Comparing HEALS and HEROES Stimulus Bills for Small Businesses

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With pressure rising on Congress to pass a new stimulus bill before their next recess, small business owners are looking to find what economic measures will be provided to them. Here’s a comparison of the small business provisions included in the Republican Senate-proposed HEALS package, and the Democrat House-led HEROES bill, which has been passed in the House.

Stimulus Payments

The CARES Act provided an Economic Impact Payment of up to $1,200 per adult, and $500 per dependent under 17 years old.

The HEALS Act will include an additional stimulus of up to $1,200, with payments being reduced starting for those earning over $75,000. Dependents will qualify for $500. All dependents to be eligible, regardless of age.

The HEROES bill includes an additional payment of up to $1,200, with payments being reduced starting for those earning over $75,000. Dependents will qualify for $1,200, for a maximum of three per household. The bill also retroactively allows all dependents to be eligible, regardless of age.

Unemployment benefits

The CARES Act expanded unemployment benefits to self-employed individuals and introduced a $600 weekly supplement (PUA) to state and federal unemployment benefits. Those who exhausted state unemployment benefits would qualify for an additional 13 weeks of coverage.

The HEALS Act will extend the PUA program, with a $200 weekly supplement until October 5, 2020. After October 5 and ending December 31, the combined weekly supplement and unemployment insurance payment will be capped to achieve 70% of lost average weekly earnings, up to a maximum of $500.

The HEROES bill will extend the $600 weekly supplement to January 31, 2021. A soft cutoff will also be added, where individuals remaining on state unemployment benefits on January 31 would be eligible to continue receiving the supplement for as long as March 31, 2021.

Paycheck Protection Program

The CARES Act launched the Paycheck Protection Program with $349 billion in funding, which has since been topped up and expanded.

The HEALS Act removes the requirement to provide supporting documentation with your forgiveness application. A good-faith certification will be used instead for loans under $150,000. Additional expenses will be eligible for forgiveness: certain software and cloud computing services, essential supplies, and repairs resulting from rioting.

The bill will also allow small businesses to apply for a second round of PPP funding, but borrowers will need to demonstrate a loss of revenue of at least 50%.

The HEROES bill will extend the PPP to December 31 and extend all loans to a five-year term. The “60/40” restriction on how funds can be spent will be removed.

Tax Provisions

The CARES Act added an employee retention credit in the form of a payroll tax credit of 50% of employee wages, capped at $10,000 per employee. Social security tax payments were also deferred. The business interest expense tax deduction was raised to 50%.

The HEALS Act expands the employee retention tax credit to 65% of employee wages, up to $10,000 per employee per quarter ($30,000 for the calendar year). The bill will also allow employers and self-employed individuals to claim COVID-19-related testing, PPE, and other supply expenses on their taxes. Business meal expenses will increase from 50% to 100% tax-deductibility. The bill expands the Work Opportunity tax credit to encourage employers to hire unemployed workers.

The HEROES bill expands the employee retention tax credit to 80% of employee wages, up to $15,000 per employee. The bill introduces a new business interruption credit for self-employed individuals: a 90% refundable income tax credit which can be claimed on 2020 taxes.

Other additions

The HEALS Act includes the creation of a new working capital loan under the SBA 7(a) program for businesses who have seen a 50% decrease in gross income in 2020. The loan has a length of up to 20 years, at 1% interest. The act also clarifies how state and local income taxes should apply to remote workers or those who work in multiple states.

The HEROES bill confirms that forgiven PPP loans, EIDL grants, and covered SBA loan payments do not count as taxable income. Forgiven PPP expenses will also be allowed to be deductible on federal tax. The bill also proposes new protections to small businesses against debt collection activities such as repossessions and evictions during the pandemic. The EIDL grant program will be funded with an additional $10 billion.

Will any of these measures pass?

None of these proposed measures have been passed into law. Bipartisan negotiation is required for a coronavirus bill (or set of bills), to pass both the House and Senate. Bench will continue to digest new legislation for small businesses throughout the pandemic.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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