Washington Builds COVID-19 Counterattack Around Stimulus, Paid Leave
Options for contractors include loans, tax credits, modified tax rules; busy spring helping some
Congress and President Trump have ushered into law a $2 trillion dollar stimulus package designed to buffer steep economic fallout in the ongoing COVID-19 health emergency.
The law will use a variety of methods to deliver aid and loans to both individuals and businesses. For the HVAC industry, the most relevant elements include $350 billion in U.S. Small Business Administration (SBA) loan support and $500 billion of additional liquidity earmarked for larger businesses and municipalities.
This coronavirus crisis began to spread in the U.S. during what was for many contractors a mild winter. ACCA’s vice president for public policy and industry relations, Todd Washam, said that contractors who did have cash on hand may have burned through a good portion of it maintaining payroll through the early part of the year.
In that context, he expects the SBA loan component to be very important for contractors. On a more positive note, contractors who have been in touch with Washam and others have reported a busier spring than usual. More than one source has theorized that the sudden increase in time spent at home is leading some homeowners to understand and want to fix deficiencies in their current system’s performance. Other residents may be newly receptive to IAQ-related options in light of COVID-19.
SMALL BUSINESS SUPPORT
The new law’s small business support aims to ease the way for more employers to keep more workers on their payrolls through the worst of the crisis, reducing layoffs and unemployment. This comes on the heels of previous congressional response to the coronavirus in the form of employer compensation for COVID-related leave (see sidebar).
ACCA had supported a heavier emphasis on bolstering unemployment benefits as opposed to paid leave reimbursement, since contractors generally have already budgeted for paying unemployment insurance but may not have reserves on hand to cover paid sick leave. Between the CARES Act and its predecessor, the response thus far essentially attacks the problem from both sides.
Washam said he had spoken to dozens of contractors in recent days, with very few reporting layoffs. According to Washam, those contractors expect to add their workers right back to their staff once their SBA loans are in place.
The SBA’s Economic Injury Disaster loan program also offers low-interest loans of up to $2 million dollars to small businesses “that have been severely impacted” by COVID-19. For even more immediate needs, the SBA makes “express bridge loans” of up to $25,000 that can be used on their own or as a stopgap while applying for an Economic Injury Disaster loan.
The SBA’s definition of a “small business” depends on a company’s particular industry and other factors. Businesses can consult the Size Standards Tool on the administration’s website.
Elsewhere in the world of important paperwork, contractors should consult their accountants regarding tax-related flexibility included in the CARES Act. These provisions include more accommodating parameters for handling operating losses, adjusting the terms first set forth in the 2017 tax cut bill. The new law also modifies the schedule for paying payroll taxes.
NOT THE FIRST …
The CARES Act was not Congress’ first COVID-19 response with relevance for HVAC contractors. On March 18, President Trump signed the Families First Coronavirus Response Act. That law allows up to 80 hours of paid sick leave, as well as additional paid child care leave when the coronavirus has compelled a school closure or the unavailability of child care providers.
An important note: For employers with fewer than 50 workers, the law does offer an exemption from providing that child care leave in cases where the viability of the business is threatened.
Otherwise, the Act provides for 100 percent reimbursement to employers for both types of paid leave. The Department of the Treasury later detailed that health insurance costs are included in the credit, employers face no payroll tax liability for those funds, and self-employed individuals can receive an equivalent credit.
Treasury also stated that “reimbursements will be quick and easy to obtain,” in the form of providing an “immediate dollar-for-dollar tax offset against payroll taxes.” If an employer is owed a refund, the IRS will send the refund “as quickly as possible.” Toward that end, the law appropriated almost $400 million for agencies to process and expedite those payments or tax credits.
See the sidebar for more information on the types of leave covered and additional reimbursement details for employers.
… MAYBE NOT THE LAST
Elected officials and others already float the occasional reference to the possibility of additional stimulus. House Majority Leader Steny Hoyer has reportedly told his caucus to expect at least one more stimulus effort.
Stephen E. Sandherr, CEO of the Associated General Contractors of America, acknowledged the recent stimulus and its impact but said Congress would need to do more.
“Specifically, Congress must provide financial compensation for losses incurred on federally funded projects because of COVID-19 related delays and cancellations,” he said in a statement.
Indeed, when Washam offered his anecdotal overview of how ACCA members are faring, the primary scenario around the country where he had heard of any layoffs involved contractors in states where large construction projects had been shut down in response to the virus.
Many state-level executive orders for nonessential business closures have been specific in declaring most if not all construction as essential business. Pennsylvania represented the most high-profile case of a governor’s closure order, at least initially including a ban on construction work.
Francis Dietz, AHRI vice president for public affairs, observed that the legislative response to COVID-19 might even come to involve the AIM Act’s HFC phasedown proposal. The phasedown has existed so far as a standalone proposal and also as an amendment to a major energy bill that has taken a back burner at the moment. It could find yet another home as things progress, he noted.
“There would also be opportunities with future economic stimulus packages that focus on infrastructure and energy issues,” Dietz said, adding that the HFC phasedown plan could also latch on to end-of-fiscal-year funding bills.
TIME TO TRANSLATE
While this legislation seems poised to throw millions of life vests to businesses and individuals trying to stay afloat in extraordinary times, HARDI CEO Talbot Gee pointed out that questions about the both efforts will remain outstanding until departments like the IRS, Department of Labor, and Treasury can complete their own reviews and share their guidance.
“Contractors are wondering if the leave provisions are retroactive,” Washam said, as one example. ACCA had just received some Department of Labor input, but many points may take a while to sort out given the sheer size of these bills and the speed involved.
Washam mentioned that in the bigger picture, he feels good about Congress’ level of commitment to small business.
For now, he said, the assorted agencies are “doing as good a job as possible, given the circumstances.”