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March 26, 2020

COVID-19: President Trump and Senate Finalize Terms of Phase 3 Economic Stimulus Package

After days of debate and negotiations, the Trump administration and a bi-partisan delegation from the Senate reached an agreement early Wednesday morning on a $2 trillion economic stimulus package meant to boost the US economy faltering in the wake of COVID-19. Late yesterday, by a vote of 96 to 0, the Senate approved the massive legislation, representing Phase 3 of a series of bills written in response to COVID-19. It is expected that the House will swiftly take up the stimulus package, with the hopes it will make its way through both chambers and to President Trump for signature by the end of this week.

Phase 1, H.R. 6074—also known as the Coronavirus Preparedness and Response Supplemental Appropriations Act—was enacted into law March 6, providing $8.3 billion in emergency funding for federal agencies to respond to COVID-19. Included in Phase 1 were provisions allowing impacted small businesses to qualify for Economic Injury Disaster Loans (EIDLs). Phase 2, H.R. 6201, became law as of March 18 and contained provisions for paid sick leave, free COVID-19 testing, food assistance, unemployment benefits, and requirements that employers provide additional protection for health care workers.

Phase 3—also known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)—seeks to expand upon the prior phases by providing greater assistance to individuals, small businesses, state and local governments, tribal governments, and key industries impacted by COVID-19 (e.g., hospitals, airlines). It is unprecedented in size as well as scope and seeks to flood the economy with capital during this ever-evolving public health crisis. Key provisions include:

  1. Stimulus checks to many individuals and families based on income level
  2. Hundreds of billions in forgivable loans and grants for small businesses so they can maintain their existing workforce
  3. Billions in stimulus funds for state, local, and tribal governments, including over $7.5 billion for New York State
  4. A Marshall Plan for hospitals and other medical facilities so they can provide necessary medical care
  5. An extension of unemployment benefits that will increase the maximum unemployment benefit amount and ensure full pay for four months for workers who are laid-off or out of work
  6. A $500 billion loan and loan-guarantee program to be administered by the US Department of the Treasury, with $425 billion earmarked for businesses, cities, and states; $58 billion for passenger and cargo airlines combined; and $17 billion for firms that are deemed important to national security

A key component of the Phase 3 stimulus package is the Keeping American Workers Employed and Paid Act, which provides relief for small businesses hit by the economic downturn resulting from COVID-19. Its provisions offer payroll protection for both large and small companies that furlough employees so they are available to return to work once the crisis subsides. It also amends the Small Business Act (SBA), expanding eligibility for loans and providing $350 billion in 100-percent guaranteed loans that may be used for payroll costs, employee salaries, mortgages, rent, utilities, health benefits, and interest on debt obligations incurred prior to the covered period. These loans are to be forgiven as long as specific conditions are met in full. The legislation also provides $10 billion for SBA emergency grants up to $10,000 per grant. These funds may be used by qualifying small business for operating costs once they have applied for an EIDL.

Covered small businesses include “small business concerns” as defined under the Small Business Act as well as those businesses with fewer than 500 employees. In addition, not-for-profits, sole proprietorships, independent contractors, and eligible self-employed individuals are eligible for relief.

We have a specific team of Barclay Damon attorneys who are actively working on assessing the legislation and are prepared to assist clients. If you have any questions regarding the content of this alert, please contact them at GRP Other:CARES@barclaydamon.com.

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