There have been a lot of changes during the past few weeks. Coronavirus (COVID-19) started expanding globally. The response to COVID-19 involves different agencies responding to the expansion, including the Center for Disease Control (CDC), Congress and the White House, and state and local governments.
Approval of bills by the US Congress and the President of the United States led to responses by the Small Business Administration (SBA), the Internal Revenue Service (IRS), the Department of Homeland Security (DHS).
This article provides an overview of the precautions to slow the spread of the Coronavirus and the federal laws designed to help the economy.
The importance of supply and demand in an economy
To summarize, there needs to be a balance in an economy between the supply and demand for an item or service. This balance determines the price for that item or service.
In economic models, the item or service should cost more if the demand increases while the supply stays the same. The cost should decrease if the demand decreases.
Recently there was an increase in production, or supply, of crude oil by the second and third-leading oil producers in the world. Demand did not change. The result is the price of gasoline at the pump decreased to the consumer.
Coronavirus (COVID-19) and the CDC
Attempts to slow the spread of the Coronavirus (COVID-19) started when it expanded into the United States. Step-by-step precautions in response to COVID-19 were put in place to slow its spread.
Consequently, according to the Center for Disease Control (CDC), the virus is “thought to spread mainly from person-to-person.” The spread is through respiratory droplets and between people who are in close contact. Social distancing is the term describing the six feet close contact distance.
Guidelines in response to COVID-19
As a result, the White House announced guidelines that included procedures to slow the spread of COVID-19.
The President’s guidelines, dated March 16, 2020, included activities to minimize the risk of spreading the virus.
- work or engage in schooling from home, when possible
- avoid social gatherings in groups of more than ten people
- avoid eating or drinking at bars, restaurants and food courts
- practice good hygiene
Compliance with Coronavirus guidelines
For this reason certain events started to be delayed or canceled to meet the guidelines and keep people from congregating.
- NCAA basketball tournament
- NBA season
- cease in-person classes for some time
- closure of restaurants and bars to in-person traffic.
- cease operations for public-facing businesses that encourage public congregation that cannot comply with CDC guidelines
- closure of gyms and exercise facilities
- concert venue closure
- closure of sporting event facilities
Businesses, defined as non-essential, were asked to close. Others are defined as essential and are exempt from closure. The Department of Homeland Security identifies 16 critical infrastructure sectors that are vital to the United States.
Federal response to COVID-19 spread
Consumers lose their jobs when businesses close. What happens when there is concern from the consumer about whether they will have enough money to purchase the items and services they need?
There are three bills approved by Congress and signed by the President in response to COVID-19.
- 1 – Public law 116-123 emergency funding dated 3/6/2020
- 2 – Public law 116-127 dated 3/18/2020
- 3 – Public law 116-136 dated 3/27/2020
Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 Public law 116-123 in response to COVID-19
Firstly, this bill provides emergency funding for federal agencies in response to the Coronavirus spread. Congress approved, and the President signed it on 3/6/2020.
In summary, some of the issues addressed in the bill include
- developing vaccines and other medical supplies
- grants for public health agencies and organizations
- humanitarian assistance
This bill can be read for more detail.
Families First Coronavirus Response Act (FFCRA or Act) Public law 116-127
Secondly, the Families First Coronavirus Response Act is the next step in response to COVID-19 by the federal government. Congress approved, and the President signed it on 3/18/2020.
Provisions of the bill in response to COVID-19
This bill provides
- paid sick leave, tax credits, and free COVID-19 testing
- expanding food assistance and unemployment benefits
- increasing Medicaid funding
More detail is available about this bill.
Eligible Employees
Employees of private sector companies with fewer than 500 employees are eligible for up to two weeks paid sick leave for COVID-19 related reasons.
Qualifying reasons
These are qualifying reasons for an employee to take leave related to COVID-19. The employee
- is subject to quarantine or
- has COVID-19 symptoms and is seeking a medical diagnosis
- is caring for an individual subject to a quarantine order
- is caring for the employee’s child with the closure of the child’s school or place of care
More information about the bill.
Employers 100% reimbursement for paid leave
Reimbursement to the employers is through an offset against federal payroll taxes. The IRS website provides examples, including calculations.
The IRS has developed form 7200 – Advance Payment of Employer Credits Due to COVID-19 to request an advance payment of employer credits due to COVID-19.
Coronavirus Aid, Relief, and Economics Act or the CARES Act Public law 116-136
Thirdly, this bill, known as the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act), is in response to COVID-19 and its impact on the economy, individuals, and businesses. The President signed the bill on 3/27/2020.
More information about this bill.
The bill
- funds various loans, grants and other types of assistance to businesses
- provides tax rebates up to $1200 per individual and an additional $500 per child
- temporarily expands unemployment benefits
- suspends payments and interest on federal student loans
This program intends to pump money into the economy and keep the workforce in place.
Paycheck protection program & loan forgiveness (Sec 1102) in response to COVID-19
The Paycheck Protection Program (PPP) covers any business, non-profit, veterans organization, or Tribal business generally not having more than 500 employees.
The payroll costs covered by the PPP include salary, wages, commissions, tips, paid leave, healthcare payments, and retirement benefit payments. Annual salary amounts greater than $100,000 are not included in payroll costs for PPP purposes.
Determine the average monthly payroll costs within the twelve months before the loan. Multiply this monthly average x 2.5. The loan cannot exceed $10 million.
The PPP loan intends to retain workers. It covers payroll costs, group health benefits, employee salaries, wages, commissions, interest on a mortgage, rent, utilities, and interest on debt obligations.
The Small Business Administration guarantees the loan with no collateral or personal guarantee required.
Loan Forgiveness (Sec 1106 of the Act) – The borrower is eligible for tax-free forgiveness of the indebtedness. There is a formula that calculates the amount of forgiven debt.
The calculation must prove the proceeds paid for payroll costs, interest on mortgage and debt obligation, rent, and utility payments.
Recovery Rebates for individuals (Sec 2201)
Section 2201 provides for a $1,200 advance credit per person and $500 per qualifying child. The advance credit may be limited based on the AGI.
Emergency increase in unemployment compensation benefits (Sec 2104)
Another benefit is an additional $600 added to the states calculated weekly unemployment. The amount is known as the “Federal Pandemic Unemployment Compensation.”
COVID-19 SBA Economic Injury Disaster Loan Application (EIDL)
Small businesses can obtain up to $2 million in low-interest Economic Injury Disaster Loan assistance.
There may be bills that a business cannot pay due to the impact of COVID-19. The EIDL loan is for the payment of fixed debts, accounts payable, and other bills.
Small businesses can get both the Economic Injury Disaster Loan and the Paycheck Protection Program loan, but the loan proceeds need to cover different expenses.
Do you have any questions?
In conclusion, let me know if you have any questions, would like more information about this topic or have suggestions for related topics.