possibly directives about staffing levels.
What This Means for Small Business Owners: Depending on your industry, especially in healthcare and retail, you may be subject to increased OSHA scrutiny and should look out for new regulations concerning workplace safety.
Government Stimulus: Increasing and Expanding Payroll Tax Credits
What’s Been Done So Far
The Phase 3 legislation (the CARES Act) introduced a tax credit for employers for wages paid from 13 March through the end of the calendar year. The maximum for the credit was set at $5,000 per employee and is not available to businesses that take out loans through the Paycheck Protection Program, which was also introduced in the same act. A separate tax credit for employers was introduced by another piece of legislation, the Families First Coronavirus Act. More guidance can be found from the IRS.
What Could Be Included in Phase 4
White House officials have indicated they would be open to expanding payroll tax credits in the coming Phase 4 relief bill. This could take several forms, including:
- Increasing the Cap: The current $5,000 cap for the credit could be increased to allow employers to claim a larger amount.
- Relaxing the Requirements: The current conditions for taking advantage of credit require that the business either be suspended by government directive or face a 50 percent decline in gross receipts during a quarter compared to the same period the year before. This may be relaxed to increase eligibility.
- Eliminating Incompatibility with PPP: As it stands today, the payroll tax credit from the CARES Act cannot be claimed if an employer takes a loan from the Paycheck Protection Program. This restriction may be waived, though this is unlikely.
What This Means for Small Business Owners: If payroll tax credits are expanded, businesses should face less pressure from payroll expenses, but this relief will be spread out over at least the rest of the year and may not address short-term revenue shortages.