Legislative Updates

November 23, 2020

Federal Reserve, Treasury Dispute Return of Unused COVID-19 Funds

Summarized from Jade West, National Association of Wholesaler-Distributors

In a surprise move last week, Treasury Secretary Steven Mnuchin asked the Federal Reserve (Fed) to return to the Treasury unused COVID-related emergency funds. In an even more surprising move, the Fed objected to the request, setting up a rare public dispute between Treasury and the Fed.

A significant part of the $455 billion Secretary Mnuchin has asked the Fed to return would come from the under-utilized MSLP. The Treasury has been unable spend the funds, but the resources would be available to Congress to reallocate. It should be noted that for several months members of Congress and many in the business community have been calling for these unused funds to be returned to Treasury and reallocated as part of a new COVID-19 relief package. It is unclear why Mnuchin chose to take this action at this time.

You can read a Bloomberg story on this issue and the dispute between Treasury and the Fed here.

November 23, 2020

Narrowing Majority Could Push House Speaker to Negotiate

Summarized from Jade West, National Association of Wholesaler-Distributors

In the category of “the more things change, the more they stay the same” … Senate Minority Leader Chuck Schumer (D-NY) told the press he was pleased that Majority Leader Mitch McConnell (R-KY) had agreed to re-start negotiations on a new COVID bill. McConnell staff immediately responded that Schumer must be confusing the must-pass spending bills with COVID-19 legislation, suggesting that in fact there was no resumption of negotiations.

 There is still hope for a bill in December, with a lot depending on what Speaker of the House Nancy Pelosi (D-CA) chooses to do. Republicans are likely to have gained more than a dozen seats in the House, giving the speaker the narrowest House majority in more than 100 years. Arguably, her negotiating hand is stronger now with her larger majority than it will be after the new Congress is sworn in on Jan. 3. However, there is speculation among political pundits that she could be putting off new COVID negotiations hoping for a Democratic Senate majority after the Georgia Senate run-off elections on Jan. 5, or waiting to negotiate with a Biden Administration after January 20th. In the interim, businesses face threats of new shutdowns and wait for Congress to act. 

November 23, 2020

McConnell Reaffirms Support for Liability Protection in Relief Package

Summarized from Jade West, National Association of Wholesaler-Distributors

The Institute for Legal Reform recently conducted a survey on COVID-19 liability relief for employers. The survey shows that 79 percent of Americans agree that aside from cases of gross negligence, employers who follow the latest government guidelines should be protected from lawsuits. The survey also shows that strong majorities of Republicans, Democrats, and independents agree that Congress should pass liability protections. For more on this survey, click here.

NAW continues to work with its trade association allies for passage of a new relief measure that includes COVID-19 liability protections for businesses. Senate Majority Leader Mitch McConnell (R-KY) and his staff continue to reassure business groups that liability remains a top priority for any new relief package.

November 16, 2020

Tax Deduction Issue Remains; Court Orders Disclosure of Borrower Info

Summarized from Jade West, National Association of Wholesaler-Distributors

As you know, the IRS ruled earlier this year that otherwise-tax-deductible expenses that are paid with a forgiven Paycheck Protection Program (PPP) loan will not be deductible. This ruling is in direct conflict with the statute, which clearly said PPP loans would not be taxable. NAW and its trade association colleagues have been working with allies in the House and Senate to pass legislation that would reaffirm statutory intent and reverse the IRS ruling. The NAW has also communicated with the SBA and Treasury urging that the IRS ruling be rescinded, but with no success – Secretary Steven Mnuchin has been truly “dug-in” on this issue.

The NAW is still actively lobbying for Congressional action on this and hope Congress will pass a COVID-19 bill in the lame-duck session that includes the Cornyn bill, which would reverse the IRS ruling.

In the interim, however, Treasury and the IRS appear to be moving in the wrong direction on this. As Tax Notes reported last week:

Treasury officials told (Edward S. Karl of the American Institute of CPAs) they anticipated issuing additional guidance before the end of the year, and possibly by the end of November, generally stating that if a borrower has a reasonable expectation of loan forgiveness, the expenses can’t be deducted to the extent they’re paid for with the loan. That’s true regardless of when the loan is forgiven …

While the progress on the tax deduction question remains in limbo, the SBA and Treasury continue to make other changes to the PPP program. The issue of whether to publicly disclose information about PPP loans and borrowers was heatedly debated this past summer, however, it seemed to be resolved when the SBA and Treasury released the names of PPP borrowers, but provided information on the size of the loans in ranges rather than specific amounts, and announced that they would treat as confidential more detailed information. Unfortunately, last week the District Court for the District of Columbia ruled that the SBA must release – by Nov. 19 – names and addresses of all PPP and Economic Injury Disaster Loan (EIDL) borrowers and the exact amount of those loans. The SBA said last week that they had not decided whether to appeal that decision.

The NAW has pursued this with the SBA but have not been told whether they have yet made that decision. 

You can read a detailed story about this decision here, and the actual court decision is here.

November 16, 2020

Questionnaire Would Burden Many PPP Loan Borrowers, NAW Says

FEDA has signed onto a letter from the National Association of Wholesaler-Distributors (NAW) opposing a Small Business Administration (SBA) plan to have Paycheck Protection Program recipients that borrowed more than $2 million fill out a new “economic necessity” form.

Form 3509 is nine pages long and would require detailed financial information and supporting documents from borrowers. Additionally, lenders would have to upload the completed forms to the SBA website in an apparently time-consuming process that would have them respond to a series of questions. The completed form would be due within 10 business days of receipt from the lender.

The SBA says it is in the process of reviewing loans to maximize program integrity and protect taxpayer resources and that the response forms would be used as a part of good-faith certification. Failure to complete the forms could result in the determination that the borrower was ineligible for the PPP loan and any associated forgiveness.

The NAW sent the letter to officials from the U.S. Treasury and the SBA, as well as congressional leaders, encouraging them to reconsider the new form. “The members of our organizations have been on the frontlines both delivering and receiving aid from PPP loans which have been critical to the small business economy over the last eight months,” the letter states. “Unfortunately, the questionnaires introduce a confusing and burdensome process for both borrowers and lenders, and we fear that it could lead the agencies to inappropriately question thousands of qualified PPP loans made to struggling small businesses.”

To read the full letter to congressional leaders, please click here. The letter to the Treasury and SBA may be found here.

November 16, 2020

Justices Roberts and Kavanaugh Indicate Unwillingness to Tear Down Health Care Law

Summarized from Jade West, National Association of Wholesaler-Distributors

The fate of the Affordable Care Act (ACA) is once again in the hands of the Supreme Court, which last week heard its first oral arguments in a case over the law’s constitutionality.

The Supreme Court case centers around the law’s individual mandate that initially required all consumers to have health insurance or pay a penalty, which the Supreme Court in 2012 upheld as within Congress’ taxing authority. Congress effectively repealed the penalty in 2017 and a group of states, led by Texas, brought a lawsuit. The states argue that without the tax, the mandate — and the entire law — is unconstitutional.

Chief Justice John Roberts and Justice Brett Kavanaugh signaled that they’re unlikely to tear down Obamacare as the oral arguments began in a Republican-backed lawsuit challenging the landmark health care law. Both justices strongly questioned whether the elimination of the mandate penalty made the rest of the law problematic and Kavanaugh appeared to favor leaving the rest of the law intact if the mandate is struck.

Oral arguments are not a perfect indicator of how the justices may eventually rule, but this may provide some reassurance those who support Obamacare. For the ACA to survive unscathed, at least two Republican appointees will need to join the court’s three liberal justices. Oral arguments in the case are continuing and a court ruling is not expected until next year.

October 26, 2020

No Changes for Pandemic Relief Package, PPP Loans

Summarized from Jade West, National Association of Wholesaler-Distributors

The chances for a U.S. COVID-19 pandemic relief package passing Congress before the Nov. 3 election are quickly fading as House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin continue negotiations over the details of a nearly $2 trillion aid package.

Meanwhile, Senate Democrats voted 51-44 against a targeted $500 million GOP bill that would have provided a second round of funding for the Payment Protection Program (PPP) as well as additional COVID-19 relief. Republicans also blocked a bill from Senate Committee on Finance that would have renewed the $600-per-week federal subsidy to unemployment benefits.

Read a more in-depth Bloomberg analysis of the ongoing negotiations here.

October 12, 2020

Congressional Action Still Needed for Loan Forgiveness Association Tells Federal Officials

The Small Business Administration (SBA) and the Treasury Department released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less—an action that is designed to streamline the process for small businesses and provide much needed financial and administrative relief.

“Today’s action streamlines the forgiveness process for PPP borrowers with loans of $50,000 or less and thousands of PPP lenders who worked around the clock to process loans quickly,” said Secretary Steve Mnuchin. “We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds. We continue to favor additional legislation to further simplify the forgiveness process.”

The SBA and Treasury have also eased the burden for PPP lenders, allowing lenders to process forgiveness applications more swiftly. However, according to President and CEO of the Consumer Bankers Association Richard Hunt, the streamlined effort will not be enough to help mom-and-pop businesses and argues that Congressional action is still needed to protect these small businesses.

“Congress can solve this problem tomorrow and inject the equivalent of $7 billion into our economy by passing bipartisan, common-sense legislation to streamline PPP forgiveness for small businesses on Main Street in communities across the country," Hunt stated.