Update on Congressional Action
by CUAD Communications
3/20/2020

New Congressional Action Regarding Coronavirus Pandemic Impact on Credit Unions.

 

Earlier this week, the U.S. Senate approved the Families First Coronavirus Response Act which will help individuals affected by the coronavirus pandemic. In the coming weeks, Congress is expected to consider additional legislation to help certain businesses affected by the current crisis, such as Small Business Administration (SBA) guaranteed, zero interest, business loans for states that have declared for disaster assistance. More information on the SBA Disaster Loan program is located at the end of this update.

 

Senate Majority Leader, Mitch McConnell, acknowledged the small business burden created by the legislation, but he said the issue would be addressed in the next stimulus package. Proposals could include loans to small businesses, direct cash payments to working adults, and financial aid to the airlines.

 

This legislation provides paid leave for certain individuals, establishes free coronavirus testing, adds additional protection for frontline health workers, and provides additional benefits for those most affected by this crisis. The bill also provides emergency funding for state unemployment insurance programs. The Senate is presently considering this legislation. 

 

We understand this news will generate several questions from you and your HR staff. However, the Department of Labor (DOL) Secretary will issue specific guidance on paid sick leave within seven (7) days that may address many of your questions.

 

Sick Leave Credit 

 

The bill provides for emergency paid 10 days of sick leave and 12 weeks of paid family leave for some workers who are sick, quarantined, providing care to the sick, or unable to work because of unavailable childcare. This benefit is paid for by employers who will then receive a fully refundable tax credit against their payroll tax liability. If the employer’s cost of providing this new benefit exceeds its payroll tax liability, the balance will be refunded to the employer by the Treasury. It also pays for free coronavirus testing for those who need it.

 

Certain employers would be required to provide two weeks of full or partial paid leave to full-time employees (pro-rated for part-time employees). Days when an individual receives pay from their employer (regular wages, sick pay, or other paid time off) or unemployment compensation do not count as leave days for purposes of this benefit. 

 

For the purposes of this benefit, there are two categories of employees that would receive differing amounts of compensation. The first group includes employees subject to a Federal, State, or local quarantine or isolation order related to coronavirus; employees that have been advised by health care provider to self-quarantine due to coronavirus; and employees experiencing symptoms of coronavirus. These employees would be entitled to their full wages, not to exceed $511 per day. 

 

The second group includes employees caring for an individual who is quarantined or been ordered to self-isolate. It also includes employees who must provide childcare because of school or daycare closures. For this category, employers would be required to pay these employees two-thirds of their wages, up to $200 daily. 

 

This new mandate applies to all public sector employers as well as private sector employers with less than 500 employees. The tax credit only applies to the latter group. Employers with more than 500 employees would not be eligible for the tax credit as most already offer paid sick leave. Employers with less than 50 employees may be exempt if they meet certain criteria issued by the Secretary of Labor. 

 

This new benefit to employees will be subject to the federal income tax as well as the employee payroll tax. The employer will not have to pay the 6.2% payroll tax on this benefit. As this is an emergency benefit, it ends on December 31, 2020. 

 

Family Leave Credit 

 

Another provision of the new bill would expand the Family and Medical Leave Act to provide benefits for employees with children who cannot work because of school and daycare facility closures. Employers with less than 500 employees would be required to provide up to ten weeks of paid leave for these employees. Employees would receive two-thirds of their pay, up to $200 daily.

 

Similar to the sick leave provision described above, some employers with fewer than 50 employees could be exempt from this new requirement. Participating employers would receive a payroll tax credit like the one provided for sick leave. This credit would also be fully refundable against the employer’s payroll tax liability. Also, the employee (and employer) taxation of this benefit would be identical to the provision described above for the sick leave credit. 

 

Finally, this provision also ends at the end of this year. 

 

Please consult your human resources and tax professionals before making any business decisions based on this legislation. Additional resources will become available at Treasury.gov, DOL.gov, and IRS.gov. 

 

North and South Dakota are expected to file Disaster Declarations opening door for SBA Disaster Loans for Small Business Members impacted by the COVID-19 crisis.

 

Do you have questions about the SBA’s Disaster Loan Assistance available in the Dakotas? You must be in an SBA declared disaster area to be eligible for SBA disaster assistance, yet neither state has officially received a “Disaster Declaration.” We do, however, believe that the official “Disaster Declarations” for the Dakotas are in the works. For now, the SBA is encouraging small businesses and non-profits impacted by COVID-19 to complete and submit an Economic Injury Worksheet.

 

 

 

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