Senate Majority Leader McConnell releases “Phase III” coronavirus bill

By Leslie Sack

On Thursday, March 19, Senate Majority Leader Mitch McConnell (R-KY) officially introduced his “Phase III” legislation aimed at stemming the impact of COVID-19. Leader McConnell’s Coronavirus Aid, Relief, and Economic Security (CARES) Act seeks to address a host of pressing issues pertaining to the pandemic, including a number of provisions that would provide direct financial help to individuals, relief for small businesses, support for health care professionals, and additional steps to help stabilize the economy and the job market.

Leader McConnell has indicated that he does not have full buy-in from Senate Democrats and some GOP Senators, and so the legislation is considered an opening offer. With 60 votes needed for final passage out of the chamber – coupled with the fact that Senators Cory Gardner (R-CO) and Rick Scott (R-FL) are self-quarantining as a precaution – it will be critical for Leader McConnell to secure Democratic support on the final vote. Democrats are reviewing the proposal and Senate Minority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) have stated they take issue with the GOP’s proposals on direct financial aid and targeted industry relief, calling for “strong and strict provisions that prioritize and protect workers” to be incorporated in the final package. It is likely that House Democrats will formulate their own proposal to serve as the party’s official counteroffer.

Here are some of the notable economic policies included in the legislation:

• Small Business Loans — Small businesses and nonprofits with 500 or fewer employees may receive guaranteed small business loans during the COVID-19 emergency. The loans are designed to cover payroll, mortgage payments, rents, and debt payments for March-June 2020. 
• Other Business Provisions — The bill delays payroll taxes and estimated tax payments for corporations. It would also make a number of tax modifications to help businesses during a downturn.
• Industry Loans — The bill would provide more than $200 billion for “assistance to severely distressed sectors of the United States economy.” This includes providing $50 billion in loans and loan guarantees for passenger air carriers, $8 billion for cargo air carriers, and $150 billion to “other eligible businesses.” It also would place limits on executive compensation for loan recipients.
• Recovery Rebates and Other Individual Relief — The bill would provide “recovery rebates” of up to $1,200 for individuals ($2,400 for married couples filing jointly). Rebates begin phasing out for incomes of $75,000 and above ($150,000 for joint filers). Checks would also include $500 per dependent child. Furthermore, the tax year 2019 payment deadline would be extended to June 15, 2020, and the rebates would be means-tested based on the individual’s previously-reported income.
• Paid Sick and Family Leave — The bill would place limits on how much employers must pay out for sick and family leave and expands the Secretary of Labor’s ability to exempt small businesses from paid sick and family leave provisions.
• Student Loan Provisions – The bill makes a number of changes to ensure that students who drop out as a result of COVID-19 remain eligible for loan and grant programs, makes it easier for students to gain paychecks from work-study, and allows for waivers from certain institutional financial requirements to help educational institutions cope with the crisis. It would also require the federal government to suspend payments for three months on federal student loans, with an additional three-month suspension available at the discretion of the Secretary of Education.

The bill does not include a series of big-ticket priorities — such as funding for certain expiring health care programs and infrastructure improvements — that some lawmakers were hopeful to tack on to this legislation. Those omissions may set the stage for future “Phase IV” discussions. The House Financial Services Committee is working on draft language to assist with liquidity for mortgage servicers in order to support borrower forbearance. There is some chatter that they will make a push to have that included in “Phase III”, but we see that as an uphill effort, as the House May simply pass what the Senate sends. If that occurs, we do expect servicer assistance to be in a “Phase IV” package. In the meantime, the Senate plans to stay in session for as long as it takes to finalize this deal and passage on the measure.