Senate Passes $2 Trillion Phase 3 Deal, Sends to House for Approval
Early Wednesday morning, Senate and White House negotiators announced they had reached a deal on a $2 trillion Phase 3 economic stimulus package in response to the Coronavirus pandemic—the Coronavirus Aid, Relief and Economic Security (CARES) Act. The announcement came after an intense five days of round-the-clock talks between Republicans and Democrats. The massive $2 trillion relief package—the largest in American history—includes significant funding for hospitals and health care providers, state, local and tribal governments, small businesses, unemployment insurance and payments to individuals.
After a long day spent ironing out details and finalizing text, the measure passed the Senate on Wednesday night with strong bipartisan support despite a last minute issue that arose among Republicans regarding unemployment insurance. As a result, the Senate voted first on an amendment offered by Sen. Ben Sasse (R-NE) to address the issue. The amendment failed by a vote of 48-48. The Senate then proceeded to vote on final passage of H.R. 748, which serves as the legislative vehicle for Phase 3. The economic relief package passed by a vote of 96-0 and now heads to the House of Representatives for approval.
House Speaker Nancy Pelosi (D-CA) and Minority Leader Kevin McCarthy (R-CA) have been closely tracking the negotiations and keeping members abreast of the negotiations in an effort to lock up broad support that will allow them to use expedited procedures to pass the emergency relief package and send it to President Donald Trump's desk for signature before the end of the week.
On Wednesday night, House Majority Leader Steny Hoyer (D-MD) sent out a notice to members of Congress that the House of Representatives will convene at 9:00 a.m. on Friday, March 27 to consider the bill. In the notice, he indicated that due to the limited flight options, members participating in self-quarantine, and several states mandating stay-at-home orders, the body intends to pass the Phase 3 package by a voice vote.
The procedural maneuver is conducted by the chair calling for the "yeas and nays" and ruling on which side prevails. Any member may raise a point of order that a quorum is absent (in the context of a voice vote a quorum is presumed unless a member makes a point of order), or request a recorded vote. If a quorum call or recorded vote is requested, it would be necessary for members of the House to return to Washington to pass the measure. Nonetheless, House leaders in both parties are counting on the urgent need to pass the stimulus package and strong reluctance of members to travel to Washington to ensure the success of the voice vote. Taking nothing for granted, the House whip operations were mobilized even before a deal was reached in the Senate to ensure members' support.
Summary of Key Provisions in the Final CARES Act
The final CARES Act establishes a $150 billion COVID-19 pandemic response fund to provide additional resources to state, local and tribal governments. Other provisions of the legislation provide additional support through increased Medicare and Medicaid funding and regulatory relief, including:
- Extension of expiring Medicare and Medicaid payment provisions through November 30, 2020.
- A moratorium on Medicare sequestration payment cuts from May 1, 2020 through December 31, 2020.
- Increased Medicare payments to hospitals under the Inpatient Prospective Payment System (IPPS) and Hospital Accelerated Payment Program.
- Expansion of Medicare telehealth coverage and reimbursement to qualified providers.
- Increased flexibility under Medicare regulatory requirements for clinical diagnostic laboratories and post-acute care providers, including inpatient rehabilitation hospitals, long-term care hospitals and home health agencies.
- Delay in scheduled payment cuts to clinical laboratories.
- Increased Medicare payment for durable medical equipment for the remainder of 2020.
- Medicare telehealth flexibility to kidney dialysis providers.
- Expanded eligibility for states to receive enhanced federal matching funds under Medicaid during the public health emergency.
Other significant provisions of the CARES Act:
- Extend the current moratorium on Medicaid Disproportionate Share Hospital payment cuts through September 30, 2022.
- Provide Medicare Part B coverage of COVID-19 vaccines without cost-sharing.
- Require Medicare drug plans to provide three-month supplies of prescribed medications.
Division B, the emergency appropriations division of the CARES Act, includes a total of $330 billion for COVID-19 response activities and agency operations. The bill particularly provides assistance to hospitals and health care workers, as well as funding to obtain medications, personal protective equipment (PPE) and other necessary medical supplies.
With slightly updated versions of the Senate Phase 3 COVID-19 package unveiled throughout the week, the final Senate proposal now notably provides $100 billion in grants to health care institutions for unreimbursed health care-related expenses and lost revenues attributable to the public health emergency. Eligible institutions include hospitals, public entities, not-for profit entities, and Medicare and Medicaid enrolled suppliers and providers.
The final CARES Act also:
- Provides $4.3 billion to support efforts of the Centers for Disease Control and Prevention (CDC) and public health agencies, including $1.5 billion to support public health and preparedness activities by state, local, territorial and tribal governments in procuring PPE, conducting laboratory testing, implementing infection control and mitigation strategies, and advancing other response activities.
- Provides $1 billion for the Defense Production Act to bolster domestic supply chains to allow industry to increase production of PPE and other medical supplies.
- Provides more than $27 billion for the Biomedical Advanced Research and Development Authority to support research and development of vaccines, therapeutics and diagnostics, including:
- $3.5 billion to advance construction, manufacturing and purchase of vaccines and therapeutics
- $16 billion for the Strategic National Stockpile for medications, PPE and critical medical supplies
- $250 million for the Hospital Preparedness Program
- Funding for innovations in manufacturing to support a U.S.-sourced supply chain of vaccines, therapeutics and small molecule active pharmaceutical ingredients, and to support U.S.-based next generation manufacturing facilities
- Funding to support research related to antimicrobial resistance
- Funding to support increased medical surge capacity, workforce modernization, and increased telehealth access and infrastructure.
- Includes $945 million to support COVID-19-related research through the National Institutes of Health.
- Includes $425 million to increase access to community mental health services.
- Provides $200 million for the Centers for Medicare and Medicaid Services (CMS) to assist with infection control efforts in nursing homes.
- Provides $275 million for the Health Resources and Services Administration, including $90 million for Ryan White HIV/AIDS programs and $185 million to support rural critical access hospitals, rural tribal health and telehealth programs, and poison control centers.
The final version of the CARES Act contains a new employee retention tax credit for employers whose 2020 operations were fully or partially suspended due to government orders limiting commerce, travel or meetings to slow the COVID-19 spread. Additionally, the legislation provides an income tax exclusion for individuals who are receiving student loan repayment assistance from their employer and a temporary exception from excise tax for alcohol used to produce hand sanitizer.
The measure would also:
- Grant a one-time tax rebate check of $1,200 per individual and $500 per child, with the amounts beginning to reduce at annual incomes of $75,000 for individuals, $112,500 for head of households and $150,000 for married couples. Eligibility for checks will be based on filed 2018 and 2019 returns. The rebate amount is reduced by $5 for each $100 that a taxpayer's income exceeds the phase-out threshold and is completely phased out with incomes exceeding $99,000 for individuals, $146,500 for head of household with one child and $198,000 for joint filers with no children.
- Waive the 10 percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for Coronavirus-related purposes. Income attributable to such distributions would be subject to tax over three years. There is also additional flexibility for loans from certain retirement plans for Coronavirus-related relief.
- Waive the required minimum distribution rules for certain defined contribution plans and individual retirement accounts (IRAs) for calendar year 2020.
- Allow filers to deduct up to $300 of cash contributions to charitable organizations in 2020, whether filers itemize deductions or not.
For individuals, the 50 percent of adjusted gross income limitation is suspended for 2020. For corporations, the 10 percent limitation is increased to 25 percent of taxable income. The provision also increases the limitation on deductions for contributions of food inventory from 15 percent to 25 percent.
Other notable components of the bill include provisions to:
- Enable employers to provide a student loan repayment benefit to employees on a tax-free basis. An employer may contribute up to $5,250 annually toward an employee's student loans.
- Provide an Employee Retention Credit for employers subject to closure. The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the crisis. The credit is available to employers whose (1) operations were fully or partially suspended or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. The credit is provided for the first $10,000 of compensation, including health benefits, and is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
- For employers with more than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services.
- For employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.
- Allow employers and self-employed individuals to defer payment of the employer share of the Social Security tax over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Provide that a loss from 2018, 2019 or 2020 can be carried back five years and also temporarily removes the taxable income limitation to allow a net operating loss to fully offset income.
- Modify the loss limitation applicable to pass-through businesses and sole proprietors.
- Accelerate the ability of companies to recover corporate Alternative Minimum Tax credits, allowing them to claim a refund and obtain additional cash flow.
- Temporarily increase the amount of interest expense businesses are allow to deduct by increasing the 30 percent limitation to 50 percent of the taxable income (with adjustments) for 2019 and 2020.
- Allow businesses immediately to write off costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of a building.
- Temporarily waive the federal excise tax on any distilled spirits used for or contained in hand sanitizer.
Small Business Provisions
The final CARES Act provides $562 million for the Small Business Administration's (SBA) Disaster Loans Program and $349 billion in SBA loan guarantees. It also allows Fiscal Year (FY) 2018 and FY 2019 State Trade Expansion Program grant funds to remain available through FY 2021. The Act provides $100 billion for secondary market guarantee sales. It also provides:
- $10 billion for emergency Economic Injury Disaster Loans (EIDL). The measure would expand eligibility for emergency EIDL to include tribal businesses, cooperatives and Employee Stock Ownership Plans with fewer than 500 employees, or any individual operating as a sole proprietor or an independent contractor from January 31, 2020 to December 31, 2020. Private non-profits are also eligible for both grants and EIDLs.
- $17 billion for loan subsidies for existing 7(a), Community Advantage, 504 or Microloan products. Paycheck Protection Program loans are not covered. SBA will pay the principal, interest and fees owed on the loans for a six-month period. Payments must be made within 30 days after the first payment is due.
The final version of the CARES Act enables SBA to make loans under the Paycheck Protection Program:
- Loans must be registered within 15 days, and the loan period is between February 15 and June 30, 2020.
- Eligible applicants must be small businesses, nonprofits, veteran's organizations or tribal business concerns with up to 500 employees or the applicable SBA size standard for their industry, if higher. Sole proprietors, independent contractors and other self-employed individuals are also eligible for loans. Businesses with multiple physical locations that employ no more than 500 employees at a single location and do not cross certain thresholds for gross annual receipts are also eligible.
- Waives affiliation rules for hospitality and restaurant industry businesses, franchises approved by SBA and small businesses that receive financing through the Small Business Investment Company.
- Enables the SBA loan to be used for payroll support, paid sick and medical leave, insurance premiums, and mortgage, rent and utility payments.
- Increases the federal government's loan guarantee for the SBA Payment Protection Program to 100 percent until December 21, 2020.
- Allows the Treasury Department to authorize bank and nonbank lenders to participate in the Paycheck Protection Program. Authorizes the Treasury Department to issue regulations and guidance to this effect.
- Allows for loan forgiveness for amounts spent by borrowers on payroll costs and interest payment on mortgages, rent or utilities incurred prior to February 15, 2020.
The CARES Act sets the maximum SBA 7(a) loan amount to $10 million until December 31, 2020. It also ties the loan amount to payroll costs incurred and allows the Department of Defense to waive certain restrictions on the usage of other transaction authority in contracts to improve defense industrial base liquidity, particularly among small businesses, in its response to COVID-19.
The CARES Act provides funding for women- and minority-owned small businesses, including:
- $240 million in grants to small business development centers and Women's Business Centers to provide education, training and counseling to impacted small businesses regarding business practices and resources necessary to mitigate against COVID-19. It eliminates the non-federal match requirement for Women's Business Centers for three months.
- $10 million for minority business centers to provide technical assistance to businesses and $25 million for SBA resource partners to provide online information and training. The measure also eliminates the non-federal match requirement for Minority Business Centers for three months and allows centers to waive fee-for-service requirements through September 2021.
- $25 million for SBA to offer resources and services in the 10 most commonly spoken languages other than English.
Assistance to State and Local Governments
The final CARES Act establishes a $150 billion "Coronavirus Relief Fund" for state, local and tribal governments to use to cover any unbudgeted costs related to COVID-19 that were incurred between March 1 and December 30, 2020. The bill sets aside $3 billion for Washington, D.C. and U.S. territories including Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands and American Samoa, as well as $8 billion for tribal governments.
The remaining $139 billion will be shared among the 50 states proportionally by population, with each state receiving at least $1.25 billion. If a local government applies for, and is certified by the Treasury to receive, a payment from the fund, the payment must be made directly to the local government, and that amount will be subtracted from the allocation of the state in which the local government is located.
The fund prioritizes speed and requires that payments must be made to governments within 30 days of enactment. However, it also establishes an inspector general to monitor the disbursement and use of relief funds, and gives the inspector general the authority to recoup any misused funds.
In addition to this special fund for state, local and tribal governments, the emergency supplemental appropriations found in Division B of the CARES Act awards more than $270 billion to state, local and tribal governments across many currently existing federal programs, including:
- $1.5 billion to support economic development grants for states and communities suffering economic injury as a result of the Coronavirus.
- $850 million in Department of Justice Byrne JAG grants to state, local and tribal officers in responding to Coronavirus.
- $400 million in election security grants to states.
- $345 million for states and local governments to respond to worker layoffs as a result of the Coronavirus.
- $1.5 billion for state and local governments for public health preparedness and response activities.
- $3.5 billion for Child Care and Development Block Grants to states to prevent child care centers from closing.
- $25 billion for transit providers, including state and local governments, for operating and capital expenses that will be distributed using existing Federal Transit Administration formulas.
Paid Sick and Family Leave
The Families First Coronavirus Response Act ("Families First Act"), referred to as Phase 2 and signed into law on March 19, 2020, includes important paid sick and family leave protections in response to the COVID-19 pandemic. The Families First Act requires employers with less than 500 employees to provide 80 hours of paid sick leave to full-time employees to cover time that an employee is away from work due to the Coronavirus, such as if the employee must stay home, take care of someone else with the virus or care for their own child due to a school closure or lack of childcare. The Families First Act also requires employers with less than 500 employees to provide 10 weeks of paid family leave to cover employees who are not working because they are caring for their child due to school closures or unavailability of a child care provider due to the public health emergency. The emergency family leave mandate only requires employers to provide two-thirds of an employee's pay, while the emergency sick leave mandates full wage replacement up to a per-day and aggregated cap. The law also provides companies with a refundable tax credit to cover the cost of the new mandated leave.
The CARES Act clarifies and expands these requirements and others. The bill:
- Allows SBA 7(a) loans to be used to cover paid family and sick leave mandated under the Families First Act.
- Allows advance payments under the SBA Emergency Economic Injury Disaster Loans grants to be used to, among other purposes, "provide paid sick leave to employees who are unable to work due to the direct effect of COVID-19."
- Excludes individuals who are receiving paid sick leave or other leave benefits by participating in the Pandemic Unemployment Assistance Program.
- Gives an employee that was recently rehired access to paid family leave if the employee (1) was laid off after March 1, 2020, (2) worked for the employer for at least 30 of the last 60 calendar days and (3) was rehired by the employer.
- Allows employers to receive the tax credit established by the Families First Act in advance of providing the mandated leave rather than waiting to be reimbursed.
- Allows the federal government to reimburse federal contractors for the cost of paid sick leave given to employees who are unable to work due to the closure of a federally owned or leased site, and when telework is not an option. The amount of the reimbursement will not be duplicative of any tax credits the contractor uses to cover the cost of the leave.
White House Coronavirus Task Force Briefing Highlights
- President Trump highlighted the work of Ford, GE Healthcare, 3M and other industry partners, commending their progress in producing medical equipment and protective gear.
- The President also indicated that he spoke with Japan's Prime Minister, Shinzo Abe, lauding his decision to postpone the 2020 Tokyo Olympics until 2021.
- President Trump noted that the Senate is close to passing Phase 3 of its COVID-19 response, the CARES Act. He highlighted provisions in the legislation such as paid sick leave for workers, noting that this provision is at no cost to employers. He also highlighted that the bill includes $350 billion for job retention loans for small businesses, $300 billion in direct cash payments to American citizens, up to $250 billion in expanded unemployment benefits and over $100 billion for health care institutions.
- In response to concerns from Republican senators that unemployment insurance provisions in the CARES Act will encourage individuals to quit their jobs, Treasury Secretary Steven Mnuchin defended the provision, asserting that most Americans want to keep their jobs and that the provision is a way to rapidly disperse funds to states.
- Vice President Pence noted that the CDC is developing guidance about the best ways to utilize resources at national parks. This guidance will be published tomorrow.
- Regarding supply of ventilators, Vice President Pence noted that they have determined that anesthesia gas machines may be converted to ventilators, stating that the Administration is working with General Motors and other companies immediately to produce ventilators and other supplies.
- Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, gave an update on the weekly World Health Organization call, noting that other countries have warned the United States to examine carefully how travel and other restraints are released once the number of COVID-19 cases are on the decline in order to avoid importing cases.
- Dr. Fauci also discussed the potential of the COVID-19 outbreak becoming a seasonal or cyclical concern, and he noted that cases have been appearing as other countries go into their winter season. He asserted that the United States needs to be prepared for a second cycle, emphasizing the need to develop and make available a vaccine.
- Phase 3: Final CARES Act Text
- Phase 3: Final CARES Act Section-By-Section Summary
- Phase 3: Final CARES Act: Small Business Summary
- Phase 3: Final Title-By-Title Summary of Appropriations Division of CARES Act
- Phase 3: Final Senate Emergency Supplemental Appropriations Summary
- Phase 3: Senate Democratic Summary of CARES Act
- Phase 3: Updated CARES Act Section-By-Section Summary of HELP Provisions
- Phase 3: Updated CARES Act Section-By-Section Summary of Finance Tax, Unemployment Insurance Provisions
- Phase 3: Updated CARES Act Section-By-Section Summary of Finance Health Provisions
- Senate Minority Leader Schumer Dear Colleague Letter on COVID-19 Package
- House Speaker Pelosi Statement on Senate Coronavirus Bill Agreement
- House Majority Leader Hoyer: Dear Colleague on the Senate's Bipartisan Coronavirus Bill Agreement
- House Republican Whip Alert on CARES Act
- House Republican Leader McCarthy Coronavirus (COVID-19) Public Health Update
- Phase 3: House Democratic COVID-19 Proposal
- Phase 3: House Democratic COVID-19 Proposal Section-by-Section Summary
- States: The Wall Street Journal Guide to State Lockdowns
- States: National Governors Association (NGA) Overview of State Actions
- States: Stateside Associates: New Executive, Legislative And Regulatory Actions Issued By State/Local Governments
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- Immigration: United States Suspends Visa Services Abroad, Cancels ESTA Entry Authorizations for European Visitors and Closes USCIS Field Offices, in Response to the Novel Coronavirus (COVID-19) Pandemic
- Labor and Employment: Coronavirus and the Workplace by Richard J. Rabin, Grace Margaret O'Donnell.
- Small Business: President Trump and Congress Move to Make Small Business Loans Available in Wake of COVID-19
- Tax: Tax Filing Extensions Due to Coronavirus
- Tax: Federal Income Tax Payment Deadline Delayed to July 15 Amid COVID-19 Crisis
U.S. Food and Drug Administration
- Tweet at 4:43 AM, March 24, 2020 (Link)
- "Through the emergency Investigational New Drug (eIND) application process, FDA is facilitating the use of COVID19 convalescent plasma as an investigational treatment for individual COVID19 patients with serious or immediately life-threatening COVID19. (Press Release)"
U.S. Food and Drug Administration Administrator Stephen Hahn
- Tweet at 9:04 PM, March 24, 2020 (Link)
- "At FDA, we're working 24/7 to fight the #COVID19 pandemic. Here's the latest update on actions we're taking: (Press Release)"
U.S. Department of Health and Human Services
- Tweet at 8:03 AM, March 25, 2020 (Link)
- "HHS announced $250 million in grants from the Administration for Community Living (ACL) to help communities provide meals for older adults. Funding has been provided to states, territories and tribes for subsequent allocation to local providers. Read more here."
Centers for Medicare and Medicaid Services Administrator Seema Verma
- Tweet at 10:20 AM, March 25, 2020 (Link)
- "3 more Medicaid 1135 waivers approved yesterday (ND, SD, OK) - bringing total to 16. More coming today. To see all approved waivers visit this site."
U.S. Department of Labor
- Tweet at 10:05 AM, March 24, 2020 (Link)
- "U.S. Department of Labor's Office of Workers' Compensation Programs has published guidance for federal employees and outlines Federal Employees' Compensation Act coverage as it relates to coronavirus. (Press Release)"
The Federal Reserve
- Tweet at 5:34 PM, March 24, 2020 (Link)
- "Federal Reserve provides additional information to financial institutions on how its supervisory approach is adjusting in light of the coronavirus. (Press Release)"
Senate Majority Leader Mitch McConnell (R-KY)
- Tweet at 1:51 AM, March 25, 2020 (Link)
- "At last, we have a deal. After days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic. We're going to pass this legislation later today."
Senate Minority Leader Chuck Schumer (D-NY)
- Tweet at 2:40 AM, March 25, 2020 (Link)
- "We have a bipartisan agreement to address this public health and economic crisis. It is not a moment of celebration but one of necessity. We fought to send much-needed resources to fight coronavirus and to put people and workers first. The agreement now reflects those priorities."
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