COVID Relief Bill Part 2

It was a race against time. With Christmas looming just around the corner and 12 billion Americans poised to lose their unemployment benefits, lawmakers scrambled to pass the new COVID Bill.

Since Congress got stuck in gridlock for the past months, they had been in and out of tight negotiations. They finally settle differences to produce a $900 billion relief package: 5,600 pages long, lower than what was hoped for, but just as historical. 

What did the parties lose?

The first and last COVID Relief bill was passed way back in March and since then, Congress has been in an impasse. Because of the deadlock, mutual compromises had to be made. 

On one hand, we have the Democrats who wanted nearly twice as much funding as the Republicans were willing to accept and had to settle with the $900 billion budget. They wanted more money to go to the states and local government, but they had to give way to finalize a bill where both sides could be satisfied.

On the other hand, Republicans demanded sweeping liability protection for businesses, hospitals and other institutions open during the pandemic.

Negotiations nearly broke down as Democrats pushed to provide more funds to give relief to states and local government, while Republicans pulled by proposing to limit the power of the Federal Reserve to provide credit to municipalities, businesses and other institutions. They settled this affair by providing in the legislation to bar only emergency lending programs that were the same as the ones that were newly employed in 2020. Democrats also secured an extension for state and local governments to spend money allocated under the March stimulus law, before the end of the Dec. 31 deadline.

Passing this bill is nothing short of a miracle. Let’s attempt to dissect the highlights of the five-thousand-paged legislation.

Highlights

Stimulus Check

Included in the package is a stimulus check valued at $ 600 per single individual and $ 1,200 per married person. While it is half the amount of the first approved check, the amount for Child Dependent increased from $500 to $600.

It is to be noted that the computations to determine who qualifies are the same. In the first stimulus check, the cutoff AGI to qualify for the maximum amount was $75,000 and they received nothing at $99,000 above.

Now, at $75,000 you are able to receive the full $600, but those earning at $87,000 will no longer receive any benefits. The difference between $87,000 and $99,000 means fewer people will be able to qualify for the stimulus check. So, don’t be surprised when you received it the first time, but are unable to qualify the second time.

What happens when you haven’t received the previous stimulus check or just got part of it? You don’t need to worry, you can just claim it as a recovery rebate credit when you file your 2020 tax return.

Unemployment Benefits

The measure covers a $300 per week federal unemployment supplement for 11 weeks. The new unemployment benefit is a compromise from the original one. Instead of $600 a week, it would be at $300. However, this resulted in an agreement to extend the time people could collect their benefits and created an additional federal benefit on top of the usual state benefit. This so-called Federal Pandemic Unemployment Compensation benefit will be paid for 11 weeks, starting after Dec. 26 and through March 14.

The best part about it is the waiver of overpayments. If you happened to receive more than you were supposed to, due to administrative errors from the Pandemic Unemployment Assistance program, the latest bill allows the state the discretion to waive the overpayments when honest mistakes were made that could be detrimental to the claimant.

A second PPP Loan

In the new legislation, $284 billion in Paycheck Protection Program loans are included that is now called PPP2. The components of this package are exciting since it covers provisions that small businesses have been clamoring for.

These PPP2 loans are available for first-time qualified borrowers and finally, previous PPP recipients may apply for a second loan up to $2 million, provided, they:

  • Have 300 or fewer employees.
  • Have used or will use the full amount of their first PPP loan.
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

PPP2 will also permit first-time borrowers from the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.

The terms of the PPP2 is generally similar to that of the original. To be eligible for full forgiveness PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks.

The PPP2 also retains the simplified version of the forgiveness application for $150,000 or less. The SBA is urged to create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

The bill also clarifies that the business expense paid with forgiven PPP loans are tax-deductible. It states, “No deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided”. The provision applies to loans under both the original PPP and subsequent PPP loans.

Other highlights

  • $8 billion for Covid-19 vaccine distribution and $20 billion to ensure Americans receive shots for free. 
  • The bill also puts at least $20 billion more into Covid-19 testing and contact tracing.
  • The bill extends the federal eviction moratorium through Jan. 31 and a fund of $25 billion in rental assistance.
  • The package includes $15 billion in payroll support for U.S. air carriers that are reeling from the pandemic.
  • The new round of the PPP allows restaurants to receive loans equal to 3.5 times their average monthly payroll costs, while businesses in other industries are restricted to loans of 2.5 times payroll expenses.

Final Words

As Senate Majority Leader Mitch McConnell said, Congress doesn’t deserve praise for simply doing its job and it is disappointing that it took this long to produce the bill that was desperately needed by the American people.

While Speaker Nancy Pelosi said there is more to be done and this bill is just the first step. Any more help will need to wait next year when Congress resumes.

Will the bill be signed by the president? Stay tuned as we follow this saga that is the elusive COVID relief bill.

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