After days of intense negotiation, last night the Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion stimulus package to respond to the economic fallout from the coronavirus (COVID-19) outbreak. The House is expected to pass the bill today, with President Trump to sign it soon thereafter. The Act follows a $100 billion relief package signed into law on March 18, 2020—the subject of a previous client alert. Designed to help workers, businesses, and healthcare providers weather the storm caused by COVID-19, the nearly 900-page bill contains the following key provisions:
- $500 billion lending program for businesses and local governments. The Act provides for direct loans and loan guarantees to specified industries: $25 billion for passenger airlines and related businesses; $4 billion for cargo airlines; and $17 billion for businesses “critical to maintaining national security.” More broadly, it authorizes the Treasury Department to spend $454 billion on programs and facilities established by the Federal Reserve to provide liquidity for the financial system to enable lending to distressed businesses, cities, and States. Specifically, it allows the Treasury Department to make loans directly to those programs and facilities; to purchase obligations or interests directly from issuers; and to make purchases on the secondary market. The Act requires the Treasury Department to publish application procedures and requirements within 10 days of enactment.
The Act imposes important conditions on participation. Specifically, any transactions with the specified industries must be publicly reported on the Treasury Department’s website within 72 hours. It also requires borrowers in those industries to maintain their existing employment levels as of March 24, 2020, to the extent practicable—and, in any event, to not reduce their employment levels by more than 10 percent—until September 30, 2020.
The Act generally prohibits share repurchases and the payment of dividends by businesses participating in the $500 billion program while any loan is outstanding, plus one year, absent a waiver from the Secretary; there are also limits on executive compensation for companies that accept loan assistance.
To address potential conflicts of interest, the Act precludes participation by businesses in which the President, Vice-President, cabinet secretaries, Members of Congress, and their immediate families, have an equity interest of 20 percent or more.
To strengthen oversight over the $500 billion program, the Act establishes an Office of Special Inspector General for Pandemic Recovery—appointed by the President with the advice and consent of the Senate—to conduct audits and investigations, and to prepare quarterly reports on program activities, including detailed statements of all transactions and a list of participating businesses. The Act also creates a five-member Congressional Oversight Commission with members appointed by the parties’ respective leadership in the House and Senate.
- More than $350 billion in assistance for small businesses. The Act provides for $349 billion in forgivable loans to small businesses and non-profits to maintain existing workforce levels and to help pay other expenses. The loan program will be administered by the Small Business Administration (SBA). The Act further provides for an additional $10 billion for emergency grants of up to $10,000 to provide immediate relief for small business operating costs, and $17 billion to cover six months of loan forbearance for small businesses with existing SBA loans.
- Direct payments. The Act provides for the one-time payment of $1,200 directly to most Americans, with $500 to most children, in the form of tax credits. The full payment is available for individuals making up to $75,000, or joint filers making up to $150,000. These payments will phase out at higher income levels.
- Approximately $150 billion in investment in the healthcare system. The Act allocates $100 billion to a “Public Health and Social Services Emergency Fund,” to reimburse eligible healthcare providers for healthcare related expenses or lost revenues attributed to COVID-19. It also invests billions more in medical research and medical equipment and infrastructure, including protective equipment, testing supplies, and increased workforce and training. Additional funding is also available to delivering Medicare payment increases to hospitals and health care providers. Senate Minority Leader Chuck Schumer described this as a “Marshall Plan” for the country’s healthcare system.
- $150 billion in aid to States and local governments. The Act provides for $150 billion in aid to States and localities. Of that, $3 billion in aid is dedicated to Washington D.C. and U.S. territories, and $8 billion in aid is dedicated to Tribal governments. The Act allocates aid proportionally based on State and territory populations and provides that each State shall receive a payment of not less than $1.25 billion in aid.
- Expanded unemployment insurance. The Act expands both the eligibility for federal unemployment insurance and the benefits. It provides for a flat weekly payment of $600 in benefits, on top of the benefits already available under State programs, for up to four months. The Act also extends temporary federal unemployment benefits to self-employed, contract, and other workers who may typically be ineligible for unemployment insurance.
Once enacted, this will be the largest economic stimulus package in American history, which Senate Majority Leader Mitch McConnell described as a “wartime level of investment into our nation.” Given the scale and scope of the legislation—and its extraordinarily quick passage, without public hearings or debate—many of the key provisions will require further analysis. WilmerHale has prepared this analysis based on its initial review of the legislation and available guidance from congressional leadership. We will provide ongoing updates on this significant legislation and continue to monitor implementation of the Act’s key provisions.
Implementing regulations and guidance establishing how the stimulus funds will be distributed are expected in the coming days. Our experienced team of lawyers and policy professionals are available to help clients navigate this challenging environment. In particular, WilmerHale has a Coronavirus Task Force and dedicated site with frequent legal updates on critical issues affecting our clients’ businesses, including access to alerts, news, guidance, and analysis.