July 28, 2020

HEALS Act: What's Inside New Stimulus Package?

We finally have a draft bill from Senate Republicans, entitled the HEALS Act (Health, Economic Assistance Liability Protection & Schools Act…apparently the “P” is silent). Keep in mind that there is still much to be agreed upon…so certain parts of this bill WILL change. That having been said, let’s take a look at what’s inside this stimulus package:

Stimulus Checks

Unsurprisingly for anyone who watches our weekly videos (This Week This Morning, sign up for weekly videos HERE, watch last week's episode HERE), a second round of stimulus checks are included in this bill. The dollar amounts and qualifying income levels are the same as the first round under the CARES Act.

Dark Horse Observation: It appears that the Treasury is inclined to pay anyone who rightfully received a check last time. If, however, you haven’t filed your 2019 Federal tax return because your income increased from 2018 such that you would be above the qualifying income thresholds, you would be smart to wait a couple more weeks to ensure the treasury doesn’t end up using your 2019 return to disqualify you.

Unemployment Benefits

Under the HEALS Act, the Pandemic Unemployment Assistance (PUA) has been reduced from $600/wk to $200/wk through the end of September. Starting in October, unemployment insurance will be capped at 70% of a worker’s previous wages. Stated differently, the $200 PUA will be adjusted to an amount that equals 70% of your previous wages. State benefits PLUS the PUA would be capped at 70%.Dark Horse Observation: Don’t be surprised if this changes. State unemployment offices will be overwhelmed if they have to calculate PUA themselves. This would lead to significant delays and would be politically unpopular.

Payroll Protection Program

Small businesses with 300 or fewer employees will be eligible to receive a SECOND forgivable PPP loan if their revenue has declined by 50% or more due to the COVID-19 pandemic.

Businesses with existing PPP loans could use funds for expenses related to COVID safety for loan forgiveness. A business would still need to spend 60% of it’s funds on payroll but the other 40% that can be spent on rent, mortgage interest and utilities would now include these safety-related expenditures. Additionally, businesses with PPP loans under $150,000 would only have to sign a one-page form attesting that they spent the funds on qualified expenses to receive full loan forgiveness.

Recovery Sector Loan Program (better than the EIDL)

Senator Marco Rubio introduced a new 20-year working capital loan for small businesses which carries an interest rate of 1% and could be used to refinance existing debt. The proposal allocates $60 Billion to loans which would target low-income communities, minority-owned and seasonal businesses. To be eligible, a business must have experienced a 50% (or greater) decline in revenue in Q1 OR Q2 of 2020 compared to the same quarter of 2019.

100% Meal Deductions

A HEALS Act surprise: businesses can now deduct 100% of business meals for 2020. This is up from the previous 50% limitation. To qualify, the meals must be provided by a restaurant.

Liability Protections for Businesses

Businesses, hospitals, and schools will receive five years of liability protection, retroactive to 2019. Excluded from this protection would be acts of gross negligence and willful misconduct.

We expect to have final legislation during the first half of August. While it is true that the Senate would normally break for recess on August 7th and not return until September 8th, it is extremely unlikely that the American public would stand by in limbo for a one-month recess without a stimulus package that has been signed into law. The House of Representatives indicated that they will postpone their recess as long as needed to get a stimulus bill finalized. More updates to come.

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