Senate Unveils $1 Trillion “HEALS Act” Coronavirus Relief Package

Following weeks of speculation and negotiations, the Senate released its latest coronavirus relief package on Monday, July 27, 2020.  Dubbed the “HEALS Act”, this $1 trillion GOP economic and stimulus package should serve as the starting point for Congressional negotiations as common ground between the Senate and the House of Representatives’ $3 trillion HEROES Act is sought.

Highlights of the HEALS Act, which were released in the form of several bills, include:

• Unemployment Benefits: As the additional $600/week in unemployment benefits ends on July 31, 2020, the future of unemployment is a high-priority item for Democrats and Republicans. In addition to the $2 billion earmarked to upgrade state unemployment insurance systems, the HEALS Act replaces the $600/week unemployment benefit with a two-phased system:
  • Unemployment benefits of $200/week would be continued from August 1, 2020 – September 30, 2020.; and
  • Beginning in October, the $200/week in unemployment benefits would be replaced with a payment (up to $500) that, when combined with the state unemployment insurance payment, would replace 70% of lost wages.
• Stimulus Payments: 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, are eligible for a $1,200 rebate ($2,400 married). There is also an additional $500 per dependent that would be provided to taxpayers with dependents of any age.
• Liability Protection: Liability protection is included in the HEALS Act, limiting the legal exposure that businesses, universities, schools and hospitals could face from lawsuits stemming from coronavirus-related damages.
• Paycheck Protection Program (PPP): The PPP would be augmented to:
  • Authorize $100 billion to recovery sector businesses, including seasonal businesses and businesses located in low-income census tracts that meet the applicable SBA revenue size standard, have no more than 500 employees and demonstrate at least a 50% reduction in gross revenues.
    • Loan amounts would be available at up to twice the borrower’s annual revenues not to exceed $10 million; and
    • Loans would have a maturity up to 20 years at a 1% interest rate.
  • Provide $190 billion of committed and appropriated funds to support PPP and PPP Second Draw Loans to borrowers that meet the applicable SBA revenue size standard, have no more than 300 employees and demonstrate at least a 50% reduction in gross revenues.;
  • Set aside $25 billion for entities with 10 or fewer employees and $10 billion for community lenders.;
  • Expand forgivable expenses to include supplier costs, covered worker protection expenditures and covered operations expenditures.; and
  • Simplify the forgiveness application process for smaller loans and expand eligibility for certain IRC Sec. 501(c)(6) organizations.
• Employee Hiring and Retention Payroll Tax Credit: The existing CARES Act employee retention credit would be strengthened by:
  • Increasing the applicable percentage of qualified wages from 50% to 65%;
  • Decreasing the decline in gross receipts threshold from 50% to 25%;
  • Increasing the qualified wages from $10,000/year to $10,000/quarter (limited to $30,000/year);
  • Increasing the employee threshold from 100 to 500 when determining if credit availability is limited to those employees not performing services; and
  • Allowing PPP recipients to claim the credit.
• Work Opportunity Tax Credit (WOTC): A temporary expansion of the WOTC is included in the HEALS Act, adding a new WOTC targeted group – 2020 qualified COVID-19 unemployment recipients. The credit amount for this targeted group is increased to 50% of the first $10,000 of qualified first-year wages (up from the general amount of 40% of the first $6,000 of qualified first-year wages).
• Safe and Healthy Workplace Tax Credit: A refundable payroll tax credit equal to 50% of an employer’s qualified employee protection expenses, qualified workplace configuration expenses and qualified workplace technology expenses is established. The credit applies to amounts paid or incurred between March 13, 2020 – December 31, 2020 and is formulaically-limited based upon a quarterly average of employees.
• Independent Contractors: Marketplace platform companies can 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.
• Business Meals: Business meal expenses incurred prior to January 1, 2021 would be eligible for a 100% tax deduction.

As referenced above, the release of the HEALS Act sets the wheels in motion for the next round of coronavirus-related funding and relief negotiation.  While the House and the Senate do have significant ground to make-up between the two stimulus packages, we do anticipate some type of deal coming together in the next few weeks.

Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email covid19@saxllp.com with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.