March 18, 2020

As the Families First Coronavirus Response Act (Round 2) Goes to President, Round 3 in High Gear

Holland & Knight Alert
Christopher J. Armstrong | Nicole M. Elliott | Taite R. McDonald

Following Senate passage of the Families First Coronavirus Response Act (round two), the Administration and Senate are already busy finalizing measures to be included in round three, which will be focused on economic distress caused by the coronavirus (COVID-19) pandemic. The Trump Administration continues to use its authority to respond to the crisis, and more action is likely to come.

Round Three Takes Shape

Senate Majority Leader Mitch McConnell's (R-Ky.) office outlined the path forward for round three. Sen. McConnell has tasked the chairs of the Finance, HELP, Small Business, Banking, Commerce, and Appropriations committees with leading the effort with focus on the following areas: small business liquidity, direct financial assistance to Americans and employers, increase liquidity to the aviation industry, and health care measures. The Senate is now focused on these measures, and McConnell has pledged they will stay in session until they are complete.

The Treasury Department also outlined what it would like to see in the round three, releasing the key terms of its "Stage Three Proposal," which includes:

  • Appropriation to the Exchange Stabilization Fund:
    • $50 billion for lending to the U.S. passenger and cargo air carrier industry, to be secured by collateral specified by the Treasury Department. The funds would also trigger industry requirements, including continuation of services and limits on increases in executive compensation.
    • $150 billion to secure lending or loan guarantees to other severely distressed sectors.
  • Temporary suspension of the limit on use of the Exchange Stabilization Fund to guarantee programs for the U.S. money market mutual fund industry until the conclusion of the President's emergency declaration.
  • Economic impact payments to individual taxpayers at a level of $250 billion on April 6, 2020, and another $250 billion on May 18, 2020, based on income level and family size.
  • $300 billion for small business interruption loans for employers with 500 or fewer employers, which would allow for 100 percent funding of six weeks of payroll, capped at $1,540 per week per employee. The funds would guarantee loans from private financial institutions and require that any employee compensation be sustained for eight weeks following the date of disbursement.

The Administration also requested over $45 billion in additional supplemental appropriations, including $11.5 billion for the U.S. Department of Health and Human Services and $16.5 billion for the U.S. Department of Veterans Affairs. It is not clear yet when Congress will take up additional appropriations measures.

Trump Administration Continues to Take Action

The Treasury Department issued a notice providing guidance to taxpayers following its announcement of tax relief. Notice 2020-17 makes clear that taxpayers still must file their income tax returns by April 15, 2020. However, the notice gives taxpayers until July 15, 2020, to pay the liabilities. There are limits on the payment amounts that can be deferred, $10 million for businesses, and $1 million for others including individuals. 

In addition to other ongoing efforts to address COVID-19, President Donald Trump is invoking the Defense Production Act (DPA) to ensure that an adequate supply of medical equipment remains available. Although it remains unclear exactly how the Trump Administration will utilize DPA, it is clear that this announcement intends to ensure an adequate supply of masks, medical gloves, ventilators, respirators and other related hospital equipment.

DPA, which was created in the wake of the Korean War in 1950 to address material and manufacturing supply chain shortages, has been utilized numerous times throughout history for everything from the establishment of a titanium and aluminum supply chain in the 1950s to ensuring the survival of the U.S. semiconductor base in the 1980s. What makes DPA unique is that it authorizes the President to request that a company make certain materials or supplies and  "create assured, affordable, and commercially viable production capabilities and capacities for items essential for national defense." While there are limitations in its authority for the provision of loans or loan guarantees, it does provide very robust grant funding to manufacture critical supplies. It also enables the President and the U.S. Department of Defense (DoD) to request that a manufacturing facility divert resources and convert manufacturing in a manner that the government would not otherwise have the authority to do.

Ultimately, DPA was created and remains available for the President to use in scenarios like this; however, it shouldn't be a reason for the general public to get alarmed. This is actually the second time during this Administration that the President has invoked DPA, the first of which was for the development of a U.S.-based Rare Earth Supply Chain. Albeit, the extent of its use for this initiative and subsequent efforts will far exceed the Administration's previous use of the authority. 

What's Next?

On March 19, 2020, the Senate and Administration will provide greater detail of what the round three proposals will look like, with passage expected in the coming days. The unknown question right now is whether a "round four" of legislation will occur or if Congress will recess following the next package.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact the author or your responsible Holland & Knight lawyer for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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