By Richard Harroch

On July 27, 2020, Republicans put forth their new stimulus package proposal of approximately $1 trillion called the HEALS Act (the Health, Economic Assistance Liability Protection & Schools Act). The Democrats had previously proposed a $3 trillion+ stimulus package under the “Heroes Act,” but Republicans had rejected it as too broad and too big.

There have been so many news stories and statements about a new stimulus package that it’s difficult to discern what will actually become law. This article describes what you need to know about the likely provisions of the next stimulus bill by answering the most important questions.

1. Will there be a second stimulus payment?

Yes, there will almost certainly be a second stimulus payment, although the specific details are in flux. The most likely result is a second stimulus payment similar to the first payment.

2. How much will the second stimulus payment be?

The second stimulus payment, as proposed by the Republicans on July 27, will likely be:

• A onetime stimulus payment of $1,200 for each individual
• A onetime stimulus payment of $2,400 for married or joint filers
• A onetime stimulus payment of $500 for dependents, with no age restrictions (the CARES Act required dependents to be under 17 years of age)

3. What are the income requirements for eligibility for a second stimulus payment?

In order to qualify for the second stimulus payment, you will likely need to have earned (likely in 2019) less than $75,000 (for individuals) or $150,000 (for married/joint filers).

The original stimulus payment provided that if your income was higher than those limits, then the stimulus payment was reduced by 5% of your adjusted gross income above those limits. It is expected that the second stimulus payment will have a similar provision.

The Republicans initially proposed a $40,000 threshold instead of a $75,000 threshold, but that proposal appears abandoned. The Democrats had proposed a larger stimulus payment (of $2,000 a month) but that will likely not be included in the final package.

4. Will the $600 per week federal supplemental benefit for laid off employees be extended?

The original CARES Act provided for a $600 per week federal supplemental unemployment benefit payments to laid off employees. These supplemental benefits expired on July 25 or July 26, depending on the state.

The Democrats want to extend such benefits. The Republicans complained that the $600 is too high because it exceeds the wages of many workers, discouraging them from returning to work.

The Republican package proposed on July 27 offered instead a $200 a week temporary supplement to state unemployment payments. That $200 would then be replaced with a more complicated program that would pay workers 70% of the income they collected before they lost their job. Under the Republican proposal, the states would phase in the 70% formula within two months. Given how arduous it has been for states to handle the massive volume of unemployment claims, it is difficult to see how such an approach is feasible within a reasonable period of time.

This is probably the most contested issue; however, it is expected that some compromise will be reached in the next few weeks.

On July 27, certain California legislators indicated that they would move to pass legislation to fill any gaps in the $600 unemployment benefits if Congress approves a smaller amount, to help Californians during the economic downturn. Legislative leaders expressed the view that such an additional benefit would be crucial to prevent an economic collapse and ensure working families can keep their housing and pay for necessities.

5. Will independent contractors, freelancers, and gig workers continue to receive the extra $600 a week in benefits?

The Pandemic Unemployment Assistance (PUA) program contained in the original CARES Act provided federal aid of an extra $600 per week for independent contractors, freelancers, and gig workers adversely affected by Covid-19 and not otherwise eligible for standard unemployment insurance benefits. Under the CARES Act, this aid is scheduled to continue until December 31, 2020. But there is some uncertainty as to how independent contractors, freelancers, and gig workers will be treated, so we may need to wait for the final stimulus bill to alleviate the uncertainty.

Related Article: Financial Help for Freelancers and Independent Contractors Affected by the Coronavirus Crisis

6. Will the Payroll Protection Program (PPP) be extended or expanded?

The PPP loan program is due to expire on August 8, 2020, for any new loans. The PPP has been enormously helpful to small businesses by granting favorable forgivable loans.

The Republicans in their new stimulus package proposed an expansion of the PPP, including a streamlined forgiveness process and a provision that would allow smaller businesses to take out second PPP loans.

7. Will the new stimulus package include a payroll tax cut?

No. President Trump previously insisted on a payroll tax cut as part of any new stimulus bill. But Treasury Secretary Mnuchin recently proclaimed that a payroll tax cut or payroll tax deferral would not be included initially, but could be added at a later date.

8. Will there be any new student loan forgiveness provisions in the next stimulus package?

While the Democrats included student loan forgiveness provisions as part of their proposed Heroes Act, the Republicans did not, and it is unlikely that any additional student loan forgiveness/deferral provisions will be contained in a final stimulus package.

9. Will there be a “return-to-work” bonus for employees?

Senator Rob Portman (R-OH) had proposed a “return-to-work” bonus, which would provide financial incentive for people to return to work. The bonus proposed was $450 a week for some period of time if you returned to work by a designated date.

At the moment, it is uncertain as to whether the final stimulus package will include such a bonus.

10. Will there be aid for states and cities in the new stimulus package?

Republicans and Democrats both recognize that states and cities have been significantly adversely affected by the Covid-19 pandemic.

Democrats have proposed approximately $1 trillion for state and local aid. The Republican proposal of July 27 did not offer state and local government any additional funds, but it does grant them more flexibility in using the existing federal assistance.

Some compromise will be reached on this issue, and thus there is likely to be a meaningful amount available to assist states and cities.

11. Will there be liability protection for litigation arising from the pandemic?

The July 27 Republican package proposes liability protection from lawsuits arising out of the pandemic for businesses, hospitals, and schools, for five years.

The protection would raise the burden of proof for plaintiffs in that they would have to prove that a defendant was “grossly negligent or engaged in willful misconduct,” and also that they violated state and local public health guidelines at the time.

Democrats have expressed opposition to this concept, so expect negotiations on this issue.

12. Will renters living in houses with federally backed mortgages still be protected from evictions for not paying rent?

The CARES Act provided for a moratorium on evictions for renters living in homes with federally backed mortgages, but that expired on July 25, 2020. Landlords, however, are still required to give 30 days’ notice before beginning eviction proceedings. With many courts closed because of the pandemic, eviction proceedings will likely take much longer than 30 days.

The new Republican stimulus package of July 27 proposed extending the moratorium but the extension date is unclear at the moment.

The Republican stimulus package does not provide help for tenants of buildings backed by privately issued mortgages.

13. Will there be funds allocated for testing of Covid-19?

The July 27 Republican proposal provides for $16 billion in new funding for coronavirus testing, as well as clarifying that $9 billion in previously approved funds under the CARES Act will be used for testing.

14. Will there be funds allocated for schools?

The July 27 Republican proposal allocates $100 billion towards schools, with $70 billion targeted for kindergarten through 12th grade schools and $30 billion for colleges and universities. An additional $5 billion has been proposed to go to Governor’s funds to be allocated for education as the governors see fit.

The Democrats had previously proposed $430 billion for schools.

15. When will a new stimulus bill be passed into law and become effective?

The timing of a new stimulus bill is all dependent on the negotiations between the Democrats and Republicans resulting in a final bill, that is then signed by the president. The best estimate is early August.

The Senate is scheduled to go into recess on August 7. If a new stimulus bill can’t be passed by then or if there isn’t a delay in the recess, neither the House nor the Senate is scheduled to return until after Labor Day (September 7).

Related Articles

• PPP Loan Program Extended; Loan Date Released: What Small Businesses Need to Know
• SBA EIDL Program: Advances No Longer Available But Favorable Loans Still Being Granted
• The Most Frequently Asked Questions About Unemployment Benefits in California
• How to Get Your $1,200 Stimulus Payment Direct Deposited to Your Bank Account

Copyright © by Richard D. Harroch. All Rights Reserved.

About the Author

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a venture capital fund in the San Francisco area. His focus is on Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on start-ups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of a 1,500-page book by Bloomberg—Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements. He was also a corporate and M&A partner at the law firm of Orrick, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 500 start-ups. He can be reached through LinkedIn.

This article was originally published on  AllBusiness.com. See all articles by Richard Harroch.

In March of 2020, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act. It was bigger than the original Senate proposal but smaller than the subsequent House proposal. Eventually, the two reconciled and the CARES Act became law.  

In May of 2020, the House introduced  and passed a new COVID-19 economic relief proposal. The bill, known as the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, was not taken up by the Senate. At the time, Senate Majority Leader Mitch McConnell (R-KY) suggested that the timing was not right for another bill. But with just a few days to go before federal unemployment benefits run out, that appears to have changed.

You might be looking for the “HEALS Act” (Health, Economic Assistance, Liability Protection, and Schools Act) being put together under Sen. McConnell’s watch. So far, there is no single bill, but rather a series of proposals. Various committee chairs have drafted their proposals and introduced them separately on the Senate floor.

This article focuses on the American Workers, Families and Employers Assistance Act introduced by Sen. Chuck Grassley (R-IA) targeting well, workers, families and employers assistance. It’s a much smaller proposal than the full CARES Act (and the HEROES Act), weighing in at just 168 pages – but remember, it’s just a piece of the overall package. A supplemental proposal, led by Sen. Marco Rubio (R-FL) and Sen. Susan Collins (R-ME), tackles the Paycheck Protection Program (PPP) and business tax incentives (I’ll have more on that separately).

Here’s what Sen. Grassley’s proposal provides:

Unemployment Benefits. The $600/week federal supplement for unemployment is slated to end on July 31, 2020, under the CARES Act. The House HEROES Act would extend it through January 31, 2021, and expand other unemployment-related benefits. The Senate proposal would continue payments up through October 5, 2020, but at a reduced rate of $200/week. However, beginning in October, under the Senate bill, the payments would increase so that, when combined with the state unemployment payment, it would represent 70% of lost wages. If an individual state cannot bring the total to 70%, the state can suggest an alternative and get a waiver from the Secretary of Labor. Also, beginning in October, the additional payment would be considered income for determining eligibility for other benefits.

State Funding. The proposal would provide funding to reimburse states for 80% of their increased costs of providing cash assistance and other short-term help through the Temporary Assistance for Needy Families (TANF) program, up to a cap of $2 billion. TANF provides families with financial assistance and related support services. State-administered programs may include childcare assistance, job preparation, and work assistance.

Stimulus Checks. Under the CARES Act, U.S. citizens and residents with adjusted gross income up to $75,000, or $150,000 for married couples (subject to phaseouts), who are not a dependent of another taxpayer and have a work-eligible Social Security number (SSN), were eligible for stimulus checks worth $1,200 per adult and $500 per dependent. As before, there is no “bottom,” so those folks who have no income are eligible. And as before – but in breaking with the HEROES Act – anyone with an ITIN is ineligible; any person with an SSN married who files jointly with a person who has an ITIN remains ineligible. The Senate proposal largely mirrors the CARES Act with some exceptions:

• Under the CARES Act, for purposes of getting the $500 per child, the law used the same definition for a child as you’d use for the child tax credit. The sticking point for most parents for this purpose was the age: the child must be under age 17 at the end of the tax year. That meant that taxpayers were not entitled to receive the $500 additional payment for a child above the age of 16, even if they lived with you, ate your food, spent your money and slept in your house. A change was included in the House HEROES Act and the Senate proposal to allow taxpayers with dependents of any age to receive checks. 
• As with the HEROES Act, the Senate proposal would make clear that payments should be automatic for those receiving Social Security retirement or disability benefits (SSDI), Supplemental Security Income (SSI), RRB, or VA benefits. 
• The CARES Act provided that checks were generally not subject to offset except for past due child support payments. As in the HEROES Act, the Senate proposal would clarify that the checks are protected from bank garnishment or levy by private creditors or debt collectors. This protection would also be applied retroactively to the CARES Act checks (in keeping with this Senate bill) although it remains unclear how the retroactive provisions would work; as before, I assume it will only apply to any CARES stimulus checks which have not yet been paid out, as well as new checks.
• And even though Congress didn’t include any language in the CARES prohibiting the payment of checks to decedents and prisoners – and Treasury decided to take those payments away anyway – this time, the Senate proposal did include such language. Under the Senate proposal, any decedent who died before January 1, 2020, any person in jail at the time Treasury processes the check or any individual in prison for all of 2020, may not receive a check. This language is also retroactive to the CARES Act checks.
• One of the points of confusion under the CARES Act was whether representative payees of Social Security (SSA), Veterans Affairs (VA), and Railroad Retirement Board (RRB) benefits could accept payment. As in the HEROES Act, the Senate proposal clarifies that a representative payee may accept a check provided that the representative payee used the payment for the beneficiary.

Payroll Tax Credits & Deferrals. Employers would be allowed a payroll tax credit equal to the applicable percentage of the qualified pandemic-related employee benefit expenses. The amount allowed as a credit under the Employee Retention Credit (ERC) is 50% of wages. The Senate proposal would boost that to 65% (as compared to 80% in the HEROES Act), and the $10,000 cap for all quarters would be increased to $10,000 per quarter, with a cap of $30,000 for the year (the limit was $45,000 in the HEROES Act); phase-ins would also apply for the credit reduction. A similar credit would apply to self-employed persons, but at the other end, the credit was figured differently for employers with more than 100 full-time employees: the Senate proposal would boost that cap to 500. Under the HEROES Act and the Senate proposal, a credit would be allowable for fixed expenses. Payroll tax deferrals would be allowed for recipients of Paycheck Protection Program (PPP) loans so long as there is no double-dipping.

Work Opportunity Tax Credit (WOTC) Addition. The WOTC credit is available to employers who hire individuals from certain targeted groups who have consistently faced significant employment barriers. Those targeted groups currently are TANF recipients, qualified veterans, qualified ex-felons, designated community residents; vocational rehabilitation referrals; SNAP recipients, SSI recipients, long-term family assistance recipients, and qualified long-term unemployment recipients. The Senate proposal would add a new group: 2020 qualified COVID-19 unemployment recipients. A 2020 qualified COVID-19 unemployment recipient is defined as someone who had been receiving unemployment compensation before the hiring date and who begins work after the date the bill becomes law (if it happens), but before January 1, 2021. The Senate proposal also increases the credit amount applicable to the new targeted group to 50% of the first $10,000 of qualified first-year wages (for most target groups, the maximum wages that are eligible for WOTC credit are $6,000, and the credit is 40%).

Safe & Healthy Workplace Tax Credit. The Senate proposal would introduce a new, refundable payroll tax credit equal to 50% of an employer’s “qualified employee protection expenses” for the period beginning March 12, 2020, and through January 1, 2021. Those expenses would include COVID-19 testing, protective personal equipment (PPE), cleaning supplies, qualified workplace reconfiguration expenses (like those plexiglass shields that are popping up), and “qualified workplace technology expenses (like contactless point-of-sale (POS) systems). The expenses would be capped each quarter based on the average number of employees: $1,000 for each of the first 500 employees, plus $750 for each of the next 500 and 1000 employees, and $500 for each employee over 1,000. Self-employed persons would also qualify.

Assistance For Independent Contractors. Typically, assistance provided to workers can be used as evidence of control (and thus risk converting an independent contractor into an employee) The Senate proposal would allow businesses to offer tax-free assistance – including financial aid and health care expenses – to independent contractors without jeopardizing that status.

Temporary Carryover For Flexible Spending Arrangements (FSAs). Mirroring relief found in the HEROES Act, the Senate proposal would allow taxpayers to carry amounts from FSAs forward into 2021. This would apply to FSAs for health care and dependent care.

State Tax Certainty. One of the concerns raised during the pandemic was how to assess state and local taxes for workers working remotely. The Senate proposal would allow employees who perform employment duties in multiple states to only be subject to income tax in their state of residence and any jurisdiction where the employee is present and performing employment duties for more than 30 days during the calendar year (90 days for frontline health-care and other workers). This provision would apply through 2024. And sorry, Phillies, this won’t apply to professional athletes, professional entertainers, qualified approved film, television or other commercial video production employees, or certain public figures.

And that’s it. You can read the text of the Act here (downloads as a PDF). It’s short, right? Well, relatively speaking for a stimulus package… But expect it to “bulk up” – those other proposals will eventually be rolled together.

Keep checking back for details.