Senate Draft ‘Skinny’ Covid-19 Stimulus Bill

The U.S. Postal Service could receive as much as $10 billion in aid under a draft stimulus bill circulated by Senate Republicans as an amendment to S. 178.

The would revive the Federal Pandemic Unemployment Compensation program through Dec. 27, with payments of $300 per week, down from $600 when the program lapsed at the end of July.

The measure, called the “Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act,” would also protect businesses, schools, and other establishments from liability related to coronavirus exposure and provide emergency funding for health and education programs.

The provisions are largely similar to those in the “HEALS Act,” a package of bills Senate Republicans released the week of July 27. That broader measure also would provide $1,200 payments to individuals, tax breaks for businesses, and additional emergency funding. Neither package includes any aid for states and local governments sought by Democrats.

The House passed a nearly $3.5 trillion package called the “Heroes Act” (H.R. 6800) in May that included $1 trillion in local aid and would have extended the $600 per week unemployment payments through Jan. 31, 2021. Negotiations between the White House and House Democrats broke down when leaders couldn’t agree on a topline amount for another aid package. Democrats offered a total of $2 trillion, while Republicans didn’t move away from the $1 trillion total of the Senate package.

PAYCHECK PROTECTION PROGRAM

The measure would authorize a second round of loans under the Paycheck Protection Program, which offered low-interest, forgivable loans guaranteed by the Small Business Administration for small businesses and other entities to keep workers on the payroll during the Covid-19 crisis.

It would increase the program’s combined lending authority to $816.7 billion, from $659 billion, and extend it to Dec. 31, from Aug. 8. The measure also would rescind $100 billion in unobligated PPP funds and appropriate $257.7 billion in new funds for the SBA to guarantee first and second loans.

The Small Business Administration and its lending partners had approved $525 billion in PPP loans when the application period expired on Aug. 8, with $134 billion remaining, according to SBA data.

Eligibility

The program had been open to businesses and 501(c)(3) nonprofits with 500 or fewer employees, as well as self-employed workers and some companies that are part of food or hotel chains, among others.

To qualify for a second loan, entities would have to:

• Employ 300 or fewer workers, instead of the current 500-employee threshold.
• Demonstrate that they had at least a 35% reduction in gross revenue in the first or second quarter of 2020 compared with the same period in 2019, with some exceptions.

Ineligible entities would include:

• Publicly traded companies.
• Companies that received their first PPP loan under the industry code for finance and insurance businesses.
• Entities primarily engaged in political or lobbying activities, including think tanks.
• Businesses that are partially owned by Chinese entities or that have a Chinese resident on their board.

Eligible borrowers could receive second loans for as much as 250% of their average monthly payroll costs or $2 million, whichever is less. Businesses with multiple locations couldn’t receive more than $2 million in total.

The measure also would reduce the maximum amount for first PPP loans following the bill’s enactment to $2 million, from $10 million.

At least $25 billion of loans in the second round would be set aside for entities with 10 or fewer employees as of Feb. 15, 2020. At least $10 billion would have to be issued by community financial institutions, and by insured depository institutions, credit unions, and Farm Credit System institutions with less than $10 billion in assets.

Approved Uses

PPP loans can be forgiven for borrowers that pay eligible payroll expenses or make other covered payments for mortgage interest, rent, or utility costs incurred over 24 weeks or through Dec. 31, whichever comes first.

The bill would expand uses of PPP funds that would qualify for loan forgiveness. Approved expenditures for nonpayroll costs would include:

• Payments for software or cloud computing services that facilitate operations, product delivery, payroll expenses, and other functions.
• Costs related to property damage, vandalism, or looting due to public disturbances in 2020, if the damage wasn’t covered by insurance.
• Payments made to suppliers of essential goods under contracts in effect before Feb. 15.
• Purchases of personal protective equipment.
• Adaptations such as drive-through windows, ventilation systems, sneeze guards, and screening capabilities to comply with social distancing, sanitation, and other requirements related to Covid-19.

Recipients would still have to spend at least 60% of their PPP funds on payroll costs to qualify for full loan forgiveness.

Bankruptcy

The bill would allow small business debtors to receive PPP loans if approved by a bankruptcy court. Any PPP loan would be given a superiority claim in a bankruptcy proceeding, meaning it would be repaid before other creditors.

The provision would expire two years following the bill’s enactment.

Other PPP Provisions

The measure also would:

• Require borrowers of PPP loans to disclose if they’re owned in part by the president, vice president, cabinet members, lawmakers, or their family members.
• Expand eligibility rules for PPP loans to include certain 501(c)(6) groups and tourism bureaus that employ 150 or fewer people and don’t receive more than 10% of their revenue from lobbying. Professional sports leagues and groups formed to participate in political campaigns would still be excluded.
• Bar the use of first or second PPP funds for lobbying activities.
• Allow PPP borrowers to decide whether they want their loan forgiveness period to cover costs incurred over eight weeks or through Dec. 31.
• Expand the definition of seasonal employers that would qualify for PPP loans.
• Expand a liability safe harbor for PPP lenders that act in good faith based on certifications and documentation provided by borrowers.
• Allow businesses seeking smaller PPP loans to submit simplified applications with no documentation.
• Specify a formula to calculate loans for certain farmers and ranchers under the first round of PPP funds.
• Clarify that approved PPP payroll costs include employer-provided group insurance benefits.

POSTAL SERVICE

The CARES Act (Public Law 116-136) allowed the U.S. Postal Service to borrow as much as $10 billion in additional funds from the Treasury Department to cover operating expenses during the Covid-19 emergency. On July 29, the Postal Service announced it reached an “agreement in principle” with the Treasury Department on the terms of the loan, which haven’t been released.

Under the bill, the Postal Service would no longer have to repay any money it borrows, though it would limit the use of CARES Act funds to periods when the Postal Service has less than $8 billion in cash on hand.

USPS had $12.9 billion in cash and cash equivalents as of June 30, up from $8.8 billion at the end of fiscal 2019, according to its most recent financial report.

UNEMPLOYMENT

The bill would restore and reduce to $300 per week, from $600, the Federal Pandemic Unemployment Compensation program established under the CARES Act.

The extra payments, which are provided to individuals receiving regular jobless benefits, would run through Dec. 27 under the measure.

The CARES Act also established other pandemic-related unemployment programs that are set to expire on Dec. 31, including:

• Pandemic Unemployment Assistance, which provides support for as long as 39 weeks to individuals who don’t qualify for regular unemployment benefits.
• Pandemic Emergency Unemployment Compensation, which provides 13 additional weeks of support to individuals who’ve exhausted regular benefits.

LIABILITY

The measure would create exclusive federal causes of action for claims related to virus exposure or related medical care, meaning lawsuits couldn’t be brought under common law or another medical malpractice statute.

Defendants could be found liable only if they didn’t make reasonable efforts to comply with relevant public health guidelines and were either grossly negligent or engaged in willful misconduct. The proposal also would require stricter pleading requirements and evidentiary thresholds for plaintiffs.

The measure would limit compensatory damages to the plaintiff’s economic losses. Punitive damages could be awarded only if the defendant’s willful misconduct caused the injury and would be capped at an amount equal to compensatory damages. The bill would preempt less stringent state and federal limits.

The measure would allow lawsuits against anyone who sends a demand for payment in exchange for settling or otherwise not pursuing a coronavirus-related lawsuit. The Justice Department could also bring civil suits against anyone engaged in a pattern or practice of making such demands in relation to “meritless” claims.

The liability provisions would apply to virus exposure on or after Dec. 1, 2019, and until at least Oct. 1, 2024. They would apply to any cases pending on the date of enactment.

The bill would block any coronavirus-related liability or proceeding to enforce federal labor and employment laws if the employer “was relying on and generally following” relevant health and safety standards and guidance and made an attempt to satisfy the laws’ requirements consistent with that guidance.

No employer could be held liable for injuries resulting from employee coronavirus testing except in cases of gross negligence or intentional misconduct.

The measure would stipulate that creating policies and providing personal protective equipment or other assistance related to Covid-19 wouldn’t constitute evidence of an employment or joint employment relationship.

EMERGENCY APPROPRIATIONS

The measure would provide emergency funding for the Health and Human Services Department and Education Department to respond to the coronavirus pandemic.

HHS: The measure would provide $20 billion for the Biomedical Advanced Research and Development Authority to purchase vaccines, as well as $6 billion for distribution.

It also would provide $16 billion for testing and contact tracing.

Education: The measure would provide $105 billion for the Education Stabilization Fund created by the CARES Act.

It would include $70 billion for elementary and secondary schools, which would be distributed to local educational agencies based on their Title I grant funding allocations and to private schools based on their portion of enrolled students in the state. Two-thirds of funding would go to schools that provide in-person instruction for the upcoming school year.

The fund would also include $29 billion for higher education institutions. Grants would be awarded to schools largely based on their number of Pell Grant recipients, and wealthier schools subject to an endowment tax for 2019 would have their allocations reduced by 50%.

The higher education funding would include $2.9 billion for Historically Black Colleges and Universities and Minority Serving Institutions.