Category: Federal Legislation

IRS Issues Guidance on an Employee’s Reduction in Hours and Involuntary Termination of Employment to Qualify for the 100 Percent COBRA Premium Subsidy

The American Rescue Plan Act of 2021 enacted on March 11, 2021 (the “Act”) provides a federally-funded, 100 percent subsidy for the premiums for COBRA continuation coverage from April 1, 2021 to September 30, 2021 for assistance eligible individuals. On May 18, 2021, the IRS issued Notice 2021-31, which provides comprehensive guidance on all aspects of the subsidy. The Notice is in the form of 86 questions and answers and spans 41 single-spaced pages. This news alert focuses on the guidance dealing with the two events that trigger entitlement to the subsidy: a reduction in hours and an involuntary termination of employment. The guidance on reduction in hours is found at Q&A 21 to 23, and on involuntary termination of employment at Q&A 24 to 34. Definition of Assistance Eligible Individual The Act defines an assistance eligible individual as an individual who: Is a qualified beneficiary for a period of COBRA continuation coverage that includes the months between April 1, 2021 and September 30, 2021; Is eligible for COBRA continuation coverage due to a reduction in hours or an involuntary termination of employment other than for gross misconduct; and Elects COBRA continuation coverage. Other COBRA qualifying events, such as a voluntary termination of employment, a child’s aging out of dependent status, or divorce, do not...

American Rescue Plan Act of 2021 Includes Significant Mental Health Investment

Providers of mental health services may be eligible for funding, loans, and grants as detailed below. On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021. One key component of the $1.9 trillion initiative is an investment of more than $3.5 billion toward behavioral and mental health services. This funding covers a variety of providers and mental health consumers. Section 2701 Funding for Block Grants for Community Mental Health Services $1.5 billion for carrying out certain aspects of the Public Health Service Act (“PHS Act”), as they relate to mental health: 42 U.S.C. 300x et seq. – block grants for states providing community mental health services for adults with serious mental illnesses and children with serious emotional disturbances 42 U.S.C. § 290aa-4(c) – behavioral and mental health statistics Section 3052 Funding for Block Grants for Prevention and Treatment of Substance Abuse $1.5 billion for carrying out certain aspects of the PHS Act, as they relate to mental health Block grants for states Section 2703 Funding for Mental and Behavioral Health Training for Healthcare Professionals, Paraprofessionals, and Public Safety Officers $80 million to award grants to health professional schools, academic health centers, state and local governments, and other appropriate public and private nonprofit entities, to plan, operate, or participate in trainings and...

More Help Available for Venues Impacted by COVID-19 (Shuttered Venue)

Relief may soon be available to artistic venues impacted by the COVID-19 pandemic. Under the Shuttered Venue Operators Grant (SVOG) program, venues affected by the pandemic may be eligible for grants equal to 45 percent of their gross earned revenue, with $10 million being the maximum amount available for a single grant award. The SVOG program was created in December 2020 as part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260. The program was initially funded with $15 billion and will receive an additional $1.25 billion under the American Rescue Plan Act, H.R. 1319. Eligible entities covered under the program include: Live venue operators or promoters Theatrical producers Live performing arts organization operators Relevant museum operators, zoos, and aquariums that meet specific criteria Motion picture theater operators Talent representatives Each business entity owned by an eligible entity that also meets the eligibility requirements Qualified entities must also have been in operation as of February 28, 2020, and have applied for or received a loan under the Paycheck Protection Program on or after December 27, 2020. Grant funds may be used for expenses, which include: Payroll costs Rent payments Utility payments Scheduled mortgage payments (not including prepayment of principal) Scheduled debt payments (not including prepayment of principal) on any indebtedness...

The Ins and Outs of the 100 Percent COBRA Subsidy Under the American Rescue Plan Act

As a result of the COVID-19 pandemic, employees who have been involuntarily terminated or had their hours reduced and lost their group health plan coverage face a major hardship – being able to afford the premiums for COBRA continuation coverage. The newly enacted American Rescue Plan Act of 2021 (the “Act”) addresses this hardship through a 100 percent subsidy for premiums for COBRA coverage for the six-month period from April 1, 2021 through September 30, 2021. Individuals and Coverages Eligible for the Subsidy Employees who have involuntarily been terminated or had their hours reduced, and who are currently in their 18-month COBRA continuation coverage period, are eligible for the subsidy. Their qualified beneficiaries, spouses, and dependents who were covered under the employer’s plan and lost coverage due to the employee’s involuntary termination or reduction in hours are also eligible. Domestic partners and their children, regardless of whether the employer’s plan provides COBRA-like coverage for them, are not qualified beneficiaries and therefore are ineligible for the subsidy. Eligible individuals are currently in their 18-month continuation coverage period if their involuntary termination or reduction in hours occurred on or after November 1, 2019. Individuals are eligible for the subsidy regardless of whether they previously elected COBRA and continue to be on COBRA, previously elected COBRA but discontinued...

Restaurants Receive Additional Support Under the American Rescue Plan of 2021

President Biden recently signed the $1.9 trillion American Rescue Plan Act of 2021, H.R. 1319 (the “Act”) into law on March 11, 2021. The Act will send aid to millions of Americans still recovering from the global COVID-19 pandemic. Of particular interest to the restaurant industry, the Act provides the industry with additional assistance through the $28.6 billion Restaurant Revitalization Fund (the “Fund”). Section 5003 (Support for Restaurants), Title IV (Committee on Small Business and Entrepreneurship) provides support to restaurants as follows: Fund: A total of $28.6 billion is appropriated for a new program at the Small Business Administration (SBA) offering assistance to restaurants and other food and drink establishments. Of this amount, $5 billion is set aside for businesses with less than $500,000 in 2019 annual revenue. Restaurant Revitalization Grants: Grants are available for up to $10 million per entity (and affiliates), with a limitation of $5 million per physical location up to 20 locations. Revitalization grants are calculated by subtracting 2020 revenue from 2019 revenue. During the first 21 days post enactment of the Act, priority will be given to applications from restaurants owned and operated by women, veterans, or socially and economically disadvantaged individuals. Revitalization grants may be used for a wide variety of expenses, including payroll, mortgage, rent, utilities, supplies, food...

American Rescue Plan of 2021 Expands Paycheck Protection Program to Additional Nonprofit Entities

President Biden recently signed the $1.9 trillion American Rescue Plan Act of 2021, H.R. 1319 (the “Act”) into law on March 11, 2021. The Act will send aid to millions of Americans still recovering from the global COVID-19 pandemic. The Act modifies certain provisions of the Paycheck Protection Program (“PPP Program”) in a number of ways, including, but not limited to, expanding the eligibility of certain nonprofits to participate in the PPP Program. Section 5001 (Modifications to Paycheck Protection Program) of the Act amends the PPP Program as follows: 1. Section 5001(a)(1) of the Act expands the eligibility of nonprofits to include a new category termed “additional covered nonprofit entity” – which are nonprofits listed in Section 501(c) of the Internal Revenue Code other than 501(c)(3)s, 501(c)(4)s, 501(c)(6)s, or 501(c)(19)s – to receive an initial PPP Program, provided that: The organization does not receive more than 15 percent of receipts from lobbying activities; The lobbying activities do not comprise more than 15 percent of activities; The cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020; and The organization employs not more than 300 employees. In addition: Larger nonprofits are now eligible for the PPP Program by striking the application...

Congress Reaches Agreement on Additional COVID-19 Relief

On Sunday, December 20, 2020, Congressional leaders announced an agreement on a fourth major COVID-19 response bill. Although the legislative language is being finalized, statements from the parties involved in negotiations indicate the agreement includes focused relief for businesses, individuals, and families. For businesses: Expansion of the Paycheck Protection Program (PPP). The proposal includes more than $284 billion for first and second forgivable PPP loans. PPP will now be accessible to nonprofits, local newspapers, TV, and radio broadcasters. Dedicated PPP set-aside for small businesses and lending through community-based lenders like Community Development Financial Institutions (and Minority Depository Institutions). $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions. $20 billion for additional grants under the Economic Injury Disaster Loan Program. Provision of a tax credit to support employers offering paid sick leave. Extension and improvement of the Employee Retention Tax Credit. $82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission and reopen classrooms. For individuals and families: A new round of direct payments worth up to $600 per adult and child. $25 billion in rental assistance for families and an extension of the eviction moratorium. Enhancement of the Low Income Housing Tax Credit to increase affordable housing construction and provide greater...

Section 230: What Is It and Why Is Everyone Talking About It?

Section 230 of the Communications Decency Act of 1996 (“Section 230”), 47 U.S.C. § 230(c), has garnered significant attention in the media in recent months. But what is Section 230 and why are both President Trump and President-Elect Biden talking about its repeal? Section 230 is commonly referred to as the 26 words that created the internet. It ensures that an online platform can host and transmit third-party content without the liability that attaches to a publisher or speaker under defamation law, and encourages self-regulation by allowing online platforms to remove offensive content in good faith from their platforms. 47 U.S.C. §§ 230(c)(1)-(2). Yelp, Facebook, Twitter, and Wikipedia have flourished in part because of the simultaneous protection from liability for defamatory statements posted by third-party users and from the removal of harmful or discriminatory content. Some believe that repealing Section 230 is long overdue, because what started out as a law meant to reward online platforms that remove harmful content in good faith has transformed into a broad liability shield. In one circumstance, that protection extended even to an online platform that recommended terrorist content to a user based on that user’s preferences. See Force v. Facebook, Inc., 934 F.3d 53 (2d Cir. 2019). Others argue that the repeal of Section 230 would have many...

Significant Changes Coming To the Paycheck Protection Program

As of 6/3/20, over $100 billion in PPP funding was still available from SBA authorized participating lenders. Today, President Trump signed HR7010, the Paycheck Protection Program Flexibility Act of 2020. The bill changes specific loan forgiveness provisions of the Paycheck Protection Program (PPP). PPP was a part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) passed by Congress to mitigate the effects of COVID-19. Companies or organizations who secured PPP loans are cautioned and advised to review the new legislation very carefully, as detailed below. Under PPP, eligible businesses could apply for forgivable loans of 2.5 times their average monthly payroll or $10 million, whichever is the lesser amount. A recipient can have 100 percent of its PPP loan forgiven if it uses the proceeds of the loan on the following items during the eight weeks beginning on the date of loan origination: Payroll costs as defined by the CARES Act; Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation); Any payment on any covered rent obligation; and Any covered utility payment. Loan recipients were also required to spend at least 75 percent of the loan proceeds on payroll costs. The new law contains the following...

UPDATE: Federal Reserve Board Expands Main Street Lending Program

After receiving extensive public comment during the past month, the Federal Reserve announced on April 30, 2020 that it will expand the scope and eligibility of its Main Street Lending Program (“Program”). The Federal Reserve’s recent action follows the unprecedented steps taken by the Board of Governors of the Federal Reserve on April 9, 2020, to provide up to $2.3 trillion in credit facilities to households, employers, and state and local governments in response to the COVID-19 emergency’s impact on the U.S. economy. Gibbons previously covered these newly announced programs in a client alert. The Program facilitates lending to small and medium sized businesses. The Federal Reserve received 2,200 submissions relating to the Program, and on April 30, 2020 issued two updated Term Sheets and an initial Term Sheet, which are summarized as follows: The Program comprises the Main Street New Loan Facility (MSNLF), the Main Street Expanded Loan Facility (MSELF), and the new Main Street Priority Loan Facility (MSPLF). Below is a side-by-side comparison chart and additional details about the Program. Program Loan Options MSNLF MSPLF MSELF Term 4 years 4 years 4 years Minimum Loan Size $500,000 $500,000 $10,000,000 Maximum Loan Size Lesser of $25M or 4x 2019 adjusted EBITDA Lesser of $25M or 6x 2019 adjusted EBITDA Lesser of $200M, 35% of...