In March of 2020, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act. It was bigger than the original Senate proposal but smaller than the subsequent House proposal. Eventually, the two reconciled, and the CARES Act became law.
In May of 2020, the House introduced a new COVID-19 economic relief proposal. The bill, known as the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, was not taken up by the Senate. At the time, Senate Majority Leader Mitch McConnell (R-KY) suggested that the timing was not right for another bill. But with just a few days to go before federal unemployment benefits run out, that appears to have changed.
You might be looking for the "HEALS Act" (Health, Economic Assistance, Liability Protection, and Schools Act) being put together under Sen. McConnell's watch. So far, there is no single bill, but rather a series of proposals. Various committee chairs have drafted their proposals and introduced them separately on the Senate floor.
This article focuses on the Continuing Small Business Recovery and Paycheck Protection Program Act introduced by Sen. Marco Rubio (R-FL) and Sen. Susan Collins (R-ME). It's just 92 pages long.
If you're looking for the American Workers, Families, and Employers Assistance Act (which focused on stimulus checks and unemployment), you'll find it here.
Here are some highlights of what the Rubio/Collins proposal, which focuses almost exclusively on the Paycheck Protection Program (PPP), includes:
Additional PPP Expenses. One of the criticisms of the PPP was that it was limited. Of course, that was also the intent (to get folks back on the payroll), but as businesses remain closed due to COVID-19, there has been a clamor to increase the pool of expenses to qualify for forgiveness. The Senate proposal would extend those expenses to pay for any software, cloud computing, human resources, payroll, billing and accounting; costs related to “property damage and vandalism or looting due to public disturbances” that occurred during 2020 not covered by insurance; supplier costs; and worker protection related to social distancing, sanitation or other safety requirements.
Lender Safe Harbor. Another concern raised in the PPP focused on those certifications. The Senate proposal clarifies that lenders may rely on loan certification or documentation submitted by borrowers. No enforcement action will be taken against a lender who, in good faith, relied on that documentation.
Covered Period For Forgiveness. Previously, the covered period time frame was fixed and inflexible. The Senate proposal would extend the covered period and allow the borrower to elect a covered period between eight weeks after origination and December 31, 2020.
PPP Second Draw Loans. Some businesses have claimed that they have exhausted their funds because they didn't know how much they would be affected by the COVID crisis. The Senate proposal would allow the hardest-hit small business owners to receive a second PPP loan - and still qualify for forgiveness. Under the proposal, an eligible business must have 300 or fewer employees and demonstrate at least a 50% reduction in gross receipts in the first or second quarter of 2020 relative to the same quarter in 2019.
Businesses that would not qualify include publicly-traded companies, those businesses which are excluded under 13 CFR 120.110 except for those otherwise made eligible by statute or guidance, businesses in financial services which have already received a PPP loan, and entities affiliated with entities in the People's Republic of China.
Businesses can borrow up to 2.5 times the average monthly payroll costs in the one year before the loan, up to $2 million (new businesses can figure 2.5x the sum of total monthly payments divided by the total number of months in which payments were made).
Businesses who borrow under a second PPP loan would be eligible for loan forgiveness equal to the sum of their payroll costs, mortgage, rent, utility payments, operations expenditures, property damage costs, supplier costs, and worker protection expenses incurred through 2020. The 60/40 split between payroll and non-payroll for forgiveness still applies.
And in a clear nod to complaints that small businesses didn't get a fair shot, the Senate proposal will set aside $25 billion companies employing 10 or fewer employees.
PPP Loan Caps, Generally. Worried about those caps moving again? The Senate proposal officially reduces the maximum amount borrowers may receive under the first round of PPP funding from $10 million to $2 million.
Ch-Ch-Changes. One of the clear frustrations about PPP loans has been the continually changing - and unpredictable - guidance. The Senate proposal allows borrowers eligible for a bigger loan as a result of "any interim final rule that allows for covered loan increases" to ask for an increase even if the initial covered loan amount has been fully disbursed, or if the lender has already submitted a Form 1502 report related to the covered loan.
PPP Targets. The Senate proposal creates specific PPP loan calculations for certain farmers and ranchers, allowing lenders to recalculate previously approved loans. It would also enable Farm Credit System Institutions to make PPP loans, and it would improve terms of 7(a) loans for seasonal businesses and businesses located in small business low-income census tracts.
501(c)(6) Organizations. Section 501(c)(6) organizations are business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual. The Senate proposal would expand eligibility to include 501(c)(6) organizations - with some restrictions, generally related to size and lobbying. (And if you're scratching your head trying to remember, yes, the National Football League (NFL) used to be a 501(c)(6) organization but gave it up in 2015.)
Lobbying Restrictions. The Senate proposal doubles down on lobbying, banning any borrower from using PPP loans for lobbying.
Conflicts of Interest. Many taxpayers weren't happy to learn that PPP loans went to companies with ties to members of Congress and the Executive Branch. The Senate proposal would require the President, Vice President, the head of an Executive department, or a Member of Congress and their respective spouses, children, sons and daughters-in-law to make disclosures. That's not as far as the HEROES Act would go, which would ban some kinds of related loans altogether.
And that’s a general summary of the Rubio/Collins proposal. Remember, this is just a proposal: it’s not guidance, interim, final or otherwise. Keep checking back for details.