Coronavirus Legislative Update: Senate Republicans Introduce the HEALS Act COVID-19 Response Legislative Package and Begin Negotiations to Bring a Final Bill to the President's Desk in the Coming Weeks
Additional contributors to this Advisory: Ben Berk, William Bosch, Paul Fishman, David Freeman, Reuven Graber, Kristin Hicks, Dan Kracov, Anthony Raglani, Paige Sharpe, Allison Shuren, and Charlie Wachsstock. Associates Jamie Lee and Casey Patchunka and Project Policy Advisor Jessica Monahan also contributed this Advisory.
To help our clients navigate the coronavirus (COVID-19) crisis, Arnold & Porter has established a Coronavirus Task Force covering a wide range of issues and challenges. Subscribe to our "Coronavirus (COVID-19)" mailing list to receive our latest client Advisories and register for upcoming webinars.
Introduction
The coronavirus has swept across the United States, paralyzing much of the nation, ending a record run on Wall Street, and inducing a level of economic uncertainty and anxiety that threatens to plunge the United States—along with the rest of the world—into a global recession or depression. The resulting crisis has created unprecedented emergencies for corporations, associations, and small businesses. Handling these extraordinary challenges, which cut across traditional legal disciplines, requires a fully coordinated effort based on accurate and up-to-date information about available resources and the rapidly evolving legal and regulatory landscape.
This is the latest update summarizing recent federal government actions addressing the coronavirus crisis, accurate as of the time of publication. In addition to this written update, Arnold & Porter intends to host a webinar on the final legislative package when it clears Congress and becomes law, which we currently forecast to happen between August 7 and 14.
The Path to HEROES and HEALS in Congress
Background: The coronavirus pandemic has forced Congress to move with unprecedented speed to respond to the crisis. Since March 1, Congress has passed four major pieces of legislation totaling almost $3 trillion dollars in new spending to support all elements of the American economy during the pandemic: (1) March 6 - the Coronavirus Preparedness and Response Supplemental Appropriations Act ($8.3 billion); (2) March 18 - the Families First Coronavirus Response Act ($104 billion); (3) March 27 - the CARES Act ($2.2 trillion); and (4) April 24 - the Paycheck Protection Program and Health Care Enhancement Act ($484 billion).
Passage of those four bills shared a few attributes. First, the process was almost entirely controlled by top House and Senate leadership, with some input from Committee Chairmen and Ranking Members, but almost no meaningful input from rank and file Representatives and Senators. Second, the normal committee process and regular order were bypassed. Third, one chamber of Congress took control of the process for each bill and left the other chamber to accept a finished product.
The Process: Passage of the fifth package is going to be different and much more challenging. The House passed the HEROES Act on May 15 as a bold $3 trillion opening bid reflecting the policy priorities of numerous Democratic constituencies. Unlike the first four COVID-19 packages, HEROES is a partisan package that did not consider political priorities from the minority party, leading to just one Republican in the House voting for the bill.
The partisanship in the House was the first sign of trouble for the Senate. The White House and Republican Senate leadership decided to delay consideration of the next COVID-19 bill until late in the summer, allowing them to see if economic and healthcare conditions improved enough to reduce the cost and scope of the next package. That delay has largely backfired on President Trump and Senate Majority Leader Mitch McConnell (R-KY). Two of the most politically popular provisions of CARES—a moratorium on evictions expired on July 24 and enhanced unemployment benefits will run out before August 1—and Republicans will take most of the political blame for a reduction in support. Since HEROES passed the House, there has been a resurgence of cases across the country, straining healthcare resources anew and dragging down the nascent economic recovery from the March to May nationwide shutdown. Meanwhile, Senate Minority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) have had two months to consolidate their priorities and now are negotiating from a position of strength, as polling data shows an increasing likelihood Democrats will win the White House and both chambers of Congress in November.
In fact, the HEALS package lacks complete Republican support to start in the Senate. Key fiscal hawks like Rand Paul (R-KY) and Ted Cruz (R-TX) have announced their opposition to a package that exceeds $1 trillion, and they strongly oppose many of the key elements in HEALS and the expected final deal, like continuing enhanced unemployment benefits and providing more state and local funding. As the package develops, each layer of additional spending may push away additional Senate Republicans in safe seats. Conversely, the Senate Republicans from swing states up for reelection in 2020, the seats that will decide who controls the Senate in 2020, have all the political motivation needed to support growing the HEALS package to at least $1.5 trillion or more.
The Players: The White House has new players on the field for this round of negotiations. Former conservative firebrand Congressman Mark Meadows (R-NC) is now the White House Chief of Staff and will handle negotiations along with Treasury Secretary Steven Mnuchin. The perception is that Speaker Pelosi and Minority Leader Schumer got the better of Secretary Mnuchin in CARES Act and Paycheck Protection Program Act negotiations earlier this spring. Pelosi and Schumer will also have some level of coordination with the Biden campaign given the impact of this relief package on the 2020 Presidential election. White House Chief of Staff Meadows wants to drive a better bargain for the White House through negotiations with two Democratic leaders he regularly attacked while serving in the House.
10 Negotiation Inflection Points: The policy differences between HEROES and HEALS are deeper than the $2 trillion dollar difference in their costs. Here are some of the key negotiation points for the weeks ahead:
Total Spending - The HEROES Act has more than $3 trillion in new spending, while the HEALS package comes in right around $1 trillion. Negotiations between the White House, Congressional Republicans, and Congressional Democrats will not get very far until they agree on a target spending level for the overall bill.
Liability Coverage - Senate Republicans have included more than 60 pages of legislation designed to allow businesses to reopen and operate free of worry from lawsuits related to the virus. Republicans have made it clear this is a must-have for them, and Democrats will have the chance to demand some changes to the language or gain additional spending in exchange for allowing the liability shield to become law.
Food Stamps - HEROES included extended SNAP benefits through September of 2021, expanded the minimum and maximum monthly benefit, suspended job-related requirements, and prevented the implementation of pending Trump Administration rules that would reduce access to SNAP. The HEALS legislative package includes no funding or policy changes for SNAP. At a time of record or near-record levels of unemployment, it is hard to believe the final package will not include some level of help in this area.
Education Operations - Both HEROES and HEALS provide $100 billion or more for K-12 and higher education, and up to $10 billion for early childcare support as well. House Democrats though are claiming the money in HEROES two months ago, when schools were assumed to be opening in person this fall, are now insufficient as a rising tide of a second wave of the pandemic pushes more education to a pure online experience. In turn, Senate Republicans have conditioned much of their education funding on requiring schools to have in-person education. Those philosophical differences and final funding levels will need to be ironed out in the pending negotiations.
State and Local Funding - HEROES includes hundreds of billions in funding for state and local governments to remain fully operational during the pandemic. The HEALS package includes no funding for this purpose at all.
Transportation - HEROES includes tens of billions of dollars to support every portion of the transportation sector. HEALS includes $10 billion for the continued operation of the nation's largest airports but is otherwise silent on funding various transportation modes.
Unemployment - House Democrats in HEROES want to continue the $600 enhanced unemployment benefit for the foreseeable future. In HEALS, Senate Republicans have proposed to reduce the enhanced benefit in two stages, first to $200, and then to a cap of 70% of a recipient's prior income.
Student Loans - The CARES Act created a student loan repayment moratorium. Both HEROES and HEALS propose to extend that moratorium but they differ on the length of the extension and who will be covered by the extension.
Evictions - The CARES Act had a short-term federal moratorium on evictions. The HEROES Act provides an extension of the moratorium for up to an additional year and includes additional forbearance for homeowners in arrears on their mortgages. Treasury Secretary Mnuchin has said the moratorium will be extended but seems to want a shorter period and more limitations than what Democrats have included in HEROES.
Paycheck Protection Program - HEROES includes more funding and expands the number of entities who can apply. HEALS also has more funding but has rejected most of the additional eligibility in the House bill. HEALS also includes a proposal to allow for a second loan for smaller companies that have suffered major financial losses, but there is intense lobbying to expand eligibility and ease conditions for those second loans.
Testing and Healthcare Coverage - Congressional Democrats clearly believe the United States trails other advanced nations in testing efficiency, contact tracing, and healthcare response to the pandemic. Republicans have been more hesitant to add new testing and healthcare resources to this package because so much of what was allocated in Families First and CARES for these purposes still has not been spent.
Timeline: The introduction of HEALS is the first step to finding a middle ground between HEALS and the HEROES Act the House passed in May. We now expect trilateral negotiations involving the White House, Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy (R-CA), Senators McConnell and Schumer, and the Senate leadership - including Chairmen and Ranking Members of several key Committees. Congress could pass a short-term (four to six week) bill to address expiring provisions of the CARES Act and delay consolidation of HEROES/HEALS into a final package until the end of the fiscal year (September 30) but we consider that relatively unlikely. Instead, we expect these negotiations to take five to twelve days, and forecast the next package will be on the President's desk sometime between August 7 and August 14.
Major elements of the HEALS Act are covered in this Advisory. Use the links below to navigate to different sections of this analysis:
Table of Contents
Foreign Involvement in Research
Healthcare
The HEALS (Health, Economic Assistance, Liability protection, Schools) Act
S. _, the Coronavirus Response Additional Supplemental Appropriations Act, 2020
TITLE III — Department of Defense
Coronavirus Defense Production Act Purchases: The bill appropriates $5.3 billion, to remain available until expended, for purchases under the Defense Production Act of 1950, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
Defense Health Program: The bill appropriates $705 million, to remain available until September 30, 2021, for the Defense Health Program to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $530 million for research, development, testing and evaluation.
TITLE VII — Department of Health and Human Services (HHS)
Indian Health Service: The bill appropriates $605 million, to remain available until September 30, 2021, to prevent, prepare for, and respond to coronavirus, domestically or internationally. The bill requires the Director of the Indian Health Service to, within 30 days of enactment, provide to the Senate and House Appropriations Committees a spend plan of anticipated uses of funds made available to the Indian Health Service.
Indian Health Facilities: The bill appropriates $1 billion, to remain available until September 30, 2021, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes funds for acquisition of sites, purchase and erection of modular buildings, and purchases of trailers, for provision of domestic and community sanitation facilities for Indians.
Centers for Disease Control and Prevention (CDC): The bill appropriates $3.4 billion, to remain available until September 30, 2024, for "CDC-Wide Activities and Program Support" to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes at least $1.5 billion for grants to or cooperative agreements with States and localities to carry out surveillance, epidemiology, laboratory capacity, infection control, immunization activity, mitigation, communications, and other preparedness and response activities. This also includes $500 million for activities to plan, prepare for, promote, distribute, administer, monitor, and track seasonal influenza vaccines to ensure broad-based distribution, access, and vaccine coverage. The bill requires the CDC to, within 60 days of enactment, report to the Senate and House Appropriations Committees on an enhanced seasonal influenza vaccination strategy. This sum includes $200 million for global disease detection and emergency response, and requires the CDC to provide annual reports evaluating how investments have improved infectious disease response. The bill directs $200 million for public health data surveillance and analytics modernization, and requires the CDC to, within 180 days of enactment, report to the Senate and House Appropriations Committees on updates to the public health data surveillance and IT systems modernization. The bill includes $1 million to develop and maintain a Public Safety Officer Suicide Reporting System.
National Heart, Lung, and Blood Institute: The bill appropriates $290 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Institute of Diabetes and Digestive and Kidney Diseases: The bill appropriates $200 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Institute of Allergy and Infectious Diseases: The bill appropriates $480.6 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $55 million for Regional Biocontainment Laboratories.
Eunice Kennedy Shriver National Institute of Child Health and Human Development: The bill appropriates $172.7 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Institute of Mental Health: The bill appropriates $200 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Institute on Minority Health and Health Disparities: The bill appropriates $64.3 million, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Center for Advancing Translational Sciences: The bill appropriates $1.2 billion, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
National Institutes of Health (NIH), Office of the Director: The bill appropriates $12.9 billion, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $10.1 billion for offsetting the costs related to reductions in lab productivity resulting from the coronavirus pandemic. This sum includes $1.3 billion to support additional scientific research. This sum includes $1.2 billion to accelerate the research and development of therapeutic interventions and vaccines in partnership. This sum includes $240 million for supplements to existing research training awards for extensions and other costs. The bill directs the Director of NIH to enter into an agreement with the National Academies of Sciences, Engineering, and Medicine (Academies) to develop a decision framework to assist domestic and global health authorities in planning an equitable allocation of coronavirus vaccines. The bill requires the Academies to consider risk factors related to health disparities, health care access, underlying health conditions, racial and ethnic impacts, higher-risk occupations, first responders, geographic distribution of the virus, and vaccine hesitancy in developing the plan, and provide recommendations to the Advisory Committee on Immunization Practices by September 18, 2020.
Substance Abuse and Mental Health Services Administration: The bill appropriates $4.5 billion for Health Surveillance and Program Support, to remain available until September 30, 2021, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $1.5 billion for substance abuse prevention and treatment block grants, and $2 billion for community mental health services block grants. This sum includes $600 million for Certified Community Behavior Health Clinic Expansion grants. This sum includes $50 million for suicide prevention programs. This sum includes $100 million for activities and services under Project AWARE.
Centers for Medicare & Medicaid Services (CMS): The bill appropriates $150 million for Program Management, to remain available until September 30, 2023, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes funds for strike teams for resident and employee safety in skilled nursing facilities, including activities to support clinical care, infection control, and staffing. The bill requires CMS report to the Senate and House Appropriations Committees, within 30 days, outlining a plan for executing strike team efforts.
Administration for Community Living: The bill appropriates $75 million for Aging and Disability Services Programs, to remain available until September 30, 2021, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $58 million for activities authorized under the Older Americans Act of 1965, including $3 million to implement a demonstration program on strategies to recruit, retain, and advance direct care workers.
Public Health and Social Services Emergency Fund: The bill appropriates $29 billion, to remain available until September 30, 2024, to prevent, prepare for, and respond to coronavirus, domestically or internationally, including the development of necessary countermeasures and vaccines, prioritizing platform-based technologies with U.S.-based manufacturing capabilities, the purchase of vaccines, therapeutics, diagnostics, necessary medical supplies, as well as medical surge capacity, addressing blood supply chain, workforce modernization, telehealth access and infrastructure, initial advanced manufacturing, novel dispensing, enhancements to the U.S. Commissioned Corps, and other preparedness and response activities. This sum includes funds for the Secretary of HHS to purchase vaccines in accordance with Federal Acquisition Regulation guidance on fair and reasonable pricing. The bill permits the Secretary to take such measures authorized under current law to ensure vaccines, therapeutics, and diagnostics developed from funds provided in this Act will be affordable in the commercial market. The bill requires the Secretary to ensure protections remain for individuals with pre-existing conditions enrolled in group or individual health care coverage. The bill allows for products purchased with this sum to be deposited in the Strategic National Stockpile (SNS). The bill includes $2 billion for the SNS, as well as $20 billion for Biomedical Advanced Research and Development Authority (BARDA) for necessary expenses of manufacturing, production, and purchase, at the discretion of the Secretary, of vaccines, therapeutics, diagnostics, and small molecule active pharmaceutical ingredients, including the development, translation, and demonstration at scale of innovations in manufacturing platforms. The bill directs that funds may be used for construction or renovation of U.S.-based next generation manufacturing facilities. The bill includes $6 billion to plan, prepare for, promote, distribute, administer, monitor, and track coronavirus vaccines. The bill requires the Director of CDC to, within 60 days, report to the Senate and House Appropriations Committees on a comprehensive coronavirus vaccine distribution strategy. The bill requires the Secretary to, within 30 days and every 30 days thereafter, report to the Senate and House Appropriations Committees on uses of funding for Operation Warp Speed, including details on contracts.
Public Health and Social Services Emergency Fund: The bill appropriates an additional $8.01 billion, to remain available until September 30, 2022 to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $7.6 billion for the Health Resources and Services Administration - Primary Health Care account for grants, cooperative agreements, and other necessary expenses. This sum includes $250 million for the Health Resources and Services Administration - Bureau of Health Workforce account, to remain available until September 30, 2022, for Children's Hospital Graduate Medical Education.
Public Health and Social Services Emergency Fund: The bill appropriates $16 billion for testing, contact tracing, surveillance, containment, and mitigation to monitor and suppress COVID–19. This would include: (1) tests for both active infection and prior exposure, including molecular, antigen, and serological tests; (2) the manufacturing, procurement and distribution of tests, testing equipment and testing supplies, including personal protective equipment needed for administering tests; (3) the development and validation of rapid, molecular point-of-care tests, and other tests, support for workforce; (4) epidemiology; (5) to scale up academic, commercial, public health, and hospital laboratories; (6) to conduct surveillance and contact tracing, (7) support development of COVID–19 testing plans; (8) and other related activities related to COVID–19 testing, to remain available until expended, to prevent, prepare for, and respond to coronavirus, domestically or internationally. This sum includes $15 billion for States and localities for necessary expenses for testing, contact tracing, surveillance, and related activities.
Public Health and Social Services Emergency Fund: The bill appropriates $25 billion to reimburse eligible health care providers (via the Provider Relief Fund) for health care related expenses or lost revenues attributable to coronavirus, to remain available until expended, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
S. _, the American Workers, Families, and Employers Assistance Act
TITLE III — Supporting Patients, Providers, Older Americans, and Foster Youth in Responding to COVID-19
Subtitle A — Promoting Access to Care and Services
Maintaining 2021 Medicare Part B Premium and Deductible at 2020 Levels Consistent with Actuarially Fair Rates: The bill maintains the 2021 Medicare Part B premium and deductible at 2020 levels consistent with actuarially fair rates. Transitional government contributions shall be transferred from the General Fund to the Trust Fund an amount, as estimated by the Chief Actuary of CMS. This provision is designed to protect Medicare beneficiaries from the projected increase in Medicare premiums due to the economic conditions arising out of the public health emergency and the Advance Payment program loans to providers from the Supplemental Insurance (SMI) Trust Fund.
Improvements to the Medicare Hospital Accelerated and Advance Payments Program During the COVID-19 Public Health Emergency: The bill requires the Secretary, upon request of a provider or supplier receiving a payment under the Part B Medicare Advance Payments program, to provide up to 270 days before offsetting claims to recoup the payment and to allow providers and suppliers not less than 14 months from the date of the first advance payment before requiring payment of the outstanding balance in full. The bill also would allow hospitals 270 days (instead of the 120 days provided in Section 3719 of the CARES Act) before offsetting claims and further delay the date on which the outstanding balance must be paid for 18 months (instead of the 12 months provided in CARES). The bill would make discretionary the Secretary's authority to grant or deny hospital loan requests submitted on or after July 9, 2020. Unlike Section 30206 of the HEROES Act, the bill does not address the interest rate for loans to Medicare Part A and B providers or the permissible per-claim recoupment percentage. The HEROES Act would also provide two years for outstanding balances to be fully paid.
Authority to Extend Medicare Telehealth Waivers: The bill extends the Secretary authority to waive or modify requirements with respect to telehealth services through December 31, 2021, even if the public health emergency has ended before that time. The Secretary must post information describing the requirements applicable to telehealth services and other virtual services under Medicare Parts A and B and the Medicare Advantage program within three months of enactment of the bill, and prior to waiving or modifying such requirements. The Secretary must also conduct a study on the impact of telehealth and other virtual services furnished under the Medicare program and issue such report within 15 months of the date of enactment of the bill. The bill also requires the Medicare Payment Advisory Commission (MedPAC) to conduct an evaluation by June 15, 2021 of telehealth services under Medicare Part B related to the COVID-19 public health emergency and the appropriate treatment of such expansions after the expiration of the public health emergency. Section 303 extends the telehealth coverage waivers provided by the CARES Act.
Extending Medicare Telehealth Flexibilities for Federally Qualified Health Centers and Rural Health Clinics: The bill extends Medicare telehealth flexibilities for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for five years beyond the end of the COVID-19 public health emergency. Section 3704 of the CARES Act authorized RHCs and FQHCs to furnish distant site telehealth services to Medicare beneficiaries only during the COVID-19 public health emergency.
Temporary Carryover for Health and Dependent Care Flexible Spending Arrangements: The bill allows for carryover through 2021 for health flexible spending arrangements (FSAs) and dependent care flexible spending arrangements (DCFSAs) of unused benefits or contributions remaining in a health flexible spending arrangement. FSA account users may roll over up to $2750 in unused benefits or contributions (the maximum allowed in 2020). DCFSA account holders may carry over unused benefits or contributions up to the maximum specified in the Internal Revenue Code for the plan.
On-Site Employee Clinics: The bill establishes certain qualified items and services provided by an employer on-site clinic as a Health Savings Account eligible expense through December 31, 2021.
Subtitle B — Emergency Support and COVID–19 Protection for Nursing Homes.
Establishing COVID-19 Strike Teams for Nursing Facilities: Similar to Section 30209 of HEROES, the bill authorizes the Secretary to establish and support the operation of strike teams comprised of individuals with relevant skills, qualifications, and experience to respond to the COVID-19 public health emergency.
Promoting COVID-19 Testing and Infection Control in Nursing Facilities: The bill authorizes the Secretary, in consultation with the Elder Justice Coordinating Council administered by the Administration for Community Living, to support the efforts of nursing homes participating in the Medicare and Medicaid programs to respond to COVID-19 through the development of online training courses for personnel of participating providers; enhanced diagnostic testing of visitors to, personnel of, and residents of, participating providers in communities where more frequent testing is warranted; development of training materials for personnel of participating providers; and providing support to participating providers in areas deemed by the Secretary to require additional assistance due to COVID-19 infections. The Secretary is required to develop training courses on best practices for infection control and prevention and to create an interactive website to disseminate training materials.
Promoting Transparency in COVID-19 Reporting by Nursing Facilities: The bill requires the Secretary to provide, at least weekly during the COVID-19 public health emergency, the Governor of each State with a list of all participating nursing home providers in the State with respect to which the reported cases of COVID-19 in visitors to, personnel of, and residents of, such providers increased during the previous week.
Funding: The bill provides that the Secretary may use amounts appropriated for COVID-19 response and related activities under the CARES Act and subsequently enacted legislation for purposes of implementing the provisions of Subtitle B — Emergency Support and COVID–19 Protection for Nursing Homes.
S. _, the Safely Back to School and Back to Work Act
TITLE I — Health Provisions
Improving Earlier Access to Diagnostic Tests: The bill requires the Secretary, in coordination with the Director of Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA), to establish and publish policies and procedures, within 180 days of enactment, for public and private entities to access samples of specimens containing infectious disease agents that support the development of diagnostic tests, treatments, or vaccines, to address emerging infectious diseases for biomedical research. This bill allows the CDC to enter into public-private partnerships to assist in the immediate and rapid development, validation, and dissemination of diagnostic tests for purposes of biosurveillance or other immediate public health response activities to address an emerging infectious disease that have the potential to cause a public health emergency.
Sustained On-Shore Manufacturing Capacity for Public Health Emergencies: The bill expands the activities of BARDA to include activities to support manufacturing surge capacities and capabilities to increase the availability of medical countermeasures to respond to public health threats like COVID-19, including promoting and facilitating domestic manufacturing surge capacity contracts. This bill removes all salary restrictions in the Medical Countermeasure Innovation Partner program.
Improving and Sustaining State Stockpiles: The bill directs the Secretary (through the Assistant Secretary for Preparedness and Response) to award grants, contracts, and cooperative agreements for state medical stockpiles needed during a public health emergency, such as personal protective equipment, ventilators, and other medical products. The bill requires recipients to submit a stockpiling plan to the Secretary for maintaining the state stockpile and are subject to reviews and audits as determined by the Secretary. The bill authorizes $1 billion for each fiscal years 2021 through 2030.
Strengthening the Strategic National Stockpile: The bill aims to improve the SNS by allowing the Secretary to partner with medical product manufacturers, distributors, or other entities to increase the stockpiling and manufacturing capacity to be provided during or in advance of a public health emergency.
Guidance for States and Indian Tribes on Accessing the Strategic National Stockpile: The bill requires the Secretary to publish guidance on how states, localities, territories, and Indian tribes can request assistance through the SNS within 15 days of enactment of the bill.
Modernizing Infectious Disease Data Collection: The bill would enhance CDC's infectious disease data collection and biosurveillance by integrating and updating applicable data systems and networks in collaboration with State and local public health officials. The bill would also direct the CDC to expand public meeting topics to include a review strategies to integrate laboratory testing and epidemiology systems as well as strategies to improve the exchange of electronic health information between health care providers, public health departments, and federal agencies to better provide detection of infectious diseases and inform public health preparedness and response. The bill clarifies that public-private partnerships would be eligible grantees to achieve such modernization. The bill requires a report from HHS to Congress on the improvements of biosurveillance modernization within one month of enactment of the bill.
Centers for Public Health Preparedness: The bill authorizes the Secretary to award grants, contracts, and cooperative agreements to institutions of higher education or other nonprofit entities to establish a network of ten regional Centers for Public Health Preparedness, which will support state and local health departments, health care coalitions, and the public by disseminating research related to public health preparedness and response, identifying and developing relevant evidence-based practices, helping to prepare through drills, exercises, and training, and providing technical assistance and expertise during public health emergencies.
Telehealth Plans: The bill allows employers to offer telehealth as an accepted benefit to employees who are not full-time or do not qualify for their employer's coverage during the declared COVID-19 public health emergency until the later of January 1, 2022 or the date on which the COVID-19 public health emergency ends.
Protection of Human Genetic Information: The bill prohibits the collection, storing, analyzing, dissemination or use of human genetic information collected incidental to diagnostic and serologic testing for COVID-19 for purposes other than diagnostic or serologic testing, unless permitted with explicit, written patient consent. Violations will be subject to a civil penalty of not more than $100 for each violation.
Reagan-Udall Foundation and Foundation for the National Institutes of
Health: The bill increases the funding to be transferred to public-private partnerships by the FDA and NIH from between $500,000 and $1,250,000 to between $1,250,000 and $5,000,000, the purpose of which is to research and develop tests, treatments, and vaccines for COVID-19.
S. _, the Restoring Critical Supply Chains and Intellectual Property
TITLE I — U.S. Made Act
Domestic Purchasing Requirement for Personal Protective Equipment Acquisitions for the Strategic National Stockpile: The bill requires funds appropriated to the Secretary for the Strategic National Stockpile (SNS) be used to purchase personal protective equipment (PPE) that was grown, reprocessed, reused, or produced in the United States. Covered items would include PPE equipment and clothing (and materials/components), sanitizing supplies and other medical supplies such as disinfecting wipes, curtains, beds, testing swabs, gauze and bandages, tents, tarpaulins, covers or bags, as well as any other textile medical supplies and equipment. This requirement does not apply to certain materials for which a non-availability determination was made or for procurements for amounts less than $150,000. Any procurement falling under these exceptions require notification by the Secretary within seven days on the relevant website maintained by the General Services Administration. The Secretary shall ensure training for the relevant HHS workforce engaged in maintenance of the SNS during the fiscal year 2021.
Investment Credit for Qualifying Medical PPE Manufacturing Projects: The bill creates an investment tax credit worth 30% of the basis of any tangible personal property necessary for the production of PPE placed in service by the taxpayer during the taxable year. The credit is only available pursuant to certifications awarded by the Treasury Secretary. The Treasury Secretary, in consultation with the Secretary of HHS, shall establish a "qualifying medical personal protective equipment manufacturing project program" to consider and allocate credits for qualified investments. This program will select projects based on their ability to create jobs, to produce PPE needed by the SNS, to help achieve medical manufacturing independence, and to meet surges in demand for PPE. This program is capped at $7.5 billion.
Special Rules for Transfers of Intangible Property Relating to Medical PPE to United States Shareholders: The bill provides a special rule for the transfer of qualified intangible property from a controlled foreign corporation to its domestic corporate shareholder such that the property's fair market value is treated as not exceeding its basis. So long as no portion of the distribution is a dividend, then under the provision, no gain shall be recognized the United States shareholder. Qualified intangible property is any patent or formula for use in production of PPE. The Secretary shall issue regulations and guidance necessary to carry out the purposes of this section.
Liability Shield
The bill would: (1) establish temporary rules for coronavirus-related claims; (2) provide protections for employers, businesses, schools and health care providers; (3) grant temporary labor and employment law protections; (4) and clarify existing products liability protections.
Exposure Actions: The bill would create an exclusive cause of action for coronavirus exposure claims -- that is, civil actions brought by individuals who allege that exposure to coronavirus caused personal injury or the risk of person injury. The cause of action would cover all coronavirus exposure claims that arise between December 1, 2019 and up until either the end of the coronavirus emergency declaration or October 1, 2024. The cause of action would govern any covered claim against persons, schools, colleges, charities, churches, government agencies, associations, and businesses. It would preempt all state laws that impose liability for coronavirus exposure on broader grounds and would establish a one-year statute of limitations. The bill further provides that defendants are not liable for coronavirus exposure so long as they undertook reasonable efforts in light of all the circumstances to comply with the applicable mandatory coronavirus standards and regulations in effect at the time of the alleged exposure. If a plaintiff can establish that the defendant did not take reasonable steps to comply with the applicable standards and regulations, the plaintiff must further show that the defendant’s gross negligence or willful misconduct caused an actual exposure to coronavirus that caused the plaintiff’s personal injury.
Healthcare Protections: The bill also would create an exclusive cause of action for coronavirus medical liability claims against health care providers. This cause of action would allow for claims alleging personal injury caused by the prevention, treatment, diagnosis, or care of coronavirus, or care for any other purpose directly affected by the coronavirus. Health care providers would include doctors, nurses, facilities, administrators and volunteers. Once again, this cause of action would extend to injuries occurring between December 1, 2019 and up until either the end of the coronavirus emergency declaration or October 1, 2024, with a default statute of limitations of one year. As with exposure claims, states would be permitted to further limit liability for coronavirus medical liability claims. The bill would not preempt the Public Readiness and Emergency Preparedness (PREP) Act, government enforcement actions, claims of intentional discrimination, or existing federal laws governing vaccine injuries.
Procedural and Substantive Provisions for Suit: The bill provides further clarification on federal jurisdiction over any coronavirus-related actions, limitations on damages, preemption of state laws, pleading requirements, and discovery limitations.
Labor and Employment: The bill would protect employers from liability under federal labor and employment laws for action taken to comply with coronavirus-related public health guidance and regulations. This section would foreclose lawsuits for injuries caused by workplace coronavirus testing unless the injuries were caused by gross negligence or intentional misconduct of the employer. This section also creates an exception to employer notification laws.
Protections for Products: The bill would extend liability protections to products, such as types of PPE and hand sanitizer, if they meet certain FDA requirements. This section also clarifies liability protections based on methods of distribution of approved countermeasures.
Small Business
The bill (1) amends certain provisions of the existing Paycheck Protection Program ("PPP"); (2) provides for second draw PPP loans ("Second Draw loans") for certain borrowers; (3) creates long-term, low-interest rate loans ("Recovery Sector loans") for certain recovery sector businesses; and (4) establishes a facility (the "Small Business and Domestic Production Recovery Investment Facility") to provide long-term debt with equity features to registered SBA Small Business Investment Companies ("SBICs") to invest in certain small businesses, manufacturing businesses in the domestic supply chain, and businesses in low-income communities.
Paycheck Protection Program Amendments
The bill would make several changes to the PPP, which is administered by the Small Business Administration ("SBA"). Overall, the SBA Administrator would be allowed to make commitments of $749 billion for PPP and Second Draw loans made from February 15, 2020 through December 31, 2020. The bill would rescind $100 billion previously appropriated under the CARES Act (Pub. L. 116-136) and the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116-139), and then appropriate $190 billion for the PPP and Second Draw loans.
Expanded List of Forgivable Expenses: Currently, allowable and forgivable expenses for PPP loans include payroll costs, mortgage interest payments, rent, utilities, and interest on debt obligations incurred before February 15, 2020. The bill would expand the list of forgivable expenses to include: certain operations expenditures, such as payments for software, cloud computing, and other human resources and accounting needs; costs related to property damage due to public disturbances during 2020 that are not covered by insurance; supplier costs pursuant to a pre-February 15, 2020 contract for goods and that are essential to the recipient's current operations; and the cost of personal protective equipment and adaptive investments to help a business comply with federal health and safety COVID-19 guidelines between March 1 and December 31, 2020. In addition, the bill would amend the definition of "payroll costs" to include other employer-provided group insurance benefits.
Flexible Covered Period: Currently, a PPP loan's covered period for loan forgiveness generally begins on the loan disbursement date, with some exceptions depending on the borrower's pay period, and ends either 8 weeks or 24 weeks after that date. For the purpose of loan forgiveness, the bill would permit a borrower of a PPP loan to select the end date for the loan forgiveness covered period as any date between 8 weeks following the disbursement of the loan and December 31, 2020.
Simplified Forgiveness Application: The bill would simplify the loan forgiveness application process for smaller loans by reducing the amount of documentation submitted. For loans under $150,000, borrowers would not need to submit documentation except to attest to a good faith effort to comply with PPP loan requirements. Borrowers would also have to retain relevant records for three years. For loans between $150,000 and $2 million, borrowers would not need to submit documentation beyond the certification required by the CARES Act. Borrowers of such loans also would need to retain relevant records and worksheets for three years. The Administrator would retain the ability to review and audit these loans for fraud. The SBA would have to submit regular reports to the House and Senate Small Business Committees regarding their review and audit plan to mitigate fraud risks in PPP.
Eligibility of 501(c)(6) and Destination Marketing Organizations: The bill would expand eligibility for the PPP loans to 501(c)(6) organizations (1) that did not receive more than 10% of receipts from lobbying, (2) for which lobbying activities do not comprise more than 10% of receipts, (3) that have 50 or fewer employees, and (4) that are receiving loans of no more than $500,000. In addition, 501(c)(6) Chambers of Commerce with 300 or fewer employees and Destination Marketing Organizations that are 501(c)(6) organizations, quasi-government entities, or political subdivisions of a state or local government with 300 or fewer employees are also eligible.
Maximum Amount for First Round PPP Loans: The bill would reduce the maximum amount for a first round PPP loan from $10 million to $2 million. This would only apply to loans made after the date of enactment of the bill.
Increasing Loan Amounts: For businesses whose maximum loan amounts have increased due to changes in the SBA's and Treasury Department's interim final rules that permit such increases, the bill would allow them to work with their lenders to increase the loan value. It is not entirely clear from the language of the bill whether the PPP loan, as so increased, would be subject to the $2 million limit set forth above.
Definition of Seasonal Employer: The bill would add a definition of "seasonal employer" for purposes of the PPP. A seasonal employer would be one that (1) operates for no more than 7 months in a year, or (2) earned no more than one-third of its receipts in any 6 months in the prior calendar year.
Lender Safe Harbor: PPP lenders would be protected against enforcement actions if they, in good faith, relied on a certification or documentation submitted by a PPP borrower. A similar safe harbor currently exists in program guidance issued by the SBA and Treasury Department.
Bankruptcy: If the Administrator were to make a written determination that certain small business debtors are eligible for PPP loans, the bill would establish a special procedure in bankruptcy for courts to approve PPP loans for these debtors. These loans would be given superpriority claims in bankruptcy. This would sunset two years from the date of enactment.
Conflicts of Interest: The bill would require the President, Vice President, head of an Executive department, or a Member of Congress, as well as close family members, to disclose their public official status when receiving PPP, Second Draw, and Recovery Sector loans.
Overview of Paycheck Protection Program Second Draw Loans: Currently, PPP loan borrowers are may only receive one PPP loan. Under the PPP Second Draw loans program created by the bill, certain businesses that received a PPP loan previously would be eligible to receive a Second Draw loan. The bill would direct the SBA to allow lenders to approve Second Draw loans using existing program guidance and standard operating procedure for the SBA 7(a) program to the maximum extent possible, thus avoiding the need to issue new guidance.
Eligibility: To be eligible to receive a Second Draw loan, a business would need to meet the SBA's small business concern annual receipts size standard (if applicable) or the alternative size standard, employ not more than 300 employees, and demonstrate at least a 50% reduction in gross receipts during the first or second quarter of 2020 as compared to the same quarter in 2019. Businesses, certain non-profits, veterans' organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural cooperatives would be eligible. In addition, businesses in NAICS Code 72 would be eligible if no single location employs more than 300 employees. However, certain businesses would not be eligible, such as certain ineligible businesses under existing SBA regulations, publicly-traded businesses, financial services businesses that received a PPP loan, and entities affiliated with the People's Republic of China.
Importantly, it does not appear that the exceptions to the affiliation rules applicable to first round PPP loans are applicable to Second Draw loans.
Loan Terms: Borrowers could only receive one Second Draw loan. In general, borrowers would be able to receive a Second Draw loan of up to 2.5 times the average total monthly payroll costs in the one year prior to the loan request, up to a maximum amount of $2 million. This calculation could differ for seasonal employers and new entities. If a business previously received a PPP loan, the total of the PPP loan and Second Draw loan may not exceed $10 million.
Loan Forgiveness: The Second Draw loan would be eligible for loan forgiveness equal to the sum of payroll costs; certain mortgage, rent, and utility payments; certain operations expenditures; certain property damage costs; certain supplier costs; and certain worker protection expenditures, in each case incurred during the loan forgiveness covered period selected by the borrower. The PPP requirement that at least 60% of the loan be used for payroll costs to receive full forgiveness also would apply to Second Draw loans.
Lenders and Set-Asides: The bill would authorize the Administrator to reimburse lenders for 3% of the principal amount of Second Draw loans up to $350,000 and 1% of any principal amount in excess of $350,000. The bill would also set aside $25 billion for businesses with 10 or fewer employees and $10 billion for loans to be made by community financial institutions; and insured depository institutions, credit unions, and farm credit institutions with assets of less than $10 billion. In addition, the bill would direct the Administrator to issue guidance addressing barriers to access to capital for underserved communities.
Overview of 7(a) Recovery Sector Loans: The bill would create Recovery Sector loans, which are a subset of 7(a) loans that are long-term, low-interest, and available to recovery sector businesses. The bill would allow commitments for Recovery Sector loans at $100 billion beginning on February 15, 2020 and ending December 31, 2020. The bill would appropriate $57.7 billion for these loans to be available until September 30, 2021.
Eligibility: Recovery Sector loans would be available to seasonable employers and businesses located in low-income census tracts that: (1) meet certain of the SBA's small business size standards; (2) employ 500 or fewer employees; and (3) demonstrate at least a 50% reduction in gross revenue in the first or second quarter of 2020 compared to the same quarter in 2019 (similar to the Second Draw Loans). Entities that are ineligible for PPP Second Draw loans or that received a Second Draw loan are not eligible for Recovery Sector loans.
Loan Terms: The Recovery Sector loan maximum amount would be two times the borrower's average annual receipts, up to $10 million. Recovery Sector loans have a maturity of 20 years and an interest rate equal to the Secured Overnight Financing Rate (SOFR) plus 3% per annum, although the SBA will pay the difference between such interest rate, and 1% so long as the loan remains in regular servicing status. The SBA would guarantee the loan 100%. The loan could be used for working capital, acquisition of fixed assets, and refinancing existing indebtedness. Unlike traditional 7(a) loans, the borrower would not have to demonstrate it cannot obtain credit elsewhere. Payments of principal and interest would be deferred for the first two years of the loan, with the option for the Administrator to extend the deferral period for another two years.
Lenders: The bill would require the SBA to establish a process to make PPP lenders eligible to make Recovery Sector loans. The Administrator would be authorized to reimburse lenders for 3% of the principal amount of the loan up to $350,000 and 1% of any principal amount in excess of $350,000. In addition, the bill would require the SBA to substantially reduce barriers to sell these loans on the secondary market.
Overview of Small Business Growth and Domestic Production Recovery Investment Facility: The bill would establish the Small Business and Domestic Production Recovery Investment Facility, which would commit to purchase long-term debt with equity features from registered SBA Small Business Investment Companies ("SBICs") to invest in small businesses with significant revenue losses from COVID-19, manufacturing businesses in the domestic supply chain, and businesses in low-income communities. Until the Administrator determines that the small business sector has recovered from the pandemic, at least 50% of SBICs' investment under this program would need to be invested in COVID-19 recovery small businesses and critical supply chain businesses. In addition, a portion of SBICs' capital would need to be invested in businesses owned by socially disadvantaged individuals. The bill would appropriate $10 billion for the investment facility.
Participating Investment Companies: In addition to current SBICs, the SBA would be allowed to consider non-bank, non-levered applicants for the investment facility. The SBA would select participating investment companies by considering the likelihood the applicant-company would either meet its financial goals, create and preserve jobs, recover output lost due to COVID-19, increase supply chain resiliency, or aid in the economic development of small businesses in low-income census tracts.
Commitments and SBIC Bonds: The Administrator would be authorized to make commitments to and purchase equity-like bonds ("SBIC Bonds") from participating SBICs. The Administrator's commitment would be the lesser of two times the SBIC's regulatory capital and $200 million. The SBIC Bonds would have a term of at least 15 years and an interest rate of up to 2% per annum which may be payable in kind. The Administrator will participate in the SBIC's profits at a specified rate. The bill includes certain additional limitations on distributions of profits and fees by the SBIC.
Future Actions: While the HEALS Act includes an expansion of the PPP program, several issues will likely need to be addressed in the final legislative package. Small businesses have expressed concern the requirements for a second PPP lean are too burdensome. Banks have expressed concern that the streamlined forgiveness provisions are still too onerous and asked lawmakers to consider a single question attestation that PPP funds were used in accordance with the program's guidelines to retain employees. We expect these provisions, and several other provisions—including the HEALS-proposed long term loans—to continue to evolve before the final legislative package.
Tax
American Workers, Families, and Employers Assistance Act
Title I – FURTHER RELIEF FOR WORKERS AFFECTED BY CORONAVIRUS
Improvements to Federal Pandemic Unemployment Compensation to better match lost wages: The CARES Act provided an additional $600 per week unemployment insurance payment to eligible beneficiaries. This legislation proposes to reduce that payment to $200 per week through October 5, 2020. After October 5, the $200 additional payment would be replaced with a new payment of up to $500, that, when added to the underlying state payment, totaled 70% of the beneficiary's lost wages. Under the legislation, states could devise their own payment method or use the method outlined in the legislation. States could also seek a waiver to continue a flat payment for two months if unable to provide a second payment tied to lost wages. Beginning in October, the additional payment would count as income in determining eligibility for federal low-income programs.
Supplemental emergency unemployment relief for governmental entities and nonprofit organizations: The legislation would increase the federal subsidy from 50% to 75% of the cost of providing additional unemployment benefits.
Conforming eligibility for Pandemic Unemployment Assistance to disaster unemployment assistance and accelerating appeal review: The legislation would streamline the procedures necessary for qualification for unemployment benefits, and would allow states to handle appeals in the same way they currently handle appeals for state UI benefits.
Improvements to State unemployment systems and strengthening program integrity: The legislation would provide additional resources to State unemployment systems to upgrade their systems and to strengthen their ability to fight fraud.
TANF Coronavirus Emergency Fund: The legislation would provide states with flexible resources to provide short-term relief under the TANF program. This assistance is capped at $2 billion.
Title II – ASSISTANCE TO INDIVIDUALS, FAMILIES AND EMPLOYERS TO REOPEN THE ECONOMY
Subtitle A – RELIEF FOR INDIVIDUALS AND FAMILIES
Additional 2020 Recovery Rebates for Individuals: As under the CARES Act, which passed earlier this year, this bill proposes to provide a payment of $1,200 to US citizens and US residents with adjusted gross income of up to $75,000 ($150,000 if the taxpayer files as married filing jointly). The payment phases out between $75,000 and $99,000 for single filers (or above $146,500 for heads of households with one dependent, $198,000 for married filing jointly with no dependents). In addition, the bill proposes to provide payments of $500 per dependent. Unlike the CARES act, this bill would use a more generous definition of dependent, such that older children and other dependents qualify.
The bill also seeks to make technical corrections to the payments authorized under the CARES Act, such as retroactively disallowing the deceased from claiming the payment and barring prisoners from receiving such payments. In addition, the bill also generally would protect the payment from garnishment.
Subtitle B – JOB CREATION AND EMPLOYMENT
Enhanced employee hiring and retention payroll tax credit: This legislation seeks to expand eligibility for the employee retention credit created under the CARES Act. It would expand the credit to reimburse up to 65% of $30,000 in wages, up from 50% of $10,000 in wages. It would also increase the number of eligible employers by allowing those who have suffered a decline in gross receipts of 25% as measured from the same quarter the previous year, down from the 50% declined required under the CARES Act. It also would widen the definition of eligible employers to include tax-exempt organizations.
Under the CARES Act, those employers with more than 100 employees only received the credit to the extent that employee was not providing services; those with 100 or fewer employees received the credit regardless of whether the employee provided services. This bill proposes to increase that threshold to 500 employees. The bill would also make other changes to the CARES Act program, such as clarifying that qualified wages include group health plan expenses, consistent with recent IRS guidance.
Temporary expansion of work opportunity tax credit: The legislation would create a new class of Work Opportunity Tax Credit eligible employees, allowing employers to qualify for the credit by hiring an employee who had qualified for unemployment assistance prior to hiring. The employee would have to begin work after the date of enactment and before January 1, 2021. In that case, the employer would be eligible for a credit of 50% of the first $10,000 in wages paid to that employee.
Safe and healthy workplace tax credit: The legislation would create a refundable payroll credit equal to 50% of the cost of several different types of types of expenses incurred for the primary purpose of preventing the spread of COVID-19. The categories of eligible expenses include those designed to protect employees, such as personal protective equipment and testing, those designed to protect workplaces, such as modifications to workspaces to prevent the spread of COVID-19, and technology improvements, such as contactless point of sale upgrades and tools to track employee-customer interactions. The credit is capped, not to exceed $1,000 per employee for the first 500 employees, $750 for the next 500 employees, and $500 per employee thereafter, per quarter. The credit would be available for the self-employed as well.
COVID-19 assistance provided to independent contractors: Between March 12, 2020 and January 1, 2021, the legislation would provide a safe harbor to the operators of "marketplace platforms," i.e., those websites or apps that facilitate the "provision of goods or services by providers to recipients," such that they do not jeopardize their independent contractor relationship with the individuals who provide services using the marketplace platform. This safe harbor would allow the operators to provide financial assistance because of the reduced business caused by COVID-19, COVID-19 related health benefits, equipment to protect the individual or their customers from COVID-19, or provide cleaning or training services related to COVID-19.
Subtitle C – CARES ACT CLARIFICATIONS AND CORRECTIONS
Application of special rules to money purchase pension plans: The legislation would allow money purchase pension plans to qualify for the special coronavirus-related distribution rules created under the CARES Act.
Clarification of delay in payment of minimum required contributions: This bill would provide a technical correction, moving the deadline for any minimum required contribution from January 1, 2021 to January 4, 2021.
Employee certification as to eligibility for increased CARES Act loan limits from employer plan: The legislation would allow a plan administrator to rely on an employee's self-certification regarding eligibility for retirement plan loans, and would make this certification retroactive as if it were part of the CARES Act.
Election to waive application of certain modifications to farming losses: Under the CARES Act, farmers could claim a five-year carryback of net operating losses. This legislation would allow farmers to retain a two-year carryback if that is what the taxpayer had previously elected. This section also allows farmers who previously waived the carryback to revoke the waiver. This provision would be retroactive, as if it had been enacted as part of the CARES Act.
Oversight and audit reporting: This legislation would expand the number of Congressional committees with oversight authority to include Senate Finance and House Ways and Means.
Title IV – ADDITIONAL FLEXIBILITY AND ACCOUNTABILITY FOR CORONAVIRUS RELIEF FUND PAYMENTS AND STATE TAX CERTAINTY FOR EMPLOYEES AND EMPLOYERS
Expansion of allowable use of Coronavirus Relief Fund payments by States and Tribal and Local Governments: The legislation would grant additional flexibility to uses of the Coronavirus Relief Funds available to state, tribal, and local governments, including expanding the period of time the funds may be used and allowing their use to cover revenue shortfalls. The provision also adds certain program integrity provisions, including maintenance of effort requirements and audit flags, and limitations, such as prohibitions to their use in pension funds.
Accountability for the disbursement and use of State or government relief payments: The legislation would require mandatory reporting to Treasury on the uses of these funds. This provision would also establish a quarterly reporting requirement to Congress by Treasury's Inspector General.
State tax certainty for employees and employers: The legislation would create a uniform procedure for assessing state and local income taxes on remote and mobile workers. Under the legislation, prior to 2025, employees who perform services in multiple states would be subject to state income tax only in their state of residence and any state in which they perform services in excess of 30 days (generally 90 days for 2020). In addition, this provision would allow employers to treat employees' wages as earned at their normal work location until the earlier of when the employees return to such location or the end of 2020. Additionally, for that same specified period, employers generally will not be treated as creating a taxable presence in a state due to the employment of remote workers in such state.
The Supporting America's Restaurant Workers Act: This legislation would allow 100% of the cost of a business meal to be deducted, as long as it was provided by a restaurant and incurred before January 1, 2021.
Appropriations
The HEALS package provides $306 billion in discretionary supplemental emergency appropriations funding across federal agencies for coronavirus response. The bill provides the largest allocation of funds, $118.4 billion, representing a third of the overall total to the Department of Health and Human Services. Senate and House Democrats are likely to seek additional funding increases across several agencies as negotiations move forward between the two chambers. For example, the HEALS package does not yet include any additional funding for the Department of Veterans Affairs. Funding provisions of relevance that are not covered under other policy sections of this analysis are summarized below.
Department of Commerce: $968 million
Bureau of the Census: The bill would provide $448 million in additional funding to support the 2020 Census field operations and data processing. The funding would remain available until September 30, 2022.
National Oceanic and Atmospheric Administration (NOAA): The bill would provide $20 million under the procurement, acquisition and construction account to support NOAA Weather and Climate Operational Supercomputing System operations, which provides real-time modeling and forecasting of weather in the U.S. Funding would remain available until September 30, 2023.
Fisheries Disaster Assistance: The bill would provide $500 million for direct financial assistance to fishery participants, and communities impacted by the coronavirus. Funding would be provided based on a formula prescribed by the Secretary of Commerce that would be divided proportionally to states, tribes and territories.
Department of Justice: $2.27 billion
U.S. Marshals Service: The bill would appropriate $80 million to the Federal Prisoner Detention account of the U.S. Marshals Service, in support of U.S. prisoners and detainees as authorized by 18 U.S.C. § 4013. The Federal Prisoner Detention account provides funds for the housing, transportation, and care for federal detainees housed in non-federal detention facilities, including private, state, and local facilities.
Federal Bureau of Investigation (FBI): The bill would appropriate $2 billion to the FBI. Of that amount, $213 million would be for the FBI to prevent, prepare for, and respond to COVID-19, including to pay for personal protective equipment (PPE), cleaning supplies, and testing capacity. The funds would also bolster the capacity of the Criminal Justice Information Services' National Instant Criminal Background Check System. The remaining $1.75 billion for the FBI would go toward the design and construction of a new Washington, DC headquarters facility for the FBI.
Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF): The bill would appropriate $36.4 million to ATF to prevent, prepare for, and respond to COVID-19 through the purchase of PPE, cleaning supplies, testing capacity, and remote workforce infrastructure.
Federal Prison System: The bill would appropriate $200 million to the Federal Prison System to prevent, prepare for, and respond to COVID-19. This funding can be used for inmate medical services, PPE, quarantine expenses, residential reentry centers and home confinement expansion, and additional staff costs.
Department of Defense: $29.4 billion
Operation and Maintenance (O&M): The bill would provide a total of $2.6 billion in funding for DOD operation and maintenance accounts to be used to enable the construction and sustainment of temporary facilities, the purchase of non-medical PPE to procure supplies for non-Defense Health Agency needs, enhance the maximization of teleworking, distance learning and training and to support safety measures and COVID-related investments in other on base facilities. Specifically, the bill provides the following for each O&M account: $882 million for the Army, $458 million for the Navy, $136 million for the Marine Corps, $969 million for the Air Force, $112 million for Defense-Wide, $8 million for the Army Reserve, $30 million for the Army National Guard and $12 million for the Air National Guard.
Procurement: The bill would provide $83.8 million in funding for procurement to support enhancements to improve teleworking, distance learning, and training capabilities, including the procurement of equipment to facilitate such efforts. The legislation would appropriate $48.5 million for Army procurement, $34.8 million for Navy procurement and $484 million for the Defense-Wide account.
Coronavirus Defense Production Act Purchases: The bill provides $5.3 billion to support Defense Industrial Base capacity and initiatives which support the workforce, operations, facilities, and equipment of the partners and small business providers essential to national defense. The bill outlines that the Secretary of Defense shall allocate these funds, which will remain available until expended.
Research, Development, Test and Evaluation (RDT&E): The bill would provide $22.4 million to help support technological investments across the services including the evaluation of technologies to support digital trainings and solutions for classified services. Of such funds, the bill would provide $1.5 million to the Air Force and $21 million for Defense-Wide RDT&E spending.
Revolving and Management Funds: The bill would provide $1.78 billion for the Defense Working Capital Funds, which will require additional funding in order to remain financially solvent and to avoid furloughs during the pandemic. Of such funds, the provision would provide $600 million to the Army, $694 million to the Navy, and $489.5 million to the Air Force.
Defense Health Program: The bill would provide $705 million for the Defense Health Program, which includes $175 million for operations and maintenance and $530 million for research, development, test and evaluation to help advance critical military medical research. The funding will remain available until September 30, 2021.
General Provisions: The bill provides $10.85 billion in funding to support claims for payments pursuant to Section 3610 of the CARES Act, which permits federal agencies to reimburse contractors for providing paid leave for employees unable to work at an approved government site due to the coronavirus. The bill also extends the availability of DOD funding provided in the CARES Act for an additional 12 months. The bill also would provide $8.05 billion for procurement and acquisition efforts to support the defense industrial base.
Department of Energy: $307.3 million
Office of Science: The bill would appropriate $306 million to the Office of Science to support COVID-19-related research and development activities, including equipment, enabling technologies, and personnel at national laboratory scientific user facilities. Of this total amount, $6 million would go toward the COVID-19 Insights Partnership, and $12.1 million would be for expenses related to cybersecurity and information technology.
Departmental Administration: The bill would appropriate $1.3 million for Departmental Administration to prevent, prepare for, and respond to COVID-19, including to purchase PPE for Department facilities and national laboratories. These funds can be transferred to or merged with other appropriation accounts of the Department to purchase personal protective equipment.
Department of Labor: $2.5 billion
Department of Labor: The bill would appropriate $2.5 billion in funding for the Department of Labor. Within such funds, the bill would appropriate $950 million to the Training and Employment Services, which includes: (1) $500 million for grants to States for dislocated worker employment and training activities; (2) $150 million for grants to States for youth workforce investment activities; (3) $150 million for adult employment and training; and (4) $150 million for the dislocated workers assistance national reserve.
Additionally, the bill would provide $1.5 billion to the State Unemployment Insurance and Employment Service Operations to prevent, prepare for, and respond to the coronavirus, which includes: (1) $1.1 billion to remain available until December 31, 2021 for grants to States for the administration of State unemployment insurance laws, which may include grants to upgrade information technology to improve the administration's processing of unemployment claims; (2) $38.5 million for national activities to support the administration of the Federal-State unemployment insurance system, to remain available until September 30, 2021; and (3) $350 million for grants to Guam and the Virgin Islands that will remain available through June 30, 2021. This funding may be expended from the Employment Security Administration Account in the Unemployment Trust Fund,
The bill also would provide $15.6 million for Departmental Management to enforce worker protection laws and regulations, which would remain available until September 30, 2022. Of such funds, the bill would provide $10.6 million for program management to implement the paid leave and emergency Unemployment Insurance stabilization activities and would appropriate $5 million for the Office of Inspector General for oversight related activities.
General Provision: The bill would extend the obligation period under the FY 2020 for the Veterans Employment and Training (VETS) program through September 30, 2022.
Department of Veterans Affairs: No new funding is provided
General Provisions: The bill would allow previously appropriated CARES Act funding for Veterans Health Administration, Medical Services to be transferred to the Veterans Benefits Administration, the National Cemetery Administration, and the Board of Veterans Appeals for expenses to prevent, prepare for, and respond to the coronavirus.
The bill would allow previously appropriated CARES Act funding for Veterans Health Administration, Medical Services to be transferred (up to $140 million) to the Canteen Service Revolving Fund to offset reduced collections due to the coronavirus response.
The bill would allow previously appropriated CARES Act funding for Veterans Health Administration, Medical Services to be transferred to the Veterans Benefits Administration (up to $198 million) and Information Technology Systems accounts (up to $45 million) to support necessary updates for the administration of education benefits.
The bill would direct the Secretary of Veterans Affairs to conduct new grant competitions for the construction or modification of state extended care facilities.
The bill clarifies that the Secretary of Veterans Affairs has the ability to increase grants and per diem payments to support homeless veterans by utilizing previously appropriated CARES Act funding.
The bill would ensure that National Guard members who respond to the coronavirus and later die from COVID-19 are eligible to receive veterans' survivor benefits.
Department of State: $425 million
Department of State: The bill would provide $425 million for the consular and border security programs to help the Department offset the loss of collected fees from visa and passport-related revenue. The funding would remain available until expended.
United States Agency for International Development (USAID): $4.01 billion
USAID: The bill would provide $10 million for USAID operating expenses to help support emergency response needs domestically and overseas, which would remain available until September 30, 2022. The bill would appropriate $3 billion to global health programs, which shall be directed for the U.S.'s contribution to GAVI, the Vaccine Alliance. Additionally, the bill would provide $1 billion for international disaster assistance for coronavirus vaccine distribution abroad, which shall be available until expended.
General Provisions: The bill would provide statutory flexibilities for the Department of State by (1) increasing the loan cap for the Repatriation Loans Program; (2) extending the use of visa and passport security fees already collected to help fund consular affairs through fiscal year 2021; (3) provide authority temporarily for the Department to pay education allowances for employees' dependents who are on authorized or ordered departure until employees can return to their diplomatic posts; and (4) extends authorization for paying allowances and other expenses for a longer period, through September 30, 2021. Additionally, the bill would extend the Millennium Challenge Corporation (MCC) compacts for an additional year as a result of delays related to the coronavirus.
Department of Transportation: $10.15 billion
Office of the Secretary: The bill provides $26.2 million for the Office of the Secretary of Transportation to offset increased administrative expenses associated with the implementation of activities related to coronavirus, including for the purchasing of PPE.
Essential Air Service (EAS): The bill provides $75 million to maintain existing EAS service to rural communities. The funding is allocated to help with offsetting a reduction in overflight fees that support the EAS program.
Federal Aviation Administration (FAA) Operations: The bill provides $50 million for the FAA's administrative costs related to cleaning and supplies for air traffic control towers. The funding would also support IT costs associated with employees working from home.
Airport Improvement Program (AIP): The bill provides $10 billion for the FAA's AIP to maintain operations at airports that are experiencing a reduction in passengers. This funding would be distributed by statutory entitlement and formula, and may be used for operating expenses and debt service. This also includes a set aside of $8.15 million to maintain Contract Tower operations.
Federal Motor Carrier Safety Administration (FMCSA), Motor Carrier Safety Operations and Programs: The bill provides $238,500 in additional funding for increased administration costs associated with the implementation of activities related to coronavirus.
Department of Housing and Urban Development (HUD): $3.2 billion
Tenant-Based Rental Assistance: The bill provides $2.2 billion to maintain current Section 8 voucher rental assistance to families experiencing a loss of income due to the coronavirus. The bill outlines that the same authority and conditions under the CARES Act would be applicable to additional funds made available under the HEALS Act.
Public Housing Operating Fund: The bill provides $1 billion in assistance for Public Housing Agencies to maintain public housing programs and aid in containing the spread of coronavirus in public housing properties. This funding would supplement coronavirus-related reduced tenant rent payments. The funding would remain available until September 30, 2022.
General Provisions: The bill would extend the obligation period for 2018 BUILD grant funding through September 30, 2021. Additionally, the bill directs HUD to renew for a 12-month period (without additional competition) all projects funded through the Continuum of Care program that have existing grants set to expire during the 2021 calendar year.
Financial Services
Financial Services: In the area of financial services, the HEALS Act may be most notable for what it does not do. Other than PPP and other SBA provisions discussed elsewhere, none of the financial services provisions of the CARES Act (Pub. L. 116-136), many of which have raised questions and some of which are now expiring, are addressed. For example, despite considerable discussion leading up to the release of the HEALS Act, a proposed extension of the expiring renter eviction moratorium established by the CARES Act has not been included.
This represents a very different approach from that taken in the HEROES Act passed by the House in May. In addition to extending and expanding the eviction moratorium (and expanding the CARES Act foreclosure moratorium), the HEROES Act contained a number of provisions intended to provide and/or expand assistance to homeowners and renters, financial consumers and small business. These provisions included: (1) Financial assistance to renters and homeowners; (2)Homelessness and Housing Assistance; (3) New and expanded Federal Reserve liquidity and lending facilities, supported by funding from the U.S. Treasury provided by Section 4003 of the CARES Act; (4) Debt collection and negative credit reporting moratoriums; and (5) State and local financial assistance and funding to the Community Development Financial Institutions Fund intended to support minority-owned lenders and depository institutions.
For additional information on the HEROES Act, please refer to our May 14, 2020 client advisory available here. We expect these and other provisions will no doubt receive renewed attention as the Senate and House negotiate final legislation.
We also note that under the CARES Act and Section 13(3) of the Federal Reserve Act the Federal Reserve and the U.S. Treasury Department have established a number of lending facilities to create liquidity in the financial markets and facilitate access to credit for businesses and consumers impacted by COVID-19. While many of these facilities were originally scheduled to terminate on or around September 30, 2020, on July 28 the Federal Reserve announced an extension of these facilities through December 31. For additional reading on the CARES Act and Federal Reserve Act lending facilities established in response to COVID-19, please refer to our client advisories available here, as well as our series of webinars on these subjects available here.
Future Actions: Generally speaking, the House is negotiating from a position of strength, which is likely to result in inclusion of more of the provision of the HEROES Act in the final package. In addition, the White House has signaled it wants an extension of the renters' eviction moratorium—a popular provision of the CARES Act—to be included in the final package. As a result, we would expect negotiations to revolve around the length of the extension, with Senate Republicans favoring an extension through the end of the year, while House Democrats favor the longer extension in the HEROES Act. Also, even before negotiations with the House begin, on July 28 Senate Banking Chairman Mike Crapo (R-Idaho) stated that Republicans are considering adding language to relax financial institution capital requirements by permitting the exclusion of certain assets from the calculation of the Tier 1 Leverage Ratio. Whether this happens, and whether the relaxation survives negotiations with the House, remains to be seen.
Education and Workforce Development
Education Stabilization Fund: The bill would appropriate $105 billion to the Education Stabilization Fund (established earlier this year) to assist school districts, institutions of higher education, and students with the return to school and for continued learning of all students. The bill would appropriate: (1) $1 billion for the outlying areas and Bureau of Indian Education; (2) $5 billion for the Governor's Emergency Relief Fund (GEERF); (3) $70 billion for the Elementary and Secondary School Emergency Relief Fund (ESSERF); and (4) $29 billion for the Higher Education Emergency Relief Fund (HEERF).
GEERF: The GEERF would provide grants to Governors of each state that submit an approved application. Governors could use the funds to provide emergency support grants to school districts, public and private universities, and other education-related entities that have been most significantly impacted by COVID-19 or deemed essential for providing emergency services to students. The Secretary must award funds to Governors with an approved application within 30 days of the bill's enactment. The bill would require the Secretary to allocate grants to each state as follows: (1) 60 percent on the basis of the relative population of individuals aged 5-24 and (2) 40 percent on the basis of the relative number of children counted under Title I of the Elementary and Secondary Education Act (ESEA). These allocation requirements are similar to those in the CARES Act, but the funding is nearly doubled.
ESSERF: The ESSERF would provide grants for states to award subgrants to local school districts and private schools to respond to the COVID-19 crisis, of which 90 percent must be allocated to schools that receive funds under Title I of ESEA. The bill directs state education agencies to award subgrants to local educational agencies, including private schools, with one-third of funds to be awarded immediately (regardless of in-person or distance learning options) and the remaining two-thirds to be awarded only after the local educational agency submits a comprehensive school reopening plan for the 2020-2021 school year, which must be approved by the Governor. Private schools would receive proportional funding based on the number of students attending private school in the state. Governors must award funds equally to each private school based on the number of low-income students enrolled in the private school as a share of all low-income students enrolled in private schools across the state.
For the school reopening plans, the Governor must approve such plans within 30 days after submission, subject to the following: (1) automatic approval for agencies that provide in-person instruction for at least 50 percent of students who are physically attending school at least 50 percent of each school-week; (2) no funding provided for agencies that do not provide any in-person instruction to students; and (3) prorated funding approved for agencies that provide in-person instruction to at least some students who are physically attending school part of the time.
Local educational agencies may use emergency relief funds for eligible activities similar to the activities included in the CARES Act, including: preparedness and response efforts, coordination of state and local public health departments to prevent the spread of an infectious disease, training for staff, purchasing of cleaning supplies, planning for long-term closures, planning for supplemental learning during the summer, and providing mental health services. Schools also may use this funding to purchase hardware, software, or connectivity products that aid in "regular and substantive educational interaction" between students and their classroom instructors, including assistive technology or adaptive equipment for students with disabilities.
States receiving these emergency funds must provide assurances that they will: (1) maintain and expand access to high-quality schools, including public charter schools, and not enact policies to close or prevent the expansion of such schools to address revenue shortfalls or disproportionally reduce funding to charter schools; and (2) ensure allocations of emergency funding to public charter schools are made on the same basis used for all public schools.
The bill includes language on rules of construction that would prohibit states from imposing penalties or requirements for entities as a consequence of their receipt of funds or impose limits on the use of funds.
HEERF: The HEERF would provide grants directly to public and private universities to cover the costs associated with closures or significant changes to the delivery of instruction due to the coronavirus. The bill would require these funds to be used for emergency grants to students to help defray cost of attendance (i.e., food, housing, course materials, technology, health care, and child care) and to institutions to cover expenses and lost revenue related to COVID-19. Of note, the bill would no longer require institutions to use 50 percent of the relief funds for emergency financial aid grants to students, a significant change from the CARES Act. The bill would prohibit institutions from using the funds for payments to contractors providing pre-enrollment recruitment activities, endowments, or capital outlays for facilities related to athletics, sectarian instruction, or religious worship. Nevertheless, the eligible uses under HEALS is significantly less restrictive than CARES because they explicitly allow all institutions, not just Minority-Serving and Strengthening Institutions, to cover lost revenue and payroll costs. The bill includes language on maintenance of effort that would require states to maintain support for institutions of higher education in Fiscal Years (FY) 2020 and 2021 at least at the proportional levels of support given to the institutions in FY 2019. Additionally, institutions that paid the endowment tax in 2019 would receive decreased allocations and may only use funds received for the student aid emergency grants.
First, of the $29 billion in HEERF, the bill would allocate 85% (or $24.6 billion) of the emergency funds to institutions of higher education using the following apportionment: 90 percent according to the relative share of full-time equivalent enrollment of Pell Grant recipients not exclusively in distance education prior to the emergency and 10 percent of the relative share of full-time equivalent enrollment of non-Pell Grant recipients not exclusively in distance education prior to the emergency. Second, 10 percent (or $2.9 billion) would be reserved for Historically Black Colleges and Universities and other Minority Serving Institutions. The Secretary must allocate these funds to institutions based on the following formula: 70 percent based on the institution's ratio of total Pell Grant recipients in attendance at the end of the 2019 school year, 20 percent based on the institution's ratio of the total number of students enrolled at the end of the 2019 school year, and 10 percent based on the institution's ratio of the total endowment size of eligible institutions during the 2019 school year. Finally, 5 percent (or $1.5 billion) would be reserved for institutions of higher education that have the greatest unmet need, with the Secretary prioritizing institutions ineligible for other funds but still demonstrating significant needs related to coronavirus.
Emergency Education Freedom Grants: The bill would authorize a new grant program to award emergency education freedom grants to states, which would use the funds to provide subgrants to organizations that grant scholarships to K-12 students. The bill makes clear that these funds can be used to support a student's education in a private, religious, or home education setting and that they are not treated as taxable income. Despite authorizing "such sums as may be necessary" for these grants, the HEALS Act does not include funding for this program.
National Emergency Educational Waivers: The bill renews the CARES Act provisions allowing the Secretary of Education to issue waivers of certain portions of ESEA, including: (1) maintenance of effort requirements under Title I; (2) restrictions on the carryover of Title I funds; (3) needs assessment requirements for the Student Support and Academic Enrichment Grant (SSAEG) program; (4) funding allocation requirements under the SSAEG program; and (5) the limits on the use of funding for education technology infrastructure under the SSAEG program. The waivers would not apply to requirements under civil rights laws and would last for one academic year. States and local school districts must submit a waiver request to the Department of Education to take advantage of these flexibilities.
The bill also would provide flexibilities under the Individuals with Disabilities Education Act related to personnel development scholarships and children with disabilities who are transitioning to school for the first time.
Simplification of Student Loan Repayment Plans: The bill includes a section from Senate HELP Committee Chairman Lamar Alexander's recently introduced bill, the Student Loan Repayment and FAFSA Simplification Act (S. 4247). This section would limit the repayment options for student loan borrowers who enter repayment on or after October 1, 2020 or for current borrowers who wish to change plans after that date. After October 1, borrowers could choose from the following plans: (1) a standard repayment plan with a fixed annual repayment amount paid over 10 years; or (2) an "income determined repayment plan" where borrowers would pay 10% of their adjusted gross income if it exceeds 150% of the poverty line. Adjustments to the payment amount would be required for high-income earners, and parent PLUS borrowers would not be eligible for the income determined plan. A borrower in the income determined repayment plan would be eligible for loan forgiveness after 20 years of payments for undergraduate borrowers and 25 years for graduate borrowers.
If a borrower elects the income determined repayment plan, they must stay in that plan for the duration of their repayment to receive forgiveness under the Public Service Loan Forgiveness (PSLF) program. If a borrower switches to the standard repayment plan in the middle of their repayment, the payments made prior to the switch would not qualify toward the 120 monthly payments required for PSLF loan cancelation.
The bill also would allow borrowers in the Federal Family Education Loans and Perkins Loans programs to enter into an income determined repayment plan if the borrower self-certifies they are unemployed for the purposes of determining a zero payment. This provision will no longer be in effect after December 31, 2020.
Campus-Based Aid Waivers: The bill would update the CARES Act provision allowing the Secretary to waive requirements for institutions of higher education participating in campus-based aid programs to provide a non-federal share to match their federal funding. Similar to the HEROES Act, the bill would allow the Secretary to waive the non-federal share matching requirements for nonprofit employers participating in the Federal Work Study (FWS) program.
Federal Work Study: In the event of a qualifying emergency, the CARES Act allowed schools to pay eligible students under the FWS program for the period of time they were unable to fulfill their work-study obligation. The bill would update the CARES Act to allow schools to provide FWS funds to students who were eligible but unable to begin work because the school is operating by distance education only or if the school had fewer work study positions due to the pandemic. It also would extend the CARES Act authority for schools to reallocate their FWS funds to be used for Federal Supplemental Educational Opportunity Grants.
Extension of Waivers for Foreign Institutions: The bill would extend the CARES Act provisions allowing foreign institutions to offer distance learning to U.S. students for the duration of the qualifying emergency or the end of the 2020-21 award year, whichever is later.
In-School Deferment: The bill would update the CARES Act to clarify the provisions related to temporary relief for federal borrowers, including the suspension of interest accrual through September 30, would apply to borrowers who are in a period of in-school deferment.
Perkins Loans for Teachers: The CARES Act allowed the Secretary to modify the requirements for loan forgiveness under the TEACH grant and Stafford loan teacher forgiveness programs to allow a student whose teaching service is interrupted due to a qualifying emergency to be counted as full-time service for the purposes of loan forgiveness. The bill would extend these provisions to include Perkins loans.
Expected Family Contribution Calculation: The bill states any CARES Act funds a student receives would not count in the calculation of the student's Expected Family Contribution.
Professional Judgment: The bill clarifies that financial aid administrators could determine an independent student's income to be zero and make appropriate adjustments if the student can provide documentation of unemployment benefits they have received or for which they have applied. It also would require the Secretary of Education to adjust the program review criteria for institutions of higher education to account for the rise in the use of professional judgment.
FAFSA Adjustments: The bill would direct the Secretary of Education to include a question on the 2020-21 and 2021-22 FAFSA asking if the applicant has lost significant income due to the COVID-19 national emergency. If an applicant answers this question affirmatively, the Department would direct the applicant to follow up with the financial aid administrator at the institution where they plan to enroll to provide up-to-date income information.
Career, Technical, and Adult Education Waivers: The bill would permit the Secretary of Education to grant waivers to allow states and eligible agencies to carryover unused funds under the Carl D. Perkins Career and Technical Education (CTE) Act and Workforce Innovation and Opportunity Act (WIOA) if the Secretary determines it is necessary due to a qualifying emergency. It would allow the Secretary to grant waivers under WIOA related to a state's distribution of funds and the requirement for workforce investment boards to coordinate with local adult education providers. The Secretary also could waive provisions under the CTE Act related to professional development of CTE teachers. If a state requested a similar waiver under the CARES Act, the Secretary can provide a waiver without an additional application.
Additional Workforce Activities: In addition to the funding provided in the HEALS Act (within the Coronavirus Response Additional Supplemental Appropriations Act, 2020), the bill also authorizes additional flexibilities and funding for workforce activities. The bill increases the allowance local boards may reserve to pay for the federal share of the cost of the Department of Labor's incumbent worker training (from 20% to 40%) and transitional jobs (from 10% to 40%) programs under WIOA. The bill also relaxes age requirements and eligibility periods for individuals seeking to enroll in Job Corps and YouthBuild programs during the emergency. The bill also authorizes such sums as necessary to carry out activities through FY 2022 under the Youth Workforce Investment Activities, Reentry Employment Opportunities program, and the Dislocated Workers Assistance National Reserve for Apprenticeship Grants.
Workforce Recovery and Training Services: Of the $500 million appropriated for grants to states for dislocated worker employment and training activities, the bill requires governors to reserve 40% of the state allotment for local areas most significantly impacted by the emergency. These funds must be used for in-person and virtual training services aligned to industry needs. Another 55% of funds may be used to carry out rapid-response activities, activities to facilitate remote working and training activities, online learning, and the purchase of technology, supplies, and online learning materials. Finally, 5% may be reserved for administration activities.
Future Action: While House Democrats support many of the provisions to extend certain CARES Act flexibilities for federal financial aid programs and increased funding for the Education Stabilization Fund, the HEALS Act represents a major departure from many Democratic education priorities in the HEROES Act. We expect some of these provisions to be key topics of discussion in the negotiations given how far apart the parties are on certain issues. For example, Democrats are unlikely to accept the HEALS Act proposal to simplify student loan repayment plans as opposed to a temporary extension of the CARES Act provisions to provide relief to federal student loan borrowers. It is likely that Republicans will find a compromise position on student loan relief and may push for an extension of the CARES Act relief measures targeted for specific populations affected by the pandemic. Additionally, we do not expect Democrats to agree to the HEALS Act's proposal to tie K-12 relief funds to reopening schools or the authorization of funds for school choice initiatives via the emergency education freedom grant program. We see those as major sticking points as negotiations kick off.
Regarding the workforce provisions, while Democrats will be pleased to see funding attached to the additional flexibility provided for some of the WIOA-related programs above, the HEROES Act included more than twice as much for workforce programs. While there is bipartisan support for a greater focus on workforce development and career training programs as part of the country's relief and recovery efforts, we are not confident negotiations on this front will result in significant new funding streams. For example, we do not expect a follow up to the popular community college training program created in the Recovery Act during the last recession, as many Senate Republicans believe such an investment should come later in future recovery bills.
Technology
Technology Appropriations - Federal Communications Commission
Secure and Trusted Communications Network Act: The bill would appropriate $1 billion for the Federal Communications Commission ("FCC") to carry out the Secure and Trusted Communications Networks Act of 2019 (Pub. L. 116-124), which became law on March 12, 2020. The Secure and Trusted Communications Networks Act established a procedure for identifying communications equipment that pose a national risk and preventing them from entering U.S. networks, and required the FCC to establish a program to reimburse communications providers that serve two million or less subscribers for the cost of replacing untrustworthy network equipment or services. However, Congress failed to appropriate funds for the reimbursement program. Thus, the HEALS Act would provide necessary funding for the FCC to establish the reimbursement program, per the FCC's request to Congress.
Technology - Restoring Critical Supply Chains and Intellectual Property Act
CHIPS for America: Title III of the Restoring Critical Supply Chains and Intellectual Property Act would require the Secretary of Commerce to establish a $3 billion grant program to incentivize U.S. manufacturing of semiconductor technology, and establish a Multilateral Microelectronics Security Fund designed to support international development and adoption of secure microelectronics and supply chains. The bill incorporates text from the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act (S. 3933, H.R. 7178), introduced by Sens. John Cornyn (R-TX) and John Warner (D-VA) and Reps. Michael McCaul (R-TX) and Doris Matsui (D-CA), and reflects additional momentum for a concept that recently was included in the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 in both chambers of Congress.
Eligible entities for the grant program would include private companies (or a consortium thereof), private universities, or a consortium of public and private entities that (1) have a demonstrated ability to build, modernize, or expand semiconductor facilities; (2) have been offered governmental incentives; (3) made worker and community investment commitments; and (4) secured commitments from regional educational institutions to provide workforce training. The Commerce Department would also have to confirm the project is in the interest of the U.S. but may consider whether the applicant or an incentivizing government already received or benefited from a grant made available by the program.
Eligible entities could receive up to $3 billion to finance construction, expansion, or modernization of a facility or for "similar uses" relating to national security or U.S. economic competitiveness. Alternatively, entities may use grant funds for workforce development at the facility or for site specific "development," which presumably relates to real estate, though the bill does not define the term. The project would need to be completed within five years of receiving the grant.
The Secretary of Commerce would be authorized to claw back funding in certain situations, including if the project is incomplete at the five-year mark or if, during the grant term, the entity engaged in any joint research or technology licensing effort related to a sensitive technology or product with China, Russia, Iran, North Korea, or another foreign advisory.
The bill would also require the Secretary of Defense to work with the private sector through a public-private partnership (including through an incentivized consortium) to ensure development and production of advanced and measurably secure microelectronics for use by the Defense Department, the intelligence community, critical infrastructure providers, and other national security providers. Private partners in an incentivized consortium would need to (1) have the capability to perform duties deemed critical to national security as defined by U.S. export control regulatory agencies; (2) have management processes to identify and mitigate supply chain risks; and (3) produce microelectronics consistent with supply chain standards established under Section 224(b) of the FY 2020 NDAA. In selecting participants, the bill would allow the Secretary of Defense and the Director of National Intelligence to consider whether U.S. companies previously participated in defense-, energy-, or intelligence community-sponsored programs or contracts and whether they are evaluated periodically for ownership, control, or influence by foreign adversaries.
The bill would require the Treasury Department to establish a "Multilateral Microelectronics Security Fund" to allow the Secretary of State to support the development and adoption of measurably secure microelectronics and supply chains to support developing related technology. Funds made available through the multilateral fund would remain available for ten years from enactment of the act, though the provision does not authorize appropriations directly for the fund.
The bill would also direct the Secretary of State to establish a common funding mechanism in coordination with U.S. international partners to support the development and adoption of secure microelectronics and supply chains to support development of related technology. In doing so, the Secretary of State must seek to negotiate mutual commitments with partnering governments that, at a minimum, include: (1) transparency requirements for subsidies or benefits provided to microelectronics firms located in each country; (2) consistent policies to address nonmarket economies; (3) alignment of policies on supply chain integrity and security; and (4) promotion of harmonized foreign direct investment screening measures.
The bill provides a sense of Congress that U.S. leadership in semiconductor technology and innovation is critical to American economic growth and national security, and requires the President to establish a 10-year subcommittee in the National Science and Technology Council related to U.S. semiconductor leadership. That subcommittee would be tasked with developing a national strategy on semiconductor research and development, manufacturing, and supply chain security that must be updated and submitted to Congress at least once per five years. The Secretary of Commerce would also have to establish a national semiconductor technology center to conduct research and prototype advanced semiconductor technology to strengthen the domestic supply chain. That center would establish an investment fund in partnership with the private sector to support startups in the domestic semiconductor ecosystem.
Lastly, the bill prohibits funds appropriated under the title from flowing to an entity under the control or influence of China or a foreign adversary - defined as any foreign government or non-government person engaged in a serious instance or long-term pattern of conduct significantly adverse to the U.S. national security or the security of a U.S. ally. The same restrictions apply to entities determined to have beneficial ownership from foreign individuals subject to jurisdiction or influence of foreign adversaries.
Issues Subject to Future Negotiation: The HEALS Act technology and communications provisions are narrow and targeted when compared to the HEROES Act, which included a number of prescriptive provisions addressing broadband access and deployment; E-Rate support and consumer access to broadband technology; expansion of the FCC's Rural Health Care program; and funding to allow the FCC to implement the Broadband DATA Act. The HEALS Act does not address these issues. Instead, the bill focuses on supply chain security and incentivizing semiconductor manufacturing—emphasizing long-term supply chain security and stimulating U.S. semiconductor and microelectronics technology manufacturing. Senate Republican leaders must confront these gaps between the two bills when negotiating with House and Senate Democratic leaders, particularly since many provisions in the HEROES Act that address broadband and network equipment deployment enjoy bipartisan support.
Critical Minerals
Critical Minerals: The bill would update the Congressional declaration of policy on mineral security to further clarify the responsibilities of the President to ensure domestic critical mineral production and resource assessment under the National Minerals and Mineral Policy, Research, and Development Act (30 U.S.C. § 1602). It would require the President to actively avoid supply shortages and price volatility, promote efficiency, and find ways to increase international cooperation.
The bill would also require several departments to take action with respect to critical minerals. For example, the Secretary of the Interior would be required to formulate a list of "critical minerals," and the U.S. Geological Survey would need to conduct domestic resource assessments of critical minerals. The bill would encourage the Secretaries of the Interior and Agriculture to improve the efficiency of the federal permitting review with respect to critical mineral production on federal land and, to that end, would provide only 45 days from initial preparation for Federal Register notices related to critical mineral exploration or mine permit to be published in final form. The bill would also require the Secretary of Energy to research and to provide Congress with a report on how best to facilitate the recycling and efficient use of critical minerals and development of alternatives. The Secretary of Labor and the Director of the National Science Foundation would be required to establish curricula and a competitive grant program for institutions of higher learning to build a critical minerals workforce.
Lastly, the bill would require the Secretary of Energy to carry out a program to develop advanced separation technologies for the extraction and recovery of rare earth elements and minerals from coal and coal products. The bill authorizes $23 million for this program for each of fiscal years 2021 through 2028.
Agriculture and Food
Food and Nutrition Service: The bill provides an additional $250,000, to remain available until September 30, 2021, to cover overtime for Food and Nutrition employees.
Agriculture Quarantine and Inspection: The bill provides $245 million out of money in the Department of Treasury not otherwise appropriated, to remain available until September 30, 2022, to offset the loss of user fee revenue resulting from the COVID-19 pandemic.
Foreign Influence on Research
The HEALS Act adopts the bipartisan Safeguarding American Innovation Act (S. 3997) introduced by Sen. Rob Portman (R-OH), Chairman of the Homeland Security Permanent Subcommittee on Investigations. The purpose of Sen. Portman's bill is to strengthen the national and economic security interests of the U.S. scientific enterprise. The bill has 13 Republicans and 6 Democrats as cosponsors, including the Subcommittee Ranking Member Tom Carper (D-DE). On July 22, the Senate Homeland Security and Government Affairs Committee favorably reported the bill out of committee by voice vote, despite serious objections by the higher education community.
Federal Research Security Council: The bill establishes the Federal Research Security Council under the Office of Management and Budget (OMB) to develop and standardize federally funded research and development grant making policy and management guidance. The Council is charged with developing requirements for: (1) creating a uniform federal research and development grants application process; (2) identifying and developing criteria and procedures for sharing information on federal research security risks; (3) ensuring grantees report conflicts of interest and commitment; (4) adopting best practices to mitigate the risk of misappropriation of research and data; (5) developing an insider threat program guidance; and (6) issuing warnings about foreign government pursuits to make the U.S. research community vulnerable.
In meeting its charge, the Council must develop a strategic plan that should be submitted to Congress, in addition to an annual progress report.
OMB will designate a senior-level official within its agency to serve as the Chairperson of the Council, with the Lead Science Advisor and Lead Security Advisor to the Chairperson being from the Office of Science and Technology Policy (OSTP) and the National Counterintelligence and Security Center, respectively. Council members will be from a range of federal agencies, including the Departments of Defense, Homeland Security, Justice, Energy, Commerce, Health and Human Services, State, and Education.
The bill also authorizes the interagency working group established under the 2020 National Defense Authorization Act (NDAA) to be a working group under the Council.
Federal Grant Application Fraud: The bill criminalizes an individual who knowingly prepares, submits, or falsifies a federal grant application, including failing to disclose outside compensation such as foreign compensation. The exception would be for individuals working with a lawfully authorized investigative, protective, or intelligence activity executed by law enforcement or a federal intelligence agency. Should an individual be found to conduct fraud, the penalties include fines, imprisonment for five years, or both. Individuals also may be prohibited from receiving a federal grant for five years.
Restricting the Acquisition of Goods, Technologies, and Sensitive Information to Certain Foreigners: The bill authorizes the Department of State to deny visas under the Immigration and Nationality Act to individuals who violate laws related to espionage or sabotage or acquire export controlled technologies through exemptions in export control laws (e.g., conferences, academic coursework, or fundamental research). Visas also can be denied if individuals meet criteria developed through an interagency process led by the Department of State, and involving the Office of the Director of National Intelligence, the Office of Science and Technology Policy, and the Departments of Health and Human Services, Defense, Homeland Security, Energy, and the Commerce, among other agencies.
In establishing the criteria, the Department of State must consider factors such as a foreign individual's relationship with: (1) an adversarial foreign military or security-related organization; (2) a foreign institution involved in the theft of U.S. research, intellectual property, or the violation of export controls; and (3)a foreign government seeking to make \the U.S. research enterprise vulnerable to security risks.
As an accountability mechanism, the Department must report to Congress annually on certain findings.
New Requirements for Educational and Cultural Exchange Programs: The bill would amend the Mutual Education and Cultural Exchange Act of 1961 to enhance the protection of export control regulated technologies that are important to the U.S.'s national security interests. It would require exchange visa sponsors ("J visas") to provide basic information to the Department of State about access a foreign researcher will have to export controlled technology while in the U.S. Specifically, the bill would require sponsors to: (1) disclose to the Department whether an exchange visitor will have access to export controlled technology while in the U.S. and as part of an exchange program; (2) provide to the Department a plan to safeguard against an unauthorized release of export controlled technology or data; and (3) demonstrate to the Department that programs which release controlled technology or technical data to an exchange visitor will receive proper authorization from the Departments of State and Commerce, and other relevant federal agencies, before the release of such technology or technical data.
Foreign Gift Rule Disclosures: The bill would amend Section 117 of the Higher Education Act of 1965, which addresses foreign gift disclosure requirements. It aims to increase transparency of foreign gifts and contracts made to institutions of higher education. Specifically, the bill would reduce the reporting threshold from $250,000 to $50,000 for foreign gifts and contracts made to institutions and outlines a list of content elements that would to be contained in such reports. Additionally, the bill would require that the Secretary of Education disclose the reports in a searchable public database no later than 30 days after the report is filed.
Under the bill, the Secretary is authorized to impose fines on institutions that repeatedly fail (defined as a failure to file a report disclosing a gift or contract in three consecutive years) to disclose such gifts in an amount not to exceed three times the amount of the foreign contract or gift. The bill also requires the Secretary of Education to carry out a negotiated rulemaking to promulgate regulations on filing disclosure reports and address how to report structured gifts and contracts while balancing the protection of proprietary information. In addition, the bill clarifies how the treatment of tuition payment and related fees and expenses from a foreign source that are made on behalf of a student at the institution would not be considered a foreign source.
Future Action: The full inclusion of the bipartisan Safeguarding American Innovation Act raises serious concerns with the higher education community. Many higher education associations, including the Association of American Universities and the Association of Public Land-grant Institutions, have objected to the bill. Instead, a number of higher education associations endorse other bills addressing U.S. research integrity and security, including the Securing American Science and Technology Act (SASTA), introduced by Rep. Mikie Sherrill (D-NJ) who is Chairwoman of the House Science Subcommittee on Investigations and Oversight. SASTA has been included in the House's FY 2021 National Defense Authorization Act, but it is not included in the House Democrats' version of the relief package, the HEROES Act. While Republicans have made it clear the scope of any relief package should be narrowly focused on directly addressing COVID-19 related matters, the strategic move to incorporate Sen. Portman's bill may be framed as helping to address vulnerabilities to the U.S.'s COVID-19 related research. It is unclear how House Democrats will view the inclusion of the Safeguarding American Innovation Act favorable in negotiations, given its strong bipartisan support in the Senate despite the raised concerns of the higher education community.
Child Care
Child Care Stabilization Fund: The bill authorizes a "Back to Work Child Care Grants" program and appropriates $10 billion, to remain available until September 30, 2021, to provide grants directly to licensed, regulated, and registered child care providers. The aim of the program is to support the reopening and sustainability of child care centers as parents and guardians return to work. The bill adopts language from the Back to Work Child Care Grants Act of 2020 introduced by Sen. Joni Ernst (R-IA) in July and authored by Sen. Lamar Alexander (R-TN), Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee.
The program would be administered by the Administration for Children and Families (ACF) under the Department of Health and Human Services to provide grants to states. Eligible child care providers can then apply for subgrants at the state level to support fixed costs, increased operating expenses due to COVID-19, and reenrollment of children for a transition period of up to nine months.
Assurances: States must provide assurances to ACF to receive their grants. For example, the lead agency must place specific funding conditions on the subgrants such as eligible child care providers needing to be in continuous operation and having served children through a child care program immediately prior to March 1, 2020. Further, they must certify to remain open for at least one year after receiving the subgrant. Eligible child care providers also must follow all state and local health and safety requirements, including COVID-19 protocols.
Other assurances include subgrants must be made available to eligible child care providers that do or do not receive Child Care and Development Block Grant (CCDBG) funding and lead agencies will continue to use CCDBG funds through at least December 31, 2020 to continue payments and reimbursements to applicable child care providers prior to March 2020. In addition, there must be a review of burdensome state and local regulations and requirements that prevent the opening of new licensed child care programs. If subgrant recipients fail to meet any of the assurances, then they will be required to repay the subgrant.
Application Process: States have considerable flexibility in designing state-specific plans to support child care providers. However, the application process to secure a subgrant must entail the submission of a budget plan with data on current and pre-COVID operating capacity, as well as child care enrollment, attendance, and revenue projections based on current and previous data. The application process also requires eligible child care providers to demonstrate how the subgrant funds will support the long-term viability of the child care provider and sustain its operations after the subgrant period ends.
As part of the application process in the House and Senate Democrats' child care stabilization bill, Child Care is Essential Act (H.R.7027/S.3874), Democrats require child care providers to prioritize available slots to children of essential workers, children of workers whose employers require their attendance, children experiencing homelessness, children with disabilities, children at risk of child abuse or neglect, and children in foster care. Further, the bill includes provisions to ensure child care service employers pay full compensation with benefits and do not reduce the weekly amount of their employees' compensation.
When making subgrants, the Child Care is Essential Act requires the lead agency to provide subgrants to qualified child care providers that service similar populations as outlined above. Priority also is given to child care providers with nontraditional hours, those that serve dual language learners, and those that operate in communities where there are child care deserts. Of note, the Act prioritizes those qualified child care providers that serve a high proportion of children whose families receive CCDBG subsidies.
Subgrant Disbursement: Lead agencies must disburse grants in installments, no less than on a monthly basis. Disbursements must be made only after the qualified child care provider has provided information on its financial status. The bill gives the lead agency flexibility in determining the amount for each installment. For example, one installment may have a greater amount for the first month and then the amount can be reduced for succeeding months. However, there are a couple of parameters. The minimum calculation should be based on the fixed costs for the qualified child care provider and the amount of the subgrant should not exceed the revenue for the provider's previous one-year period.
Use of Funds: A child care provider that receives a subgrant may use the funds to support a range of activities, including: (1) paying for fixed operating costs, including payroll; (2) sanitation costs; (3) securing equipment and supplies, including personal protective equipment; (4) replacing unsafe materials; (5) making facility changes and repairs due to COVID-19 protocols; (6) recruiting, retaining, and compensating child care staff and providing them with professional development; and (7) curricula development to address learning loss.
States can reserve no more than six percent of their grant funds to award subgrants to qualified child care providers but the bill allows states to reserve up to 10 percent of grant funds for administering subgrants, carrying out reporting requirements and activities such as needs assessments, child care cost modeling, and promoting the subgrants.
Obligation: The lead agency must obligate at least 50 percent of the grant funds within 6 months of the Act's enactment. If, however, a state does not obligate its funds within 12 months after the grant is awarded, then the state must return the unobligated funds.
Appropriations: The bill appropriates to ACF an additional $5 billion for Payments to States for CCDBG, to remain available until September 30, 2021. The bill also appropriates an additional $190 million for Children and Families Services Programs, to remain available until September 30, 2021, to prevent, prepare for, and respond to coronavirus, domestically or internationally.
Future Action: The HEALS Act appropriates $10 billion for the child care stabilization fund. This is $3 billion more than the appropriated funding in the House's HEROES Act for child care programs, which does not include a child care stabilization fund. Instead, the HEROES Act provides emergency funding for CCDBG and directs funding to essential workers to support their child care needs. Now, as Senate Republicans look to negotiate with Democrats, their appropriation of $10 billion is substantially lower than the $50 billion Senate HELP Committee Ranking Member Patty Murray (D-WA), and House Democrats are calling for through their Child Care is Essential Act, which establishes a child care stabilization fund with equitable distribution given to eligible child care centers, home-based child care providers, and family care home centers.
Independent analysts of the child care sector, including the Bipartisan Policy Center, estimate that at least $25 billion is needed to support a child care stabilization fund to help prevent the collapse of the sector. Therefore, we expect that both parties will agree to include a child care stabilization fund in the next relief legislation, but the authorized appropriation level will be heavily debated.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
Key Contacts
Related Services
- Aerospace, Defense & National Security
- Bankruptcy and Restructuring
- Corporate & Finance
- Education & Workforce Policy
- Financial Services
- Government Contracts
- Healthcare
- Labor & Employment
- Legislative & Public Policy
- Life Sciences & Healthcare Regulatory
- Sharing Economy
- Tax
- Coronavirus (COVID-19): Legal Resources
