H.R. 6800 – Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act
Description: Here are some of the items in the proposed House bill directed toward small businesses:
- It sets aside a portion of the remaining PPP authorized loan funding for businesses with 10 or fewer employees and a separate set aside for nonprofit organizations.
- It expands eligible nonprofits to include trade groups, chambers of commerce and others after 501(c)(6) organizations and other classes of nonprofits were left out of SBA's original PPP authorization.
- It recycles PPP loan dollars returned by companies taking advantage of the safe harbor provisions, which give businesses until May 18 to return loans and retain the “good faith” clause of their certification. That money could then be used to make new loans under this bill.
- It strikes down an SBA rule that made people convicted of non-fraud crimes ineligible for PPP loans after their release from incarceration.
- It extends the time period for when businesses need to spend loan proceeds to 24 weeks from eight weeks and extends the “covered expenses” period from June 30 to the end of this calendar year, including the time period to rehire laid-off workers. The eight-week deadline and June 30 cutoff have created confusion among small businesses unsure of which was more important if they received their loan with fewer than eight weeks before June 30.
- It eliminates the 25% cap on eligible nonpayroll expenses, including rent, mortgage interest and utilities, an SBA rule that many restaurants and other businesses said made the program unusable for them.
- It alters a tax provision created in the original CARES Act that allows companies to take a loss in 2018, 2019 or 2020 and carry those losses back to the preceding five taxable years. Under the HEROES Act, that would be limited to taxable years beginning on or after Jan. 1, 2018, and prohibits businesses with excessive executive compensation or stock buybacks from carrying back losses.
- It expands the refundable payroll tax credit for paid sick and family leave, enacted in the original CARES Act, through the end of 2021.
- It overrules an IRS decision that bars businesses from deducting expenses from their taxes if those expenses had been paid using PPP loan money. Experts say that mitigated some of the benefit of the loans, and some trade groups said not allowing businesses to deduct those expenses would greatly increase their tax burdens.
- It expands the employee retention credit: Introduced in the original CARES Act, the credit's cap would rise dramatically from a $10,000 limit on wages paid per employee to $15,000 per employee per quarter, up to $45,000 total per year. It would also allow for a partial credit, depending on the drop in a business' total gross receipts compared with the same quarter last year. It would also increase the percentage of qualified wages reimbursed through the credit to 80% from 50%.
- It creates a business-interruption credit for self-employed workers, who would get a 90% individual income tax credit if they experienced a significant loss of income, at more than 10%. The credit is capped at $45,000 and phases out gradually based on any other income the self-employed person is still receiving.
- It creates a 50% refundable payroll tax credit for qualified fixed costs for companies that have closed because of Covid-19, including rent obligations, mortgage obligations and utility payments, much like the PPP. The credit is for a maximum of $50,000, or about 6.25% of gross 2019 receipts, and only available to businesses with no more than 1,500 full-time employees or no more than $41.5 million in gross receipts in 2019.
The full text of The Heroes Act, H.R. 6800, is here. A section-by-section summary is here.
Current Status: The House passed the $3 trillion coronavirus relief package despite opposition from most Republicans and some Democrats. It now goes to the Senate where Mitch McConnell (R-KY) has indicated they will not take up new legislation until the effects of the CARES Act are determined to be insufficient in helping the economy.