Phase 4 Stimulus Update
This week, Senate Republicans announced their version of “Phase 4” relief. They are calling it the HEALS Act. If you recall back in May, House Democrats passed a bill they tagged the HEROES Act. We covered the HEROES Act when it was released.
In this blog post I will cover the highlights from the HEALS Act as it relates to Small Businesses.
Federal Unemployment - Reduces the benefit from $600 to $200 per week through September 2020. Starting in October, the amount would be replaced with a payment that replaced 70% of a recipient’s lost wages when combined with state unemployment compensation up to $500 per week.
Employee Retention Credit (ERC) - Expands the current credit, which is 50% of taxable wages capped at $10,000. The new credit would be 65% of eligible wages capped at $30,000 ($10,000 per quarter). It also reduces the gross receipts threshold from 50% to 25% compared to the same calendar quarter in the previous year.
Work Opportunity Tax Credit - Temporarily expands the program to include a new targeted group defined as 2020 qualified COVID-19 unemployment recipients. The maximum credit would be expanded from $2,400 (40% of the first $6,000 of qualified first-year wages) to $5,000 (50% of the first $10,000 of qualified first-year wages).
NEW Refundable Payroll Tax Credit - The credit would be equal to 50% of an employer’s qualified employee protection expenses. This would include coronavirus testing, cleaning supplies, and protective personal equipment (PPE). The maximum amount of qualified expenses would be $1,000 for each of the first 500 employees. The credit is reduced for employee 501 on. The credit would be for expenses incurred from March 13 to December 31.
Full Deduction for Business Meals - For 2020 only, business meals would be 100% deductible. They are currently 50% deductible under current law.
Liability Protection - Would significantly limit employer's exposure to lawsuits brought against them related to the coronavirus. Gross negligence would still be subject to legal claims.
Summary - The HEROES Act and the HEALS Act predictable contain significant policy differences. To get Phase 4 stimulus to the President for signing into law there will need to be major compromises on both sides of the aisle. The release of the HEALS Act is a major step forward though as now both parties can begin negotiations.
August 7th marks the last working day for Congress until September 8th. Over the next ten days, I expect significant momentum on a Phase 4 stimulus plan. I also expect final decisions to be made on PPP forgiveness (forms, blanket forgiveness, etc.) as the SBA has said they will open their forgiveness portal on August 10.