Category: Federal Legislation

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...

COVID-19: Federal Reserve Announces $2.3 Trillion in Loans

On April 9, 2020, acting with the approval and consent of the Secretary of the U.S. Treasury, the Federal Reserve took unprecedented additional action using its statutory emergency lending powers to provide immediate support to the national economy. In so doing, the Board of Governors of the Federal Reserve adopted a series of measures that will provide up to $2.3 trillion in credit facilities and loans to households, employers, and state and local governments, consistent with the Federal Reserve’s emergency lending powers under Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)). In particular, the Federal Reserve will adopt or expand on the following programs: Main Street New Loan Facility (MSNLF) and Expanded Loan Facility (MSELF): The Federal Reserve will purchase up to $600 billion in loans, and the Department of Treasury, through Section 4027 of the Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”), will make a $75 billion equity investment in a single common special purpose vehicle (SPV) in connection with the MSNLF and MSELF, both of which are designed to facilitate lending to small and medium sized businesses by eligible lenders (i.e., US insured depository institutions, US bank holding companies, and US savings and loan holding companies). The MSELF will provide four-year loans to companies employing up to 10,000 workers...

Third Phase of Federal Relief for Coronavirus: What Details We Know Right Now About the Legislation

While some companies have already begun to apply for relief from the Small Business Administration (SBA) and other government entities, others are waiting to see what additional programs may be on the horizon. While we do not know all the details of Phase III legislation in Congress, we do know it will include: Support for Businesses $10 billion for SBA emergency grants of up to $10,000 to provide immediate relief for small business operating costs $17 billion for SBA to cover six months of payments for small businesses with existing SBA loans A retention tax credit for employers to encourage businesses to keep workers on payroll during the crisis SBA loan forgiveness eligibility for rent, mortgage, and utility costs Support for State and Local Government $150 billion for a state, tribal, and local Coronavirus Relief Fund $30 billion for the Disaster Relief Fund to provide financial assistance to state, local, tribal, and territorial governments, as well as private nonprofits providing critical and essential services $10 billion for the Indian Health Services and other tribal programs Support for Industries $150 billion increase in the Marshall Plan for our healthcare system $30 billion in emergency education funding $25 billion in emergency transit funding Support for Workers Increase in the maximum unemployment benefit by $600 per week Four...

Key Business Provisions in the Tax Reform Law

On December 22, 2017, President Donald Trump signed into law H.R. 1 (the “Tax Act”), that enacted sweeping changes to the United States tax code. Below are some of the key sections of the Tax Act impacting businesses. These provisions are effective January 1, 2018, unless otherwise noted. Corporate Tax Rate and Alternative Minimum Tax (“AMT”) Currently, corporations are taxed at rates that range up to 35% and are additionally subject to the AMT. Corporations do not benefit from lower long-term capital gain rates. The Tax Act lowers the corporate tax rate to a flat 21% and eliminates the corporate AMT, both effective beginning in 2018 and on a permanent basis. In connection with the corporate rate cut, the Section 199 domestic manufacturing deduction is repealed going forward. The dividends received deduction is reduced from 80% to 65% and 70% to 50%, depending on ownership percentage. Increased Cost Recovery (Bonus Depreciation) Currently, taxpayers can immediately write off 50% of the cost of “qualified property” (generally, tangible personal property with a recovery period of 20 years or less). This ratio drops to 40% in 2018, 30% in 2019, and phases out after that. The Tax Act initially allows full current expensing for property placed in service after September 27, 2017, reducing the percentage that may be...

Federal Tax Reform and the Potential Repeal of the Cash Method of Accounting

In the wake of the introduction by President Trump of his Tax Reform proposal on April 26, 2017, Congress, especially the U.S. House of Representatives Committee on Ways and Means, will be considering various methods to fund tax rate reductions. The White House formally delivered the President’s proposed budget to Congress on May 23, 2017. One proposal likely to be under consideration is the repeal of the cash method of tax accounting for service businesses, though many experts dispute whether many of the budget’s finer details will ever pass both houses of Congress. Under current law, the cash method of accounting cannot be used for income tax purposes by (i) businesses that sell goods and therefore must keep inventories, and (ii) C corporations with average annual gross receipts of $5,000,000 or more. A taxpayer-favorable exception from the C corporation rule is available for qualified personal service corporations, consisting of personal service corporations (PSCs) in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, when at least 95% of the stock of such PSCs is owned directly or indirectly by employees performing services in one of such fields. To oversimplify things, this means that law firms pay federal tax based on actual cash receipts, not based upon billings or upon what...