2020 is an election year, and five months ago no one expected Congress to do much of anything.
COVID-19 changed that dramatically.
As a result, we have so much legislation that it can become confusing. During the NAED National Virtual Meeting, attendees were able to get some up-to-date facts on what is happening and how it impacts them.
Ian Reynolds, General Counsel for NAED, started the panel discussion by pointing out that we are reaching a new stage in the COVID-19 crisis. “Thoughts have shifted from an immediate response (to COVID-19) to how we re-open,” Reynolds pointed out. “And one size is not going to fit all. Geography, industry, job type are all going to impact what companies need to do to re-open. And, frankly, a warehouse worker in New York City is not going to be the same as an accountant working for a contractor in rural Wyoming.” Reynolds strongly recommends that when it comes to reopening, you stay in touch with your local health department, because it provides you with the information you need for the area where you work. Reynolds also pointed out that OSHA has a hazard assessment for business types, with four levels of risk, and our industry falls into the low to medium risk tier. But, OHSA recommends you take other risk factors into consideration when you are re-opening, including the age of your employees or any potential pre-existing conditions.
A large portion of the panel discussion shifted to the Payroll Protection Program. “For context, reform of the entire tax system for the entire country (in 2017) was $1.5 trillion,” Palmer Schoening, Founder of the Family Business Coalition, pointed out. “And, once Congress is done here with the COVID-19 legislating, we are probably looking at 3 or maybe even 4 times that amount. And it happened quickly.” The first round of PPP money evaporated very quickly, and a second round is also nearly out of money. Schoening told National Virtual Meeting attendees to contact their bank as quickly as possible if they are still interested in participating in this round of PPP money.
For larger businesses that need financial help, the panel talked about the Main Street Lending Program. Loans start at $500,000, and would be helpful if COVID-19 impacts the economy long-term. But, the Main Street Lending Program is a loan and not a grant, so you have to pay it back. You have four years to pay it back at a low interest rate.
Alex Ayers of the Family Business Coalition pointed out there are additional tax revisions that should help distributors this year. The business interest reduction will not be in play in 2020. “Basically, they took the changes that happened in the Tax Cuts and Jobs Act and temporarily scrapped those,” Ayers said. “This is going to be something where when you are looking at your taxes at the end of the year, you are going to be able to keep more of your profits by not having that limitation.”
But, Ayers and the panel expect to see some heated debate as Phase 4 of the PPP heads back to Congress. Major structural changes will be on the agenda, but Ayers says you don’t have to worry if you already participated in the PPP. “If we were looking at this just a couple of weeks ago, we would say PPP isn’t changing at all,” Ayers said. “But there’s been too many negative news articles. Folks are finding the edge cases. They are not looking at the majority of the 2.4 million loans and how great they are. They are looking at the publicly trades companies (that received loans). We have some concerns about how they are proposing changes to the PPP, whether they are changing the 75-25% rule on how much you use on wages compared to other costs, looking at transparency, that’s a big concern. NAED is going to make sure we protect PPP from retroactive changes. We don’t want something to change that will affect someone who already got the loan.”
The other heated debate will be centered on unemployment insurance. The increased unemployment benefits may make it difficult to hire back employees, since some could be making more money not working than returning to work. Schoening says that will be a problem, since unemployment is so high right now and will probably remain high for a while. “I do see them extending unemployment benefits. I expect Democrats will demand that in their next round of COVID-19 legislating. A lot of folks are making more on what one of my colleagues calls ‘hot tub unemployment’ than they are actually working, and that’s a problem. It was a huge sticking point late in the morning before the CARES Act passed, there was a Republican amendment to cap unemployment insurance benefits at 100% of a worker’s salary, and it failed.”
The panel also agreed that Phase 4 will become much more political, especially as we get closer to election day.
“They are definitely going to add money, the question is what strings will be attached to that money,” Ayers said. “We are already at the GDP of Switzerland (in terms of COVID-19 spending), it’s not far away from the GDP of many countries in how much we are spending to protect small businesses.”