DHC D.C. Update – What’s in the Federal Stimulus Package

DHC D.C. Update – What’s in the Federal Stimulus Package

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December 21, 2020 —

DHC D.C. Update:

The House and Senate are set to vote Monday on $900 billion in pandemic relief aimed at boosting the U.S. economy into the early spring, combined with $1.4 trillion to fund regular government operations for the rest of the fiscal year.

The bill includes help for small businesses, the jobless, and direct payments to most Americans. It also provides funding for vaccine distribution, food assistance, tax breaks, and money for education and childcare.

The provisions aimed at the fallout from the coronavirus represent the second-largest economic rescue package in American history, behind the $1.8 trillion virus relief package that was signed into law just nine months ago. It surpasses the $787 billion stimulus passed in response to the financial crisis in 2009.

Together with the omnibus spending bill, the total package is worth $2.3 trillion. Here are some highlights of specific provisions that DHC wanted to flag for our clients.

A link to the full text of the Relief Package and Omnibus Bill can be found here.

A division-by-division summary of the coronavirus relief provisions can be found here. A division-by-division summary of appropriations provisions can be found here.

Direct Payments

The bill provides $600 in one-time direct payments to individuals and $600 per child. The payments would be phased out for individuals over a certain income threshold. Payments could begin flowing quickly through the Internal Revenue Service, which already set up a system to distribute $1,200 payments in the stimulus bill passed in March.

Several senators, including Missouri Republican Josh Hawley and Vermont Progressive Bernie Sanders, said they wanted larger stimulus payments, but they agreed not to object to a final deal with the smaller amount. Progressive Democrats in the House have started calling these “survival checks.”

Unemployment Insurance 

Federal unemployment insurance benefits will be extended for 10 weeks through mid-March, with each week supplemented by a $300 payment, similar to the extra $600 supplement that expired at the end of July.

It includes people receiving state unemployment benefits as well as those receiving Pandemic Unemployment Assistance, the pandemic program that provided jobless benefits to those not traditionally eligible like gig workers and the self-employed. Without Congressional action, the program was on track to expire at year-end, which would have caused millions of Americans to lose their jobless benefits.

Pandemic Emergency Unemployment Compensation, which provided up to 13 additional weeks of jobless benefits to those who had exhausted their regular state benefits, was extended as well.

Unlike stimulus payments and forgiven PPP loans, which aren’t subject to federal taxes, unemployment insurance recipients must pay income taxes on their jobless benefits. Many states don’t automatically withhold taxes when they distribute those payments, so recipients will owe those taxes when they file their tax returns next spring.

Paycheck Protection Program 

The aid package includes $284 billion for the Paycheck Protection Program that was created in the CARES Act. That program’s loans to firms with fewer than 500 employees can be fully forgiven if companies keep people on their payroll. The bill also extends eligibility for the PPP to 501(c)(6) organizations like industry groups, chambers of commerce, and destination marketing organizations.

The legislation clarifies that business owners can write-off expenses paid for with forgiven PPP loans, giving small companies a tax break that could amount to more than $100 billion. The legislation would override an IRS decision that says business can’t claim deductions on costs, such as rent and wages, paid for with tax-free PPP money.

Transportation Funding Breakdown 

  • $15 billion to reinstate payroll reimbursements to airlines, which expired two months ago
  • $1 billion for airline contractor payrolls
  • $10 billion for state highways
  • $ billion for airports and airport concessionaires
  • $2 billion for the private motor coach, school bus, and ferry industries
  • $1 billion for Amtrak
  • $14 billion targeted at transit agencies to keep services running for essential workers and others who use rail, bus, paratransit, and other forms of mass transportation

Housing, Education and Other Provisions

The measure contains $25 billion for emergency rental assistance, and it extends the CARES Act’s eviction moratorium until Jan. 31.

Other key funding provisions include funds for virus testing, tracing, and vaccine development and distribution. It also has $82 billion for education funding, as well as $7 billion for broadband, $10 billion to support childcare providers and funds for U.S. Postal Service. It provides $13 billions for nutrition assistance.

$82 Billion for Education Funding Breakdown 

The pandemic aid package negotiated by Congressional leaders includes $54.3 billion for K-12 schools and $22.7 billion for colleges. Other provision include:

  • $4 billion to Governors to spend on education aid at their discretion
  • $819 million for outlying areas and the Bureau of Indian Education
  • For-profit colleges would get $908 million for grants to students
  • 1.7 billion would be set aside for historically black colleges, tribal colleges, minority-serving institutions

Tax Breaks 

The legislation includes a priority for President Donald Trump: an expansion of the business meal deduction tax—a tax preference he narrowed just three years ago in his 2017 tax overhaul. Economists have said the change would do little to help struggling restaurants.

It also includes a renewal of the employee retention tax credit for businesses that keep workers on their payrolls. The break gives companies an additional incentive to keep people employed as many firms still face revenue downturns but have run out of PPP money or never qualified for it.

The package makes changes to the earned income tax credit and the child tax credit to make it available to people who lost wages or jobs during the pandemic, as well as an expanded Low Income Housing Tax Credit to boost construction of housing or low-wage families.

The legislation would make permanent an excise tax break for beer brewers, wine makers and distillers. In addition, other expiring tax credits, including some for mortgage interest premiums and tax credits to help businesses in low-income communities.

Non-pandemic Measures 

The larger the $2.3 trillion package includes $1.4 trillion in regular appropriations to keep government operating through the end of fiscal 2021 on Sept. 30. A last-minute deal kept $12.5 billions for Veterans Affairs health funding under the total spending budget cap.

Lawmakers settled on nearly $1.4 billion for border wall construction and related spending, short of Trump’s request for nearly $2 billion. His $5 billion request for fiscal 2019 led to the longest shutdown in the county’s history, but he hasn’t has a standoff with lawmakers over all funding since he circumvented Congress by using military funds to build additional fencing.

The combined bill also includes long-discussed legislation to protect plans with health insurance from “surprise” medical bills in most emergency situations, including air ambulance rides. Patients also wouldn’t have to pay bills received more than 90 days after a visit, and health plans and providers would have to provide patients with more information on their networks and costs.

The legislation includes a reauthorization of the Water Resources Development Act that deals with water-related infrastructure and extends tax credits for renewable energy projects, including wind and solar production.

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