President Trump signed additional COVID-19 relief legislation (H.R. 133) into law on December 27, 2020. The deal includes a $900 billion economic stimulus package that will provide relief benefits to businesses and individuals impacted by the COVID-19 pandemic.

The following is a summary of some of the provisions that will have a major impact:

Financial Support for Businesses

PPP Loan Recipients

The legislation includes more than $280 billion for additional PPP loans. It includes: (1) $12 billion designated for minority-owned and very small businesses; (2) $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions; and (3) expands eligibility for more non-profits/not-for-profits, as well as local newspapers, TV and radio broadcasters.

In addition to existing categories of permissible uses for PPP loans, the new law makes the following expenses allowable and forgivable uses:

  1. covered operations expenditures including software costs, cloud computing, and other human resource and accounting needs;
  2. property damage cost due to public disturbances not covered by insurance;
  3. covered supplier costs related to contracts, purchase orders or orders for goods in effect prior to taking out the loan that are essential to the operations at the time at which the expenditure was made; and
  4. costs of PPE and other investments to help the loan recipient comply with health and safety guidelines. It also includes employer-provided group insurance benefits in payroll costs.

Recipients who have not had prior PPP loans forgiven may use these expanded criteria when applying for forgiveness.

The legislation also creates a second PPP loan called a “PPP second draw” for smaller and harder-hit businesses with a maximum amount of $2 million. Eligible entities must not employ more than 300 employees; must have used all of the first PPP loan; and must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. The law makes certain entities ineligible. In general, borrowers may receive a loan amount up to 2.5 times the average monthly payroll costs in the one year prior to the loan.

Loans for not more than $150,000 are subject to more lenient application procedures. The law allows the recipient to elect a coverage period ending between eight and 24 weeks after the loan is originated. The 60/40% cost allocation between payroll and non-payroll costs will continue to apply to all PPP loans.

Businesses not in operation on February 15, 2020, are ineligible for PPP loans.

PPP Lender Hold Harmless

With respect to a lender that relies on a certification or documentation related to an initial or second draw PPP loan, an enforcement action may not be taken against the lender, and the lender shall not be subject to any penalties relating to loan origination or forgiveness of the initial or second draw PPP loan, if:

(A) The lender acts in good faith relating to loan origination or forgiveness of the initial or second draw PPP loan based on that reliance; and

(B) All other relevant federal, state, local and other statutory and regulatory requirements applicable to the lender are satisfied with respect to the initial or second draw PPP loan.

That subparagraph (B) is a big “but” after the hold harmless provisions. There remain significant liability concerns, including relating to the Anti-Money Laundering law and the Bank Secrecy Act compliance, and lending practices both as it concerns the Consumer Financial Protection Board and state attorneys general.

Other Business Support

The legislation provides $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities.

It includes $43.5 billion for continued Small Business Administration (SBA) debt relief payments, and $2 billion for enhancements to SBA lending.

Financial Support for Individuals and Families

Direct Payment/Stimulus Checks

The relief package provides up to $600 in direct payments (presented as an advanced tax credit) to individuals ($1,200 for couples filing jointly), which is only half of the amount paid to qualifying individuals under the CARES Act passed in the spring. The legislation also provides an additional $600 per dependent child, which is $100 more than the dependent payment made in the spring. Individuals with a social security number making less than $75,000 based on 2019 incomes ($112,500 for head of household and $150,000 for couples filing jointly) will be eligible to receive a stimulus payment. The Treasure Department refers to these payments as “economic impact payments.”

Eligibility also extends to couples filing jointly if at least one spouse has a social security number, thus making it possible for families with an undocumented person to receive the economic impact payments.

Payments are expected to get to individuals quicker than the first round of stimulus checks issued in the spring. The Department of Treasury now has the infrastructure and processes in place to facilitate the distribution. Those with direct deposit information on file with the IRS will likely see their payment first.

Unemployment Compensation

Between December 26, 2020, and March 14, 2021, individuals receiving unemployment benefits will receive an additional $300 per week, similar to the additional $600 per week provided by the CARES Act. Over the summer, as select employers worked to reopen, some claimed that the extra $600 provided to staff who were laid off earlier in the pandemic made it more difficult to convince people to come back to work and, therefore, posed challenges to reopening plans for even limited operations.

The Pandemic Emergency Unemployment Compensation (PEUC) program is extended until March 14, 2021, and the claims period stretches to April 5, 2021, provided the claimant has not hit the maximum 24 week benefit allotment (which is an increase from 13 weeks provided under the CARES Act).

The CARES Act also created a temporary Pandemic Unemployment Assistance (PUA) program, which expanded unemployment benefits to individuals not traditionally eligible including, gig workers, independent contractors, individuals who are self-employed, or people unable to work because of illness or other circumstances directly attributed to COVID-19.  Again, similar to the extension provided for PEUC, despite the March 14 cutoff, eligible claimants receiving benefits as of that date may continue to receive benefits until April 5, 2021, or earlier if they exhaust the 50-week eligibility period. But, any retroactive PUA benefits are limited to the weeks of unemployment after December 1, 2020.

The Mixed Earner Unemployment Compensation, which also terminates on March 14, provides individuals who made at least $5,000 from self-income and are disqualified from receiving PUA an additional $100 per week payment.

According to reports, the PEUC and PUA extensions are expected to affect an estimated 12 million Americans.

The CARES Act fully reimbursed states for the first week of regular unemployment compensation if they entered an agreement with the Secretary of Labor to waive the waiting week period, which generally delays when someone who lost their job can file for unemployment. The latest relief package reduces the reimbursement to 50% of the amount paid in the first week.

Children and Families


The relief package increased Supplemental Nutrition Assistance Program (SNAP) benefits by 15% through June 30, 2021, for participants and specifies that Pandemic Unemployment Compensation will not be counted towards household income to assess eligibility. Five million dollars is also assigned to technical support for the SNAP online purchasing program.

Additionally, the bill makes it easier for states to issue pandemic-EBT benefits (P-EBT) for children under six years old who live in a household receiving SNAP benefits, by simplifying the analysis used to identify eligible candidates.

According to the House summary of the relief package, nearly $11 billion is allotted to support early childhood programs—broken down to support Child Care and Development Block Grants and Head Start.

Families First Coronavirus Response Act Leave

The new legislation seems to extend the tax credits for employers who continue to provide leave in line with the requirements for Emergency Paid Sick Leave and Expanded Family Medical Leave under the Families First Coronavirus Response Act (FFCRA). However, the bill does not extend FFCRA leave beyond December 31, 2020. Therefore, it appears that under this legislation, employers may continue to take advantage of the tax credit if they voluntarily opt to provide leave in line with FFCRA leave through March 31, 2021.

Mortgage Payments, Foreclosures & Evictions

The legislation provides for $25 billion for rental assistance, prioritized for individuals experiencing unemployment, in lower income brackets or at risk for housing instability or homelessness. Financial assistance provided from these funds is non-taxable for households receiving assistance.

It also extends the Centers for Disease Control and Prevention’s (CDC’s) eviction moratorium until January 31, 2020, which was initially a temporary measure of halting residential evictions to prevent the further spread of COVID-19.

While the initial relief package allowed borrowers with covered federally backed mortgages who attest that they are experiencing financial hardship due to COVID-19 to suspend their payments for 180 days, with a possible 180-day extension, there is no specific provision in the legislation that extends this forbearance into the new year. While the “covered period” under the CARES Act was the date that legislation went into effect, until the sooner of December 31, 2020, or the termination date of the COVID-19 national emergency, there is no explicit continuance of the forbearance programs, which has created a lack of clarity for borrowers seeking to access this assistance and servicers trying to plan for continued program delivery. As reported here, this has prompted industry trade associations to seek clarification about the CARES Act forbearance period from federal regulatory agencies. Similarly, there is no indication of a renewal of the foreclosure prohibition on homes with federally backed mortgages, which began in March of 2020.

Health Insurance/Provider Provisions

The Stimulus Bill includes provisions relevant to health plans and health care providers that are not specifically tied to stimulus measures. Three of the issues addressed by these provisions have been the subject of intense recent interest.

First, the bill addresses surprise medical bills in certain situations, including:

  • Emergency services furnished by an out-of-network provider;
  • Non-emergency services furnished by an out-of-network provider at an in-network facility; and
  • Air ambulance services.

Second, the Bill includes certain provisions on the transparency of costs that health plan participants will need to bear for medical expenses.

Third, the bill provides temporary, enhanced flexibility for health and dependent care flexible spending arrangements (FSAs). Most significantly, employers may amend their plans to allow employees to carry over all unused amounts to the next plan year or establish an extended 12-month grace period after the end of the current year, in which employees may incur expenses that can be reimbursed from current-year contributions. These changes will be in effect for two years.  For example, an FSA operating in a calendar year may allow unlimited carryovers from 2020 to 2021 and from 2021 to 2022. Other changes apply, including one that permits cafeteria plans to be amended to allow employees to change their FSA contribution elections prospectively without incurring any triggering event that would justify such a change. This flexibility to change contributions will apply for plan years ending in 2021.

These new rules will not be effective until 2022. We will address them in more detail in one or more upcoming alerts.

Qualified Disaster Distributions

Section 302 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of the Consolidated Appropriations Act, 2021) provides that “qualified disaster distributions” of up to $100,000 may be made to participants in tax-qualified retirement plans (such as 401(k) and 403(b) plans) and IRAs for up to 180 days following the enactment of the legislation. This effectively extends (and modifies) the Coronavirus-related distribution (CRD) provisions of the CARES Act, which allowed for in-service distributions to qualified individuals adversely affected by COVID-19.

Under the new legislation, a qualified disaster distribution is a distribution made during the incident period of a qualified disaster (and no later than 180 days following enactment of the new legislation) to an individual whose principal place of abode at any time during the incident period is located in the qualified disaster area and who has sustained an economic loss by reason of the qualified disaster. A “qualified disaster” is defined as a major disaster declared during the period beginning on January 1, 2020, and ending 60 days after enactment of the new legislation by the President under Section 401 of the Stafford Act.

Similar to the CRD provisions under the CARES Act, qualified disaster distributions:

  • Are not subject to the 10% early distribution excise tax under Section 72(t) of the Internal Revenue Code;
  • Will not be treated as violating any distribution restriction under the tax-qualified retirement plan or IRS;
  • May be repaid to a tax-qualified retirement plan or IRA by the participant within three years, and such repayment will be treated as a tax-free rollover;
  • Will result in income spread over three years, unless elected otherwise by the participant (and unless recontributed and rolled over); and
  • Will not be treated as eligible rollover contributions for purposes of mandatory income tax withholding and notice requirements.

The new legislation also addresses the ability of participants to re-contribute to a tax-qualified retirement plan or IRA certain distributions that were taken (but not used) to purchase or construct a principal residence in a qualified disaster area. Also, the CARES Act provisions increasing the loan limits in tax-qualified retirement plans for qualified individuals from $50,000 to $100,000 and allowing for a one-year delay in plan loan repayments are extended for a period of 180 days under the new legislation.

Tax-qualified retirement plans will need to be amended to reflect these provisions, but the deadline for amendment has been extended to the last day of the plan year beginning on or after January 1, 2022 (i.e., December 31, 2022, for calendar year plans).

Troubled Debt Restructuring

The new relief legislation contains an extension of the provision of the CARES Act that allows financial institutions to determine if they will suspend the Generally Accepted Accounting Principles (GAAP) requirements for recognizing any potential COVID-related losses from a troubled debt restructuring (TDR) related to a loan modification.

The provision extends the termination of the TDR provision of the CARES Act to January 1, 2022. However, the House summary of the bill indicates that the extension of the CARES Act TDR provision will be to the earlier of (i) 60 days after the national emergency termination date or (ii) January 1, 2022. Therefore, there appears to be a discrepancy between the actual bill text and the House bill summary. We will need to await clarification on that issue. The new provision also clarifies that insurance companies are covered by the provision.

Education Funding

The Act provides billions of dollars for educational institutions, including $82 billion in an “Education Stabilization Fund,” which provides flexible funding to support states, school districts, and institutions of high education respond to the evolving educational needs around the coronavirus. The Act also provides $54.3 billion in aid targeted at reopening learning institutions safely, such as through facility repairs and improvements, and addressing learning loss among students. Additionally $22.7 billion is allocated for higher education institutions, to be distributed using a formula that takes into account head count and full-time enrollment.

Broadband Access Funding

Broadband internet access services also feature in the bill, with $7 billion dedicated to expand internet access so citizens are able to connect remotely during the pandemic, with a focus on minority and low-income groups. This includes $3.2 billion for the Emergency Broadband Benefit Program at the FCC, which provides eligible households with a discount on internet services and a subsidy on devices, and internet providers a reimbursement for providing these service and devices through the FCC.

Vaccine Distribution

Billions of dollars in funding to support COVID-19 vaccine distribution, testing, and contact tracing efforts to effectively monitor and suppress COVID-19 is also coming down the pipe.  This includes nearly $82 billion to the Department of Health and Human Services and the CDC.  An additional $25.4 billion is allocated to the Public Health and Social Services Emergency Fund, $3 billion of which is slated as grants for hospital and healthcare providers to reimburse them for health-care-related expenses or lost revenue attributable to the coronavirus.