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April 30, 2020 – This week the federal government provided additional fiscal stimulus under the CARES Act, with an allocation of $480 billion to the private sector, mainly to small businesses, and an expansion of the number of states and local governments that can qualify to participate in the Municipal Liquidity Facility. Implementation of the CARES Act continued this week, with additional distributions to airlines and health care providers, and the publication of additional guidance by federal agencies. Numerous other legislative proposals have also been made.
Federal Reserve Will Publish List of CARES Act Stimulus Recipients
On April 23, the Federal Reserve announced that it would publish on a monthly basis information about the recipients of CARES Act stimulus funds, including name, amounts borrowed, and interest rate charged. The CARES Act programs include the Paycheck Protection Program Lending Facility, the Main Street New Loan Facility, the Main Street Expanded Loan Facility, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility and the Municipal Liquidity Facility.
Fourth Stimulus Act to Provide $480 Billion Aid to Small Businesses
On April 24, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act, which provides an additional $320 billion in funding to the CARES Act Paycheck Protection Program, $60 billion of which would be set aside for small and mid-sized community-based lenders to aid smaller businesses, minority-owned firms, and rural areas. The Act also provides $60 billion in loans and grants for the Small Business Administration’s Economic Injury Disaster Loan Fund (including $10 billion in administrative fees), $75 billion for health care providers to help them pay for the enormous costs of responding to the coronavirus, and $25 billion for coronavirus testing programs.
Hedge Funds and PE Firms Are Declared Ineligible for PPP Loans
On April 24, the Small Business Administration issued a final interim rule barring hedge funds and private equity firms from applying for CARES Act Paycheck Protection Program loans. The rule states that these entities are ineligible to receive a PPP loan because they are primarily engaged in investment or speculation. The rule does not bar portfolio companies of a private equity fund from applying for a PPP loan as long as it meets all of the loan program’s requirements.
Treasury Makes Additional Disbursements to Airlines
On April 25, the Treasury Department reported that since April 20 it had disbursed an additional $9.5 billion to 8 major airlines and 29 smaller passenger air carriers, among others, under the CARES Act Payroll Support Program. To date, Treasury has disbursed $12.4 billion to 93 air carriers. Funds provided under the Payroll Support Program must be used for employee wages, salaries, and benefits. Further, Treasury announced details of the Payroll Support Program for cargo air carriers and contractors.
Application Form Published for Loans to Businesses Critical to National Security
On April 25, the Treasury Department published an application form for CARES Act loans to businesses critical to maintaining national security.
Fiscal Relief Oversight Committee Asserts Itself
On April 25, the Pandemic Response Accountability Committee, a panel of two dozen federal inspectors general established by the CARES Act and charged with coordinating work to investigate the coronavirus relief effort, launched a website to catalog their efforts, despite previous efforts by the White House to sideline the committee.
SBA Struggles to Process Loan Applications as PPP Relaunches
On April 26, the Small Business Administration imposed a maximum dollar amount for individual lenders at 10% of Paycheck Protection Program funding, or $60 billion per lender, in anticipation of the second round of PPP funding launched April 27. Lenders were allowed to make a one-time bulk upload of loan applications. The SBA lowered the bulk upload minimum threshold from 15,000 applications to 5,000 applications to simplify the application process, after a chaotic rollout of the first round of PPP funding that launched April 3. However, lenders report that SBA’s computerized upload system began crashing due to an overload of application as soon as the second financing round launched.
Federal Reserve Announces Expansion of Municipal Liquidity Facility
On April 27, the Federal Reserve expanded the scope and duration of the Municipal Liquidity Facility (MLF), which will offer up to $500 billion in lending to states, local governments and certain multistate entities to help manage their cash flow. U.S. counties now qualify if they have a population of at least 500,000 residents; U.S. cities now qualify if they have a population of at least 250,000 residents. The new population thresholds allow substantially more entities to borrow directly from the MLF than the initial plan announced on April 9. In addition, the maximum term of the notes that the MLF will purchase from facility participants was increased from 24 months to 36 months.
SBA Clarifies CARES Act Paycheck Protection Program for Seasonal Employers
On April 27, the Small Business Administration published an interim final rule that gives seasonal employers greater flexibility in calculating the maximum loan amount available under the PPP, and provides certain other clarifications.
SBA Further Clarifies CARES Act PPP Requirement of “Necessity”
On April 28, the Small Business Administration updated its CARES Act Paycheck Protection Program FAQ to make clear that its recent guidance concerning the good faith certification of “necessity” by a borrower applies to businesses owned by private companies, not just public companies. Although the CARES Act suspends the ordinary SBA requirement that borrowers must be unable to obtain credit elsewhere, borrowers still must certify in good faith that their PPP loan request is “necessary to support the ongoing operations of the Applicant.” Previous SBA guidance stated that any borrower that applied for a PPP loan prior to April 23 and repays the loan in full by May 7, 2020 would be deemed by SBA to have made the required certification in good faith.
Treasury Announces Plan to Audit PPP Loans Exceeding $2 Million
On April 28, the Treasury Department announced that it would conduct a full audit all CARES Act Paycheck Protection Program loans of more than $2 million before forgiving the loan, in light of recent press reports that some large and well-funded companies obtained PPP loans despite having certified that the loan was necessary to support ongoing operations. Treasury Secretary Steve Mnuchin stated that borrowers “have criminal liability if they made this certification and it’s not true. . . . It was not a program that was designed for public companies that had liquidity. The certification was very clear that if people had other sources of liquidity they could not take this loan.”
USPTO Extends Filing Deadlines Again
On April 28, the United States Patent and Trademark Office today further extended the time to file certain patent and trademark-related documents and to pay certain required fees, which otherwise would have been due between March 27 and May 31, to June 1, 2020. This is in addition to the prior extension the USPTO announced on March 31, 2020.
H.R. 6611: Legislation to Make Supplemental Appropriations for the Department of Agriculture to Respond to the COVID-19 Pandemic
On April 23, Representative Austin Scott (R-GA) introduced legislation that would provide an additional $50 billion to the United States Department of Agriculture (USDA) so that it could continue providing relief to farmers under the Coronavirus Food Assistance Program (CFAP). The CFAP provides direct relief to farmers who have suffered losses, as well as funding for the USDA to purchase meat, dairy, and produce in order to distribute food to food banks, faith-based organizations, and other non-profits.
H.R. 6602: Emergency Cannabis Small Business Health and Safety Act
On April 23, Representatives Earl Blumenauer (D-OR) and Ed Perlmutter (D-CO) introduced the Emergency Cannabis Health and Safety Act, which would make cannabis businesses eligible for relief under the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and Economic Injury Disaster Loans emergency advances. Currently, cannabis businesses are not eligible for relief under any Small Business Administration (SBA) relief programs.
H.R. 6598: Secure Our Systems Against China’s Tactics Act
On April 23, Representative Mark Green (R-TN) introduced a bill styled the SOS ACT, which would set aside $10 billion of CARES Act funds to incentivize American investors to purchase distressed U.S. businesses that supply equipment, systems, and technologies for the U.S. military. The bill is intended to thwart Chinese efforts during the pandemic to strategically acquire distressed U.S. companies that are important to American national defense.
H.R. 6605: Helping Hospitals in Need Act
On April 23, Representative Jahana Hayes (D-CT) introduced a bill that would provide an additional $100 billion under the CARES Act to hospitals on the frontlines of the coronavirus pandemic. The first round of CARES Act relief had been allocated based on the health care provider or the institution’s 2019 Medicare Part A and B claims. The bill would instead target hospitals in geographic infection hotspots, hospitals with disproportionate shares of Medicaid and uninsured patients, and hospitals that serve children.
H.R. 6619: Restore America’s Main Street Act
On April 24, Representatives Madeleine Dean (D-PA) and Derek Kilmer (D-WA) introduced the Restore America’s Main Street Act, which would target small businesses that have struggled to access the Payment Protection Program (PPP) by providing direct relief through cash payments by way of small business rebate checks. Businesses that would be eligible for the relief include those with $1.5 million or less in gross receipts, and businesses with 50 or fewer employees.
H.R. 6625: The Cruise Reform and Uniform Industry Standards Evoke (CRUISE) Integrity Act
On April 24, Representatives Jackie Speier (D-CA) and Doris Matsui (D-CA) introduced legislation that would require companies in the cruise industry to adhere to strict standards in order to be eligible for federal aid, including relief related to COVID-19. The Cruise Reform and Uniform Industry Standards Evoke (CRUISE) Integrity Act would limit federal assistance for companies that fail to undertake tax, environmental, medical, and labor reforms, and would increase penalties for illegal practices, such as illegally dumping untreated waste into open water.
H.R. 6630: Securing America’s Critical Minerals Supply Chain Act
On April 28, Representative Pete Stauber (R-MN) introduced a bill which would provide a benefit and tax incentive for U.S. manufacturers for purchasing domestically-sourced minerals.
H.R. 6643: The Supporting State and Local Leaders Act
On April 28, Reps. Brad Schneider (D-IL), John Katko (R-NY), TJ Cox, (D-CA), Peter T. King (R-NY), and Diana DeGette (D-CO) introduced legislation that would make states and local governments eligible for emergency paid leave payroll tax credits under the CARES Act. The CARES Act expanded access to paid leave by requiring public and many private employers to extend policies to their employees, and offset the costs of doing so by providing payroll tax credits to private employers. The newly-proposed bill would extend those payroll tax credits to public employers as well.
Independent Restaurant Coalition Propose Dedicated Relief Fund
On April 29, a coalition of independent restaurants asked Congress to provide up to $100 billion in funds to help small restaurants reopen. They also proposed changes to the CARES Act Paycheck Protection Program, including basing loan forgiveness on the restaurant’s employee retention after it is allowed to reopen rather than after only eight weeks from loan origination; increasing the term of PPP loans from two years to ten years; limiting program eligibility to borrowers with less than $500 million in annual revenues; establishing new tax rebates; and requiring business interruption insurance policies to cover the coronavirus pandemic.
Philip A. Giordano
Andrew H. Braiterman
Spencer L. Harrison
Charles A. Samuelson