COVID-19 Legislative Updates

May 20, 2020

FEDA Signs on to Coalition Letter

FEDA has joined hundreds of other business groups from across the country in signing onto a letter asking congressional leaders, the U.S. Department of the Treasury, and the U.S. Small Business Administration (SBA) to repeal the Paycheck Protection Program’s (PPP) requirement that 75 percent of funds be used for payroll for businesses to qualify for loan forgiveness, among other changes.

The letter was drafted by the U.S. Chamber of Commerce on behalf of small businesses. In addition to requesting the elimination of the 75-25 percent rule, the group requests the extension of the eight-week period for purposes of calculating loan forgiveness and extending the June 30 safe harbor date for rehiring employees and restoration of pay.

“These steps would conform the PPP with the reality of the gradual reopening now occurring across the United States and would help ensure that more small businesses remain in operation,” the letter says.

The letter adds that these three changes would help ensure that the liquidity provided through the PPP will be used in a way that is most likely to help small businesses remain open by allowing companies to use more of the funds for rent payments, vendor contracts, and other necessary expenses.

To read the full letter, please click here.

During a Senate hearing Tuesday, May 19, Secretary of the Treasury Steven Mnuchin defended the imposition of the payroll ratio. Still, there appears to be growing bipartisan support for changes to the PPP, according to the National Association of Wholesaler-Distributors. A story from The Hill details some of the potential fixes being debated by lawmakers.
 

May 28, 2020

House Passes Bill to Make PPP More Flexible

Summarized from Jade West, National Association of Wholesaler-Distributors

The U.S. House of Representatives today (May 28) voted overwhelmingly – 417 to 1 – to pass the Paycheck Protection Program Flexibility Act. The bill was sponsored by Rep. Dean Phillips (D-MN) and cosponsored by 80 representatives from both political parties.

The bill has several key components that will help small businesses that have taken out a PPP loan:

  • Extend the PPP loan forgiveness period from eight weeks to 24 weeks
  • Extend to Dec. 31 the period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. The current deadline is June 30
  • Maintain forgiveness amounts for companies that document their inability to rehire workers employed as of Feb. 15 and their inability to find similarly qualified workers by the end of the year
  • Reduce the requirement that 75 percent of the PPP loan be used to cover payroll to 60 percent
  • Repeal a provision of the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments
  • Establish a minimum loan maturity period of five years following an application for loan forgiveness, rather than the two-year deadline set by the Small Business Administration (SBA), the agency managing the program
The Paycheck Protection Program Flexibility Act still must be passed by the Senate and signed by the president before its changes would go into effect. The Senate is considering its own, more limited version of a PPP flexibility bill, which was introduced by Sen. Marco Rubio (R-RL) last week.

The National Association of Wholesaler-Distributors has strongly supported the Paycheck Protection Program Flexibility Act and is already working to achieve Senate action on the bill.

“We are particularly heartened that the members of the House of Representatives were able to put aside the partisanship that has plagued the chamber in recent months to act in a responsible way to help American businesses,” the NAW said in a statement. “It is now time for the Senate to quickly take up this legislation and similarly support businesses across this great nation.”

The NAW’s full press release is available here

May 28, 2020

“Truth Act” Rejected

Summarized from Jade West, National Association of Wholesaler-Distributors

In addition to passing the changes to the PPP, the House voted today to reject a bill that would require the SBA to issue a public report on assistance provided to small businesses from coronavirus relief programs. The “Truth Act” would have required the SBA to publish:

  • The names of entities that received more than $2 million in PPP or economic injury disaster loan (EIDL) funds, as well as the lenders and intermediaries
  • Explanations for funding decisions
  • The number of employees that received assistance at each business
The amount of assistance provided to small businesses owned by minorities, women, and veterans.

May 28, 2020

Bill to Protect Expense Deductions

Although legislators appear eager to give businesses more flexibility in how they may use PPP funds, progress on resolving the expense deduction issues with the program is moving more slowly.

At the beginning of May, Rep. John Cornyn (R-TX) introduced an amendment to the CARES Act that would reverse guidance from the IRS that prohibits businesses to deduct ordinary business expenses if those expenses were paid for by a forgiven PPP loan. The IRS decision appears to be counter to the intent of the CARES Act, which states that any amount forgiven by a PPP loan “shall be excluded from gross income.”

Cornyn’s bill has been referred to the Senate Committee on Finance but no action has been taken since May 5. However, it has gained some bipartisan support since that time as 19 other senators have signed on to cosponsor it, including seven Democrats.

May 26, 2020

PPP Fix Vote Now Expected this Week

Negotiations will continue this week to extend the period within which a Paycheck Protection Program must be used and to give businesses more flexibility in how they spend the money.

The Senate and House of Representatives are each considering their own versions of the bill. The Senate bill, S. 3833, was introduced by Sen. Marco Rubio (R-FL) and would extend the period during which a PPP loan must be spent from eight weeks to 16 weeks. Senate leaders last week has attempted to quickly pass the extension by garnering unanimous consent but failed to do so, delaying action until after Memorial Day.

The House bill, H.R. 6886, would go further than the Senate version. In addition to extending the spending period from eight weeks to 24, H.R. 6886 would abolish the Small Business Administration’s requirement that at least 75 perceent of PPP loan monies be used for payroll expenses; ensure full access to payroll tax deferment for businesses that take PPP loans; and allow businesses to receive full loan forgiveness if they were unable to rehire employees by the June 30 deadline as long as they made a good faith effort to rehire employees.

House Speaker Nancy Pelosi has agreed to allow a vote on H.R. 6886 this week. The bill will be considered on the House suspension calendar, meaning it will need a two-thirds majority to pass.

The National Association of Wholesaler-Distributors, of which FEDA is a member, is working to support passage of the House bill.

It appears that congressional action will be necessary for changes to the PPP to occur. Treasury Secretary  Steven Mnuchin told The Hill in an interview that extending the eight-week loan period was not something he could do administratively. Additionally, he indicated that he would not alter the program so that businesses could use more of the loan to cover overhead costs. “It’s called the Paycheck Protection Program, it’s not called the overhead protection program,” he said.
 

May 21, 2020

Legislation Would Allow Deductions for Expenses Paid by PPP Loans

One component that has lessened the value of the Paycheck Protection Program (PPP) is the IRS guidance that prohibits otherwise deductible business expenses when a company pays for that expense using a forgiven PPP loan.

That rule appears to be contrary to the intent of the CARES Act, which established the PPP program. The CARES Act states that any amount forgiven by a PPP loan “shall be excluded from gross income.” Still, the IRS so far has held firm on its guidance regarding deductions.

To reverse this decision, Sen. John Cornyn (R-TX) introduced an amendment to the CARES Act that would allow organizations to take tax deductions for ordinary business expenses if they were paid for by loan forgiveness received in response to COVID-19. The U.S. Chamber of Commerce this week sent a letter to congressional leaders supporting passage of Cornyn’s Small Business Expense Protection Act because it “would allow the customary deduction of business expenses for small business recipients of Paycheck Protection Program loans.”

“The Small Business Expense Protection Act would restore the ability of small businesses that have received PPP loans to deduct business expenses even if the expenses were paid out of PPP proceeds, freeing up much-needed capital on Main Street,” wrote Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber.

To view the full letter from the U.S. Chamber, please click here. Remember to urge your representatives and senators to support this bill as well.
 

May 21, 2020

Amendment Would Add Flexibility to PPP Terms

As FEDA described in Wednesday's mid-week COVID-19 legislative update, there is a push to make amendments to the CARES Act that would give employers added flexibility on how they use Paycheck Protection Program (PPP) loans and how their forgiveness is calculated.

The House version of the bill, H.R. 6886, was introduced by Chip Roy (R-TX) on May 15 and is expected to be considered next week. Roy has provided a thorough summary of the amendment, which can be read here.

The Senate may consider those alterations as early as today, according to the U.S. Chamber of Commerce. FEDA encourages members to reach out to their legislators and ask them to support the amendment. To find your U.S. representative and his or her contact information, visit house.gov/representatives and enter your home zip code in the top right corner. For your U.S. senators, visit senate.gov and click on the “Find Your Senators” by state dropdown menu in the top left corner.
 

May 20, 2020

Senate Hearing Reveals Main Street Lending Program Could Begin in May

Summarized from Jade West, National Association of Wholesaler-Distributors

During a Senate hearing Tuesday, May 19, Federal Reserve Chairman Jerome Powell told legislators that the long-awaited Main Street Lending Program (MSLP) should be operational by the end of May or early June, with funds flowing shortly afterward.

The MSLP was created as part of the CARES Act in March and is aimed at supporting small and medium-sized businesses that were in found financial condition before the COVID-19 crisis began. However, the launch of the lending program has been delayed as the U.S. Treasury and Federal Reserve have prioritized other recovery and relief efforts.

In addition to commenting on a possible start time frame for the MSLP, Powell told senators that the Federal Reserves’ larger lending facilities are just coming online, so the infusion of resources into the economy to date has been modest.