By Jessica Jeane, J.D. and Pamela Wolf, J.D.
The combination of bills is dubbed the HEALS Act—Health; Economic Assistance; Liability Protection; and Schools.
A Senate GOP “CARES 2″ framework was unveiled by top Republican senators late on July 27. The framework, which consists of several Senate bills introduced on the same day, is already receiving criticism from Democrats and some fiscally focused Republicans alike.
HEALS Act. “Together, [these] bills make up the HEALS Act—Health; Economic assistance; Liability protection; and Schools,” Senate Majority Leader Mitch McConnell (R-Ky.) said from the Senate floor on July 27. Most notably, most of the tax-related provisions, as introduced by Senate Finance Committee Chairman Chuck Grassley (R-Iowa), fall under the 168-page American Workers, Families, and Employers Assistance Act (S. 4318).
Additionally, a section-by-section summary of the bill details the various tax-related provisions, which include some of the following:
- Additional 2020 recovery rebates for individuals;
- Enhanced employee hiring and retention payroll tax credit;
- Temporary expansion of the work opportunity tax credit; and the
- A “safe and healthy workplace” tax credit.
Individual taxpayer rebate. The American Workers, Families, and Employers Assistance Act, similar to the CARES Act, would give all U.S. citizens and U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work-eligible Social Security number, a $1,200 ($2,400 married) rebate. In addition, they would be eligible for an additional $500 per dependent rebate. Unlike the CARES Act limitation under which the additional $500 was limited to taxpayers with a dependent child under 17, the additional $500 would now be provided to taxpayers with dependents of any age.
Individuals with no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits, would be eligible for the full rebate amount. The amount of the rebate would phase-out completely once the income of single filers exceeds $99,000, the income of head of household filers with one child exceeds $146,500, or the income of joint filers with no children exceeds $198,000.
Hiring and payroll tax credit. The CARES Act provided an employee retention tax credit (ERTC) in the form of a refundable payroll tax credit equal to 50 percent of certain wages paid by employers to employees during the COVID-19 crisis. The American Workers, Families, and Employers Assistance Act would increase the applicable percentage of qualified wages reimbursed through the credit to 65 percent.
Gross receipts requirement. The bill would also lower the amount of the reduction in gross receipts required to qualify as an eligible employer from a 50-percent decline to a 25-percent decline compared to the same calendar quarter in the previous year. For purposes of determining eligibility in the third quarter or fourth quarter of calendar year 2020, an employer would also be able to satisfy the reduction-in-gross-receipts test if the preceding quarter’s gross receipts declined by at least 25 percent when compared to the same calendar quarter in the previous year.
Wages paid by employer. The credit is based on the amount of qualified wages paid by the employer. While the CARES Act limited the amount of qualified wages taken into account per employee to $10,000 for the year, the legislation would increase that to $10,000 per quarter (otherwise limited to $30,000 for the calendar year).
All employee wages credited. Under the CARES Act, for employers with more than 100 full-time employees, the credit is based only on the portion of an employee’s wages that compensate the employee for not performing services. For employers with 100 full-time employees or less, the American Workers, Families, and Employers Assistance Act would make the credit based on all wages paid to an employee. This provision would also increase the 100-employee threshold to 500 employees.
Coordination enhanced.The legislation would also enhance coordination between the credit and the PPP by permitting employers to be eligible for both programs, but with limitations to prevent overlapping benefits.
Health plan expenses. The American Workers, Families, and Employers Assistance Act would also clarify that group health plan expenses are considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.
Safe and healthy workplace tax credit. In addition, the American Workers, Families, and Employers Assistance Act would establish a refundable payroll tax credit equal to 50 percent of an employer’s “qualified employee protection expenses,” such as testing for COVID-19, protective personal equipment (PPE), cleaning supplies, “qualified workplace reconfiguration expenses,” including modifications to workspaces for the purpose of protecting employees and customers from the spread of COVID-19, and “qualified workplace technology expenses,” including contactless point-of-sale systems and other technology to track employee interactions with customers. The qualified workplace reconfiguration expenses and qualified workplace technology expenses would need to have a primary purpose of preventing COVID-19 spread, among other requirements.
Credit based on average number of employees. In each calendar quarter, qualified expenses could not exceed a cap based on the average number of employees. The cap would be equal to equal to $1,000 for each of the first 500 employees, plus $750 for each employee between 500 and 1000, plus $500 for each employee that exceeds 1,000.
Other provisions. The credit would also permit self-employed individuals, including sole proprietors, independent contractors, and farmers, to claim a refundable credit against income taxes for the same types of COVID-19 related expenses. The credit would apply to amounts paid or incurred for qualified employee protection expenses after March 12, 2020, and before January 1, 2021.
Gig-workers stay “independent,” not employees. The American Workers, Families, and Employers Assistance Act would establish a safe harbor permitting marketplace platform companies to provide certain COVID-19-related assistance to service providers—such as gig-economy workers—without jeopardizing the service provider’s independent contractor status under the Internal Revenue Code. Benefits covered here would include financial assistance due to lost business; health care expenses, including for COVID-19 testing or PPE; and cleaning supplies or training related to COVID-19. Benefits (other than cash payments) received by the service provider would be treated as “qualified disaster relief payments” for purposes of Section 139, which excludes the payments from the service provider’s taxable income.
Unemployment supplemental payments cut. Unemployment insurance supplemental payments would be cut under the American Workers, Families, and Employers Assistance Act, from $600 to $200 per week for weeks of unemployment through September. Beginning in October, the payment would be replaced with a payment (up to $500) that, when combined with the state UI payment, would replace 70 percent of lost wages—either through a formula specified in the bill, or by a state proposing an alternative method and receiving approval from the Secretary of Labor.
States that are not able to provide a second payment tied to lost wages by October 5 would be able to apply for a waiver from the Department of Labor to continue paying a fixed dollar amount for up to two months. Further, starting in October, the additional payment would count as income when determining eligibility for federal low-income programs, in the same way as wages and regular state unemployment insurance payments do now.
Return-work-requirement notification. Beginning 30 days after enactment, states would be required to notify recipients of UI and employers about state law on return to work and suitable work requirements. Specifically, states would be required to notify individuals and employers:
- Of the state’s return-to-work requirements;
- The individual’s rights to refuse to return to work or to refuse suitable work; and
- How an individual can contest the denial of a claim as a result of these requirements.
Paycheck Protection Program (PPP). Further,Senate Small Business Committee Chairman Marco Rubio (R-Fla.) on July 27 unveiled the Continuing Small Business Recovery and Paycheck Protection Program Bill, which would provide additional PPP assistance. According to a section-by-section summary of the bill, the measure has the following four parts:
- 7(a) Loans to Recovery Sector Businesses;
- PPP Second Draw Loans;
- PPP Improvements; and
- Small Business Growth and Domestic Production Investment Facility.
“The bill would allow the most severely affected small businesses to receive a second PPP loan,” noted Rubio’s press release. “It would also create a new long-term recovery loan program, which would provide working capital to industries that have been hardest hit by the COVID-19 pandemic.”
Restaurant meals. Also expected to be included in the HEALS “CARES 2″ package, Senator Tim Scott (R-S.C.) on July 27 introduced the Supporting America’s Restaurant Worker’s Bill. The measure would provide a temporary allowance of a 100 percent deduction for business meals through the end of 2020, although the Washington Post noted that “Experts have pointed out that few businesses are paying for their employees to eat out during the pandemic.”
Employer immunity. The HEALS Act package also includes the SAFE TO WORK Act (S. 4317), introduced by Senator John Cornyn (R-Texas) on July 27, which would limit liability for COVID-19 exposure claims for a period of almost five years for frontline workers such as nurses, doctors, teachers, and apparently any businesses as long as they are following “applicable government standards and guidance” (defined as “mandatory standards and regulations specifically concerning the prevention or mitigation of the transmission of coronavirus” issued by federal, state, and local governments) and are not grossly negligent.
Specifically, as noted by Cornyn, the bill would temporarily limit liability for personal injuries arising from alleged COVID-19 exposure at a school, college, nonprofit, church, or businesses. To qualify, entities must:
- Have made reasonable efforts to comply with “applicable government standards and guidance”; and
- Not engage in willful misconduct or grossly negligent behavior.
The protections would apply to personal injury lawsuits stemming from actual exposure to coronavirus as well as feared or potential exposure. Nuisance claims would also be covered.
Preventing frivolous suits. The SAFE TO WORK Act would create detailed procedural requirements aimed at preventing frivolous litigation in federal court, including requiring notice of suit, limiting punitive damages to findings of willfulness, and fee arrangement disclosures for class actions.
Coverage. The bill’s provisions would cover COVID-19-related exposure injuries occurring between December 1, 2019 and October 1, 2024.
Employer protections. Specifically as to employers, the SAFE TO WORK Act would:
- Ensures that employers are not liable under federal labor and employment laws for complying with coronavirus-related guidance, including stay-at-home orders;
- Protect employers from liability for injuries arising from workplace coronavirus testing; and
- Clarify that a business providing training, PPE, or other assistance to an independent contractor or a franchisee’s employee does not convert the independent contractor or franchisee’s employee into the employee of the person providing the training, PPE, or other assistance.
Gridlock ahead? Now, both House and Senate Republican and Democratic lawmakers will begin negotiations to reach a final bipartisan measure. Democrats on Capitol Hill are already expressing opposition to Senate Republicans’ proposal, especially as related to the unemployment benefits provisions. It remains to be seen whether a bipartisan agreement will be reached before Congress is set to recess on August 7.
“The Senate stimulus proposal is quite different from the House’s bill that was passed in May (the HEROES Act),” said Dorsey & Whitney attorney Troy Keller. “There are some overlaps in types of stimulus, such as unemployment benefits and individual stimulus payments, but they are far apart in the details. As a result, it will be an impressive accomplishment if the House, Senate and White House are able to agree on even components this week.”
“A major source of gridlock will be the liability protections proposed by the Senate,” according to Keller. “Senate majority leader Mitch McConnell has been firm that the stimulus package needs to include protection for businesses, schools, healthcare providers and others from COVID-related lawsuits. Several states have already adopted laws providing COVID civil liability immunity—and others have been evaluating measures—but plaintiffs in many situations can simply bring claims under federal law or move a lawsuit to another state. The Senate proposal would blanket the U.S. with immunity from a wide variety of COVID-related lawsuits, with relatively narrow exceptions. The Senate’s proposal has the support of business groups across the country, but it is a controversial one with the other side.”
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