Economic Relief Information

Summary of COVID-19 Phase 3
Unemployment Insurance and Tax Provisions

Title II - Assistance for American Workers, Families and Businesses

Subtitle A - Unemployment Insurance

Sec. 2101. Short Title. Relief for Workers Affected By Coronavirus Act

Provision

Summary & Eligibility

Sec. 2102: Pandemic Unemployment Assistance


This provision would create a new program modeled on Disaster Unemployment Assistance that would provide unemployment benefits to individuals who do not qualify for regular unemployment compensation and are unable to work because of the COVID-19 public health emergency. Pandemic Unemployment Assistance will cover self-employed workers (including gig workers and independent contractors), part-time workers, and those with limited work histories. The changes made in sections 2104 and 2107 to increase the size of regular unemployment benefits and make them available for additional weeks will also apply to benefits received through the Pandemic Unemployment Assistance program. Pandemic Unemployment Assistance will be state-administered but fully federally funded. Except as otherwise provided in this section, federal regulations for Disaster Unemployment Assistance will apply to Pandemic Unemployment Assistance. The program is effective through December 31, 2020

Sec. 2103: Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations


This provision would reduce the amount by which nonprofits, Indian Tribes, and governmental entities are required to reimburse states for benefits paid to their workers who claim unemployment insurance by 50 percent through December 31, 2020. This provision would also allow the Secretary of Labor to issue guidance to states to provide flexibility for employers in making reimbursement payments.

Sec. 2104: Emergency Increase in Unemployment Compensation


This provision would add an additional $600 in Federal Pandemic Unemployment Compensation to every weekly unemployment benefit, effective until July 31, 2020. This $600 benefit will be taxable (like regular unemployment benefits), but it will be disregarded in determining Medicaid or CHIP eligibility.

Subtitle B - Individual Provisions

Sec. 2201: Recovery Rebates for Individuals


This provision would provide $1,200 for singles and heads of households ($2,400 for married couples filing joints returns). The provision also provides $500 per qualifying child dependent under age 17 (using the rules under the Child Tax Credit). A family of four would receive $3,400. Rebates phase out at a 5% rate above adjusted gross incomes of $75,000 (single)/ $122,500 (head of household)/ $150,000 (joint). There is no income floor or phase-in – all recipients will receive the same amounts, provided they are under the phaseout threshold. Tax filers must provide Social Security Numbers (SSN) for each family member claiming a rebate (adoption taxpayer identification numbers accepted for adopted children). An exception on SSN is made for spouses of active military members. The rebates are fully available to residents of U.S. Territories, including Puerto Rico. The rebates will be paid out as advance refunds (in the form of checks or direct deposit) on the basis of taxpayers’ filed tax year 2019 returns (or tax year 2018, if a 2019 return has not yet been filed). Nonfilers generally need to file a tax return in order to claim a rebate, although IRS may coordinate with other federal agencies in some instances to get checks out.

Subtitle C - Business Provisions

Sec. 2301: Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship Due to COVID-19


This provision would provide a refundable payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50 percent reduction in quarterly receipts, measured on a year-over-year basis.

Wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or economic hardship are eligible for the credit. For employers with 100 or fewer full-time employees, all employee wages are eligible, regardless of whether an employee is furloughed. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in wages and compensation paid by the employer to an eligible employee. Wages do not include those taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave (IRC sec. 45S).

The Secretary of the Treasury is granted authority to advance payments to eligible employers and to waive applicable penalties for employers who do not deposit applicable payroll taxes in anticipation of receiving the credit. The credit is not available to employers receiving Small Business Interruption Loans. The credit is provided through December 31, 2020.

Sec. 2302: Delay of Payment of Employer Payroll Taxes


This provision would allow taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Deferral is not provided to employers that avail themselves of SBA 7(a) loans designated for payroll.

Payroll taxes that can be deferred include the employer portion of FICA taxes, the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer FICA rate), and half of SECA tax liability.

Sec. 2303: Modification of Net Operating Losses (NOLs)


The 2017 Tax Law limited net operating losses (NOLs) arising after 2017 to 80 percent of taxable income and eliminated the ability to carry NOLs back to prior taxable years. First, this provision would modify the treatment of NOL carrybacks. In the case of taxable years beginning before 2021, taxpayers will be eligible to carry back NOLs to the prior five taxable years. Effectively, this delays the 80 percent taxable income limitation until 2021 and temporarily extends the carryback period from zero to five years. The provision also temporarily disregards NOL carrybacks for the section 965 transition tax. C corporations may elect to file for an accelerated refund to claim the carryback benefit.

Second, this provision would modify the treatment of NOL carryforwards. In the case of taxable years beginning before 2021, taxpayers will be entitled to an NOL deduction equal to 100% of taxable income (rather than the 80 percent limitation in present law). In the case of taxable years beginning after 2021, taxpayers will be eligible for: (1) a 100 percent deduction of NOLs arising in tax years prior to 2018, and (2) a deduction limited to 80 percent of modified taxable income for NOLs arising in tax years after 2017. The provision would also include a technical correction to the 2017 Tax Law, relating to the effective date of the NOL carryback repeal.

Sec. 2304: Modification of Limitation on Losses for Taxpayers other than Corporations


This provision would retroactively turn off the excess active business loss limitation rule implemented with 2017 Tax Law by amending the provision to apply to tax years beginning after December 31, 2020 (rather than December 31, 2017). It also turns off active farming loss rules for tax years beginning after December 31, 2017 and before December 31, 2020.

An active business loss is defined as deductions in excess of income and gain attributable to a trade or business in which the taxpayer actively participates plus $250,000 ($500,000 for joint filers) (i.e. active business losses in excess of $250,000 ($500,000 for joint filers) were disallowed by the 2017 Tax Law and treated as NOL carryforwards in the following tax year).

The provision includes technical corrections to 2017 Tax Law. The provision clarifies that excess business losses do not include any deduction under 172 or 199A or any deductions related to performing services as an employee. The provision also clarifies that, because capital losses cannot offset ordinary income under the NOL rules, capital loss deductions are not taken into account in computing the section 461(l) limitation, and that the amount of capital gain taken into account in calculating the section 461(l) limitation cannot exceed the lesser of capital gain net income from a trade or business or capital gain net income.

Sec. 2305: Modification of Credit for Prior Year Minimum Tax Liability of Corporations


The 2017 Tax Law repealed the corporate alternative minimum tax (AMT) and allowed corporations to claim outstanding AMT credits subject to certain limits for tax years prior to 2021, at which time any remaining AMT credit may be claimed as fully-refundable. This provision allows corporations to claim 100% of AMT credits in 2019 as fully-refundable and provides an election to accelerate claims to 2018, with eligibility for accelerated refunds.

Sec. 2306: Modification of Limitation on Business Interest


The 2017 Tax Law generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income (ATI). This provision generally allows businesses to elect to increase the interest limitation from 30% of ATI to 50% of ATI for 2019 and 2020, and allows businesses to elect to use 2019 ATI in calculating their 2020 limitation.

A special rule for partnerships allows 50% of any excess business interest allocated to a partner in 2019 to be deductible in 2020 and not subject to the 50% (formerly 30%) ATI limitation. The remaining 50% of excess business interest from 2019 is subject to the ATI limitation. The 2019 ATI limitation remains at 30% of partnership ATI rather than 50% of ATI. The ATI limitation for 2020 is 50% of partnership ATI and partnerships may elect to use 2019 partnership ATI in calculating their 2020 limitation.

Sec. 2307: Qualified Improvement Property Technical Correction


This provision is a technical correction to the 2017 Tax Law that would allow the interior improvements of buildings to be (1) immediately expensed in the case of restaurant, retail, and most other property (classified as 15-year property), or (2) depreciated over 20 years in the case of a real property trade or business.

Title III - Supporting America’s Health System in the Fight Against the Coronavirus

Sec. 3607: Amendments to Tax Credits for Employers for Coronavirus-Related Paid Leave


This provision would authorize Treasury to provide advance payment of tax credits that are available to private sector employers that are required to provide up to 12 weeks of coronavirus-related paid leave to their employees.

Title IV - Economic Stabilization and Assistance to Severely Distressed Sectors of the US Economy

Sec. 4003: Emergency Relief and Taxpayer Protections


Provides funding to support expanded SBA Loans to mid-sized businesses and non-profit organizations, with between 500 and 10,000 employees.

The funds received shall be used to:

  • Support ongoing operations
  • Retain at least 90 percent of the recipient’s workforce, at full compensation and benefits, until September 30, 2020
    • Recipient to restore not less than 90 percent that existed as of February 1, 2020
  • Restore benefits to workers no later than 4 months after the COVID disaster was declared.
    • Recipient will not pay dividends with respect to common stock or purchase an equity security


Families First Coronavirus Response Act (FFCRA)

On March 18, 2020, Congress approved and the President signed the second phase of a legislative response to the growing COVID-19 pandemic. The law is titled the Families First Coronavirus Response Act (H.R. 6201) and focuses on individuals negatively impacted by the outbreak.

Topline information about this package includes:

  • employers with fewer than 500 employees and all public agencies must provide up to 80 hours (full-time employees) or two weeks (part-time employees) of paid sick time for COVID-19- related needs (with certain exceptions);

  • employers with fewer than 500 employees must provide up to 10 weeks of paid family and medical leave for an employee to care for a child for COVID-19-related needs (with certain exceptions), paid at 2/3 of regular rates; 

  • a 100 percent business tax credit for employers to pay for the paid sick and family and medical leave benefits; 

  • expanded unemployment insurance benefits; 

  • mandated free COVID-19 testing; and

  • additional resources for nutritional assistance to low-income children and adults. 

Provision

Summary & Eligibility

Supplemental Appropriations – $2.471 billion


Will provide an additional $2.471 billion in funding spread across programs administered by the Departments of Agriculture, Defense, Health and Human Services, Treasury, and Veterans Affairs:.

Emergency Paid Sick Leave


Will create a new, one-year paid sick leave benefits program designed specifically to address COVID- 19. The program will become effective 15 days after the Act's enactment and expire on December 31, 2020.

Under the plan, private-sector employers with fewer than 500 employees and all public agencies regardless of size will be required to provide employees with emergency paid sick leave. Emergency paid sick leave is available for immediate use by the employee regardless of how long the individual has been employed by the employer.

Emergency paid sick leave applies only to sick time needs related to COVID-19. It is available to employees unable to work or telework due to a need for leave because: (1) the employee is subject to federal, state, or local quarantine or isolation orders related to COVID-19; (2) the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; (3) the employee is experiencing COVID-19 symptoms and seeking a medical diagnosis; (4) the employee is caring for an individual who is subject to an order described in bullet #1 or has been advised as described in bullet #2 ("individual" not defined); (5) the employee is caring for a child because the child's school, place of care, or child care provider is closed or unavailable due to COVID-19; or (6) the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Covered employers will be required to provide 80 hours of paid sick time (or the equivalent of 10 eight-hour days) to full-time employees on top of any other existing paid leave programs. Part-time employees are required to receive the number of hours that they work, on average, over a 2-week period. An employer is prohibited from requiring an employee to use other paid leave first.

Covered employers must pay employees their full wages, not to exceed $511 per day and $5,110 in the aggregate, for a use described in points #1, 2, or 3 above. For all other uses of paid sick time (points #4, 5, or 6 above) the employer must pay employees two-thirds of their wages, not to exceed $200 per day and $2,000 in the aggregate.

Employers will receive a 100 percent refundable payroll tax credit on the wages required to be paid (below).

Emergency Family and Medical Leave Benefits


Will create a new, one-year emergency family and medical leave benefits program designed specifically to address COVID-19. The program will become effective 15 days after the Act's enactment and expire on December 31, 2020.

Under the program, private-sector employers with fewer than 500 employees will be required to provide employees with public health emergency leave under an expansion of the Family and Medical Leave Act (FMLA). An employee must have been employed with their employer for at least 30 calendar days in order to use the emergency leave.

Leave is available only to employees who are unable to work or telework due to a need for leave to care for a son or daughter under 18 years of age if their school, place of care, or child care provider is closed or unavailable due to a public health emergency related to COVID-19 (declared by a federal, state, or local authority). The FMLA's "son or daughter" definition applies, which includes a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis (in loco parentis refers to one who is acting and intending to act as a parent, with no requirement of a legal or biological relationship).

The first 10 days of public health emergency leave may be unpaid; during these 10 days, an employee may elect to substitute any accrued vacation, personal, medical, or sick leave.

Covered employers must provide 10 weeks of paid leave. Leave must be paid at an amount no less than two-thirds of the employee's wages based on the number of hours the employee would otherwise normally be scheduled to work. However, the paid leave may not to exceed $200 per day and $10,000 in the aggregate.

Employees are entitled, upon return from leave, to be restored to their job position or to an equivalent position with equivalent employment benefits, pay, and other terms/conditions of employment. However, an employer with fewer than 25 employees does not have to restore an employee who took a public health emergency leave to their position if all of the following apply:

  • the position held by the employee when the leave began no longer exists due to economic conditions or other changes to operating conditions that affect employment and were caused by the public health emergency during the period of leave;
  • the employer made a reasonable effort to restore the employee to an equivalent position with equivalent benefits, pay, and employment terms/conditions; and
  • the reasonable effort to restore the employee fails, the employer makes reasonable efforts for a period of 1-year to contact the individual if an equivalent position becomes available.

Allows employers to receive a 100 percent refundable payroll tax credit for the wages required to be paid (below).

Tax Credit for Paid Sick and Paid Family and Medical Leave


Will provide employers and self-employed individuals a refundable tax credit equal to 100 percent of qualified paid sick leave and family leave wages paid by an employer. For qualified sick leave wages, the amount of wages taken into account is capped at $511 per day for most employees but only $200 per day for employees using sick leave to care for a family member or a child whose school or place of care has been closed. For qualified family and medical leave wages, the amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all quarters.

Coronavirus Testing


The bill will dramatically expand testing for coronavirus throughout the U.S. by establishing requirements for providing coronavirus diagnostic testing at no cost to consumers, including by reimbursing providers to provide testing to those without insurance and requiring all private health insurers and government programs like Medicare and Medicaid to cover the cost of diagnostic testing.

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