How the CARES Act Benefits Alaskans

Senator Dan Sullivan

In this time of crisis, it’s important for me as your Senator to provide Alaskans with an in-depth account of what your federal government is doing to help you get through the ongoing COVID-19 global pandemic. I am committed to providing you with the most recent information about the virus and am continually updating my website at https://www.sullivan.senate.gov/coronavirus with useful information and links related to the programs created by Congress to respond to this pandemic.

     I.     Introduction

I want to begin by recognizing how difficult this has been for all Alaskans. The COVID-19 virus is an evolving pandemic, spreading worldwide, severely disrupting life across America and our state. Alaskans are worried not only about their personal health and the impacts on our health systems, but also the short- and long-term economic impacts on working families, jobs, and small businesses across the state.

This pandemic is, without a doubt, one of the greatest crises this country has confronted in living memory. We are facing an unprecedented challenge as a nation – much like a natural disaster or even a war. We are fighting this battle on many fronts, and everyone has a role to play, particularly the federal government.

Your congressional delegation is working closely with the Governor and his team, other elected officials in Alaska, our tribes, and the executive branch of the federal government. One team, one fight, as we say in the Marine Corps.

The Senate is also very much focused on legislation to help Americans get through these unprecedented challenges. This letter lays out the different pieces of legislation passed by Congress and signed into law during the month of March: Phase 1 – The Coronavirus Preparedness & Response Supplemental Appropriations Act; Phase 2 – The Families First Coronavirus Response Act; and Phase 3 – The Coronavirus Aid, Relief, and Economic Security (CARES) Act. This letter highlights the details of the CARES Act, which provides approximately $2 trillion in relief to American families, individuals, small businesses, states, tribes, hospitals, community health centers, and frontline medical professionals. In each section, I include links for more information on specific elements of this legislation.

This is a general information letter primarily focused on the CARES Act. If you have specific casework-related issues that relate to you individually, your small business, or your unemployment benefits that are not addressed in this letter, please reach out directly to my office at (907) 271-5915 or https://www.sullivan.senate.gov/contact/email and we will work with you directly.

A.     Coronavirus Preparedness & Response Supplemental Appropriations Act

Passed in early March, the first phase of Congress’ legislative response was the Coronavirus Preparedness & Response Supplemental Appropriations Act. This bill included a total of $8.3 billion to help prevent, prepare for, and respond to COVID-19. This legislation strengthened the federal response to the coronavirus outbreak and allowed for necessary precautions, prevention, and treatment at the local, state, national, and international level.

This legislation provided $2.2 billion to the Centers for Disease Control and Prevention (CDC) to support state and local governments. This includes $1 billion for state and local preparedness and response, half of which went to states, cities, and tribes, including millions of dollars to the State of Alaska. Included in this section is a set-aside of at least $40 million for tribes, tribal organizations, and tribal health service providers that also significantly benefits our state.

Additionally, the Coronavirus Preparedness and Response Supplemental Appropriations Actincludes $3.1 billion for procurement of medical supplies to supplement the Strategic National Stockpile and to support federal and state response efforts; research and development of vaccines, therapeutics, and diagnostics; and hospital and health system preparedness. An additional $300 million is made available for the purchase of vaccines, therapeutics, and diagnostics; and $100 million for community health centers, of which we have many in Alaska.

Finally, this bill confronts the global pandemic by providing $300 million for the CDC’s Infectious Diseases Rapid Response Fund, which is critical to the health and security of the United States by confronting the coronavirus on a global level. It also provides the Department of State and United States Agency for International Development (USAID) with $1.25 billion to address the global pandemic.

For more information, see this link for a section-by-section breakdown: https://www.appropriations.senate.gov/imo/media/doc/Coronavirus%20Emergency%20Supplemental%20Summary.pdf

B.     Families First Coronavirus Response Act

Phase 2 of congressional action was the passage of the Families First Coronavirus Response Act, which provided $105 billion to bolster the federal government’s response to the COVID-19 pandemic. This bill addresses the severe health and economic impacts of the outbreak by: ensuring that testing is free for Americans; paid sick leave as well as family and medical leave; enhancing unemployment insurance to help workers; and ensuring that students, seniors, and low-income households can continue to access nutrition assistance.

Specifically, the Families First Coronavirus Response Act:

Requires insurers to cover coronavirus tests and related services, such as provider visits for testing, without cost-sharing or prior authorization requirements. The cost-sharing prohibition also applies to Medicaid, Medicare, TRICARE, veterans’ health programs, the Indian Health Service, and coverage provided to federal civilian employees. It also provides $1 billion to allow the National Disaster Medical System to reimburse provider costs associated with testing uninsured individuals.
Streamlines regulations regarding the manufacturing of personal respiratory protective devices, such as N95 masks.
Provides $500 million in emergency funding for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program, as well as $400 million for the Commodity Assistance Program for the Emergency Food Assistance Program (TEFAP), which often funds food banks and other non-profits delivering nutrition assistance.
Reduces hurdles to accessing Supplemental Nutrition Assistance Programs (SNAP) to provide additional aid to households in need.
Creates temporary, emergency paid sick leave for individuals who become ill with COVID-19 or are seeking a diagnosis. The legislation creates a temporary paid family leave program for individuals with a minor child in the event of the closure of the child’s school or place of care. Expenses from impacted employers are covered fully by the federal government through a refundable payroll tax credit.
Provides $250 million for Health and Human Services (HHS) Department programs that aid elderly Americans, divided as follows:
$160 million for home-delivered nutrition services.
$80 million for congregate nutrition services that provide food in group settings, such as adult day care centers and meal sites.
$10 million for nutrition services for American Indians.
Provides $64 million to the Indian Health Service for items and services related to COVID-19. Additionally, all states, including Alaska, are eligible for a 6.2% increase in their federal medical assistance percentages (FMAP) for Medicaid. For Alaska, this means an increase in over $60 million for Medicaid. States will receive a 100% FMAP to cover the cost of tests for uninsured people through their Medicaid programs.
For a detailed breakdown, please follow this link: https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Families%20First%.

C.     Coronavirus Aid, Relief, and Economic Security (CARES) Act

Phase 3 of congressional action was the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is focused on 4 key areas:

Putting cash directly in the hands of struggling families in Alaska and throughout the country;
Delivering rapid relief to small businesses that are being crushed by this pandemic and having to lay off their workers;
Stabilizing key sectors of the economy experiencing significant stress in order to avoid massive layoffs that are starting to happen in America; and
Sending a surge of new resources to states, tribes, medical professionals, hospitals, and community health centers who are on the frontlines in battling this pandemic.
I would like to provide more details on these areas of the CARES Act.

      II.     Direct Assistance to Alaskan Families

      A.     Individual Checks to Alaskan Families

The CARES Act provides a check to taxpayers who need it most by providing $1,200 for individuals ($2,400 for couples), plus $500 for each child. These benefits are phased-out beginning at $75,000 for individuals, $112,500 for heads of household, and $150,000 for joint filers. The amount is completely phased-out for incomes exceeding $99,000, $146,500, and $198,000 respectively. The Tax Policy Center estimates that 90% of Americans will receive some benefit. For more information about this program, please see the Senate Finance Committee’s FAQ:  https://www.sullivan.senate.gov/imo/media/doc/SFC%20Recovery%20Check%20FAQ.pdf.

The vast majority of Americans and Alaskans will receive this benefit automatically if they have filed a tax return for 2018, 2019, or if they receive Social Security benefits. The benefit will be directly deposited into the bank account associated with the tax filing or Social Security payment. If an individual does not receive direct deposits for tax refunds or Social Security then a physical check will be sent to their address. There is also no minimum income requirement; if you did not file a 2018 or 2019 tax return because you did not have income, we encourage you to file in order to make receipt of your check as easy as possible. If this applies to you, please file at this address: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. The Treasury Department is anticipating that these deposits and checks will be distributed as early as mid-April. For more information about this program, please go to the Internal Revenue Service’s webpage at: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments.

B.     Tax Relief for Individuals 

The Internal Revenue Service (IRS) and the Administration recently deferred federal income taxes for 90 days to July 15, 2020 – with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income. We still encourage Alaskans to file if they will be receiving a refund check. More information from the IRS: https://www.irs.gov/coronavirus.

C.     Student Loan Relief

The CARES Act defers payment of all student loans – principal and interest – for six months. With the prevalence of student loan debt in this country, this deferment will provide major relief to students and graduates who are seeking to enter the workforce. More information from the U.S. Department of Education: https://studentaid.gov/announcements-events/coronavirus.

D.     Expanded Unemployment Insurance

The CARES Act also provides for $250 billion in additional unemployment insurance to be delivered through state unemployment offices. It expands benefits to those who are unable to work due to the coronavirus and related government responses – whether they have the illness, are caring for family who has it, or they cannot reach their job due to quarantine measures. Importantly, it also expands benefits to those who are traditionally not eligible, such as the self-employed, those with limited work history, and independent contractors, including our fishermen. It provides a total of 39 weeks of unemployment (13 weeks more than most state laws) and provides for four months of significantly increased weekly benefits ($600 above current state law) for which the state is 100% reimbursed by the federal government. The Senate Finance Committee has also provided an FAQ for this program: https://www.finance.senate.gov/chairmans-news/cares-act-unemployment-insurance-faq.

These unemployment insurance benefits, while being funded by the federal government, will be distributed through the State of Alaska’s unemployment insurance program. To file and apply, please go to: https://labor.alaska.gov/unemployment/. 

     III.     Rapid Relief for Alaska’s Small Businesses

     A.     The Paycheck Protection Program (PPP)

This provision is the economic heart of the CARES Act. The goal of this program is to provide much-needed relief to our small business sector – the engine of Alaska’s economy – so that these businesses can navigate this trying time and keep their employees on the payroll. Keeping the employer/employee relationship is crucial and one of the key elements of this economic relief package that should allow our economy to bounce back faster once the virus threat has passed.

After the Great Recession of 2008 and 2009, one of the reasons the economic recovery took so long was that so many Americans were laid off and out of the workforce for extended periods of time. The PPP includes $350 billion in low-interest loans, implemented through Federal Deposit Insurance Corporation (FDIC)-insured local Alaska banks and credit unions. It is designed to allow small businesses to stay afloat and to keep people employed throughout the crisis. These loans have a maximum of $10 million, are 100% federally guaranteed, and are forgivable for the 8-week period after origination to the extent they are used for certain qualified expenses – most importantly payroll – along with other fixed expenses. Essentially, these loans morph into grants if these businesses keep their employees employed.

The forgiveness amount must be at least 75% payroll expenses, while 25% may be spent on the other qualified expenses such as mortgage interest, rent, and utilities. The qualified expenses were expanded slightly to include “interest payments on debt obligation that were incurred before February 15, 2020.” For example, this should cover fishing vessels if mortgage interest does not. However, a maximum of 25% of the forgiveness amount can be directed toward these other purposes.

For sole proprietorships or independent contractors, you must submit documentation to establish your eligibility such as payroll, 1099s, income/expenses from the proprietorship, or even “supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.” Independent contractors are not included in an employer’s loan calculations because they can apply for the PPP themselves.

The calculation of the loan amount for each borrower is equal to 2.5 times the average monthly wages from the previous year subject to the $10 million cap. Other qualified forgivable expenses include family or sick leave, health care benefit payments, retirement payments, mortgage interest, rent, and utilities. The amount forgiven will be reduced proportionally by any reductions in an employer’s payroll during the 8-week forgiveness period, in order to provide the maximum incentive for businesses to retain their workers. Importantly, for those small businesses that have unfortunately already been forced to lay off workers, the CARES Act allows them until June 30 for the borrower to return to February 15 payroll levels without a forgiveness penalty.

At the end of the 8-week forgiveness period, the borrower will provide to the lender documentation that verifies their qualified forgivable expense payments. The lender then reports their expected loan forgiveness amount for a loan or pool of loans to the U.S. Small Business Administration (SBA), and the SBA will purchase that amount of the loan from the lender. The forgiven amount is tax free – no gift tax penalty applies. Lenders will not be subject to enforcement action or penalties by the SBA relating to loan forgiveness for eligible uses. This helps ensure that lenders will originate loans without liability concerns. 

For more information on assistance to small business owners, please visit the following: 

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp 
https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
To ensure the money is distributed more efficiently and quickly, with minimal government bureaucracy, the program makes the loans available through FDIC-insured Alaska banks and credit unions. These lenders are given delegated authority to quickly determine borrower eligibility, which is based on whether or not the business was operational on February 15 and had employees, or independent contractors on the payroll. Ability to repay is irrelevant.

On April 2, the Treasury and SBA released an interim final rule that outlines the key provisions of SBA’s implementation of the PPP and requested public comment. The updated terms are:

1% interest rate cap (lenders also receive fee compensation from the government)
2-year max loan term
No collateral or personal guarantees
No borrower or lender fees
Additionally, the SBA created an application on the SBA website, at this link: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp. Small businesses and sole proprietorships could apply starting April 3, and independent contractors and the self-employed could apply starting April 10.

Eligible small businesses for the PPP benefit are those with less than 500 employees or otherwise considered a “small business concern” according to the SBA’s website here: https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.

There are several notable small-business size standards for Alaska that will qualify:

Scheduled Passenger Air Carriers: 1,500 employees
Unscheduled Charter Air Carriers: 1,500 employees
Crude Petroleum Extraction: 1,250 employees
Natural Gas Extraction: 1,250 employees
Pipeline Transportation of Crude: 1,500 employees
Pipeline Transportation of Natural Gas: 1,500 employees
Gold Mining: 1,500 employees
Eligibility is also expanded to include the self-employed, sole-proprietors, certain nonprofits, and tribally-owned businesses, and Alaska Native regional and village corporations.

One frequent criticism about the PPP is that it doesn’t do enough to aid seasonal small businesses that typically hire many employees during the summer tourist season, but do not have many employees now. This is a legitimate concern that we are trying to rectify either through executive action or legislation.

      B.     Expedited Economic Injury Disaster Loans (EIDL)

On March 21, Alaska was approved for SBA’s Economic Injury Disaster Loans (EIDLs), which provide low-interest loans to small businesses suffering economic injury as a result of the coronavirus. These loans are issued at a maximum of $2 million and can be used to pay fixed debts, payroll, accounts payable, and other normal operating expenses. The CARES Act expands this EIDL program with an additional $10 billion in appropriations, and by making sole-proprietors, independent contractors, cooperatives, and tribally-owned businesses eligible.

Many Alaska businesses are already applying for these loans and are in dire need of working capital quickly. Under the CARES Act, an eligible entity that has applied for an EIDL loan can request an advance of up to $10,000, which the SBA is trying to distribute as quickly as possible. This advance does not have to be repaid, even if the borrower is denied for the EIDL. This is essentially a small, one-time grant to eligible small businesses. Importantly, an EIDL may also be refinanced into the forgivable PPP once a borrower is approved, and the advance would be deducted from the amount forgiven.

This program is already inundated with applications; and while the SBA is working to improve capacity, they have been considering different methods to stretch the current available funding to meet demand. In order to prevent reduced benefits under this program, Congress will need to look at increasing appropriations.

For more information on the EIDL and PPP programs, please see the SBA’s website here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

C.     Income Tax Relief

Small businesses also received tax relief from the Administration’s decision to defer federal income taxes for 90 days, with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31 through December 31 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

E.     Fishermen

To illustrate the benefits under the CARES Act for small businesses in Alaska, I will focus on our fishermen, the ultimate small businessmen and women in Alaska.

Under the CARES Act, the self-employed, including our fishermen, qualify under the definition of a small business, which makes them eligible for the expanded programs I mentioned. That means they can take advantage of the PPP as well as the SBA’s Economic Injury Disaster Loans (EIDL). They are also eligible for the expanded unemployment insurance described in more detail above.

I have also been working with federal agencies on common-sense regulatory relief; for example, the National Marine Fisheries Service recently announced a temporary waiver for on-board fishery observer coverage for Alaska’s small boat fleet. Many of these vessels have very tight quarters and this decision will reduce the number of individuals travelling from outside to our small coastal communities.

Finally, the CARES Act appropriates $300 million in direct assistance for commercial, charter, and subsistence fishermen, processors, fishery dependent businesses, and coastal communities. This assistance is structured similarly to fishery disaster payments, but the provision is specifically drafted to speed up the delivery of the funds by allowing the money to be awarded on a rolling basis, even while a season is still underway, and forgoing the usual requirement for the Governor to declare a disaster. The Department of Commerce is quickly developing this program and will soon provide information on how to apply for this assistance, which has already been appropriated.

F.     Nonprofits

Certain nonprofits such as 501(c)(3) and 501(c)(19) veteran organizations with less than 500 employees are eligible for the PPP. However, they are subject to SBA’s affiliation rules, meaning in many cases, a large parent organization will be disqualifying. More information can be found at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

The CARES Act specifies that larger nonprofits be included in the mid-sized business Federal Reserve lending facility for entities with between 500 and 10,000 employees, which is described in more detail below. Nonprofit employees are also eligible for the expanded federal unemployment benefits.

To encourage continued charitable giving to nonprofits, the CARES Act:

Allows taxpayers who take the standard deduction and do not itemize to take a charitable deduction up to $300;
Suspends the limit for charitable deductions for taxpayers who do itemize; and
Increases the corporate limitation on charitable giving to 25% of taxable income.
Appropriations are included for a variety of programs important to nonprofits, such as $150 million for the National Endowment for the Arts and the National Endowment for the Humanities; $50 million for museums and libraries; $45 million for domestic violence shelters; $2 million for the National Domestic Violence Hotline; and $25 million for runaway and homeless youth programs.

     IV.     Stabilizing Key Sectors of the Economy

This section of the CARES Act provides $500 billion to the U.S. Treasury Exchange Stabilization Fund for direct loans from Treasury to specific sectors of the economy. It also provides loans, loan guarantees, and other investments through Federal Reserve lending facilities to other large and mid-sized businesses, as well as state and local governments.

     A.     Direct Loans from the U.S. Treasury

This section includes up to $25 billion in direct loans from the U.S. Treasury for passenger air carriers, which includes small Part 135 carriers as we have in Alaska. Additionally, it includes up to $4 billion for cargo air carriers and up to $17 billion for “businesses critical to maintaining national security.” For more information, please visit the Treasury’s website: https://home.treasury.gov/cares.

The rate of these loans will be determined by the Secretary of the Treasury. Both collateralized and uncollateralized loans are available, and the duration of the loan or loan guarantee is no longer than 5 years. Recipients of the loans must maintain employee levels as of March 24, 2020, to the extent practicable and not reduce employee levels by more than 10% until September 30, 2020. These loans cannot be forgiven.

Aviation loans require a warrant, equity interest, or a senior debt instrument issued by the eligible business to the Secretary of the Treasury. The Secretary of Transportation is authorized to require, to the extent practicable, that air carriers receiving financial support continue services to any point served by that carrier before March 1, 2020. Further, the Secretary is required to take into consideration the air transportation needs of small and remote communities, and health care and pharmaceutical supply chain concerns. This is something I pushed hard for as we wrote the CARES Act in the Senate.

The CARES Act also provides grants for air carriers for financial assistance for the exclusive use of employee wages, salaries, and benefits in amounts of up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for airline contractors. Alaska’s small Part 135 carriers are eligible. Grants would be distributed based on salaries and benefits of the carrier between April 1 and September 30, 2019. Please see the Treasury’s website at: https://home.treasury.gov/cares for more information.

The Secretary of the Treasury shall make initial payments to carriers within 10 days of enactment, with subsequent payments to meet the verified payment history data, as submitted. Grant recipients must agree to not cut pay or benefits, or issue involuntary furloughs, until after September 30, 2020. The Secretary of the Treasury may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients, which, at the discretion of the Secretary, provide appropriate compensation to the federal government for the provision of the financial assistance.

The CARES Act also authorizes the Secretary to require, to the extent practicable, that air carriers receiving grant support continue services to any point served by that carrier before March 1, 2020. It also requires the Secretary to take into consideration the air transportation needs of small and remote communities.

     B.     Federal Reserve Lending Facilities for Other Businesses, States, and Municipalities

The remaining $454 billion goes to fund the Federal Reserve’s authority through special lending facilities that will be available to eligible businesses, states, and municipalities. These lending facilities can purchase interests directly, in the secondary market, or make direct loans in order to provide much-needed liquidity and stabilization to these markets. They must be “broad based,” meaning “designed for the purpose of providing liquidity to an identifiable market or sector of the financial system” and not designed to assist individual failing entities (Federal Reserve rules clarify that a lending facility where more than five entities are eligible qualifies as “broad based”). A participant must not be able to secure adequate credit elsewhere, and a participant must not be insolvent. For more information, please visit Treasury’s website: https://home.treasury.gov/cares.

Because the Federal Reserve expects that borrowers will pay them back, the Federal Reserve can lend and invest more than just the dollar amount. The Treasury estimates that this $454 billion infusion can be leveraged into over $4 trillion of liquidity into the U.S. economy. Much of the Federal Reserve’s activity under this authority will require, among other things, that recipients limit executive compensation and limit stock repurchases. A congressionally appointed oversight committee and a designated inspector general will monitor these lending facilities. Additionally, to prevent conflicts of interest, companies may not receive relief under this section if certain members of the administration, members of Congress, or their families own more than 20% of the company.

The CARES Act requires one of these lending facilities to be targeted specifically at nonprofit organizations and businesses with between 500 and 10,000 employees, subject to additional loan criteria and obligations on the recipient, such as:

Maintaining 90% of their workforce through the fiscal year;
Not outsourcing any jobs for 2 years after repayment;
Will receive interest rate of no more than 2% per annum; and 
For at least 6 months, no interest or principal payments are required.
This section of the CARES Act has been criticized by some for being a “bailout” or “slush fund” for businesses with over 500 employees. I believe such arguments mischaracterize the intent of this legislation. This is not like the Troubled Asset Relief Program (TARP) bills and other spending by the Congress in 2008 and 2009 during the Great Recession. That was more of a classic bailout resulting from Wall Street firms’ reckless and irresponsible business and lending practices that threatened the financial stability and main street economy of the Unites States, and therefore required hundreds of billions of dollars to stabilize these firms. What is happening now is a fundamentally different dynamic. The current situation is more like a natural disaster or a war and is causing massive dislocation in the U.S. economy and massive job losses in sectors of the U.S. economy that, until just a few months ago, were very strong. For example, the airline industry didn’t do anything wrong in this crisis, but now it has seen a 90% drop in bookings and revenue. I believe the federal government has an important role to play in helping avoid massive layoffs in these sectors of the economy as we get through this pandemic.

     C.     Income Tax Relief:

Corporations and other larger businesses benefit from the IRS and the Administration’s recent deferral of federal income taxes for 90 days—with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

     D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31, 2020 through December 31, 2020 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

     V.     Surge of Funding for States, Tribes, Hospitals, Community Health Centers, and Medical Professionals

     A.     A Surge in Funding for States, Cities, and Municipalities

The coronavirus has dramatically impacted the financial wherewithal of our state and local communities. A major portion of the CARES Act provides $150 billion in funding for these entities. Generally, this is distributed according to per capita population; however, a minimum payment of $1.25 billion is required per state.

The State of Alaska will receive slightly more than the minimum after our population calculation is taken into account. States have a great deal of discretion on how to spend these funds, so long as the funding is used for “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19)” that “were not accounted for in the budget most recently approved as of the date of enactment of this section for the State or government” and were incurred during 2020. 

     B.     $8 Billion Stabilization Fund for Tribes

The CARES Act includes an $8 billion fund available to tribes throughout the United States to assist in their response to the COVID-19 crisis. There is also $1.03 billion for the Indian Health Services, $450 million of which goes directly to tribal health entities. There is an additional $1.5 billion for the CDC’s state and local preparedness grants, which includes a provision that allocates no less than $125 million of these funds to tribes, tribal organizations, urban Indian Health organizations, or health services provided to tribes. The Departments of Interior and Treasury are devising a formula on the most equitable way in which to distribute these tribal funds. Your congressional delegation fought hard for this tribal provision to be included in the CARES Act, and we are thankful that Department of Interior and our Alaska Native people are there as a resource for Treasury. For more information, please see this page provided by the Senate Finance Committee: https://www.finance.senate.gov/chairmans-news/rural-resources-in-the-coronavirus-aid-relief-and-economic-security-cares-act.

     C.     A Massive Surge of Resources for Hospitals, Community Health Centers, and Medical Professionals on the Front Lines

The federal government has a responsibility to fund the medical equipment and research needed to combat this virus. The CARES Act provides urgent funding for emergency medical supplies to hospitals, additional ventilators and protective equipment, and supports an $11 billion “Manhattan Project” effort toward discovering new treatments and even a vaccine. 

The CARES Act provides $150 billion to ensure health care providers and hospitals continue to receive the support they need for COVID-19-related expenses and lost revenue, as well as $1.32 billion in additional funding for community health centers. The CARES Act expands access to telehealth services provided by community health centers and makes changes to Medicare to bolster our health system. Additionally, it addresses liability issues to assist with supply shortages for critical equipment, such as medical masks, and encourages the development and testing of new vaccines and treatments. It also includes $14 billion for VA medical services.

Additionally, on April 3, 2020, President Trump announced he will be issuing an executive order to provide $100 billion to reimburse hospitals for the cost of treating uninsured COVID-19 patients. Under this order, healthcare providers will be reimbursed for the cost of treating uninsured Americans suffering from COVID-19 at current Medicare rates.

     Conclusion

Your congressional delegation is battling this pandemic on multiple fronts. We are working to stabilize the global energy markets, bring home Alaskans stranded overseas and, importantly, bring as many resources to Alaskans, families, workers, small businesses, communities, health care professionals, and tribes as possible.I am in constant communication with the Governor and his team, assisting the State of Alaska’s work with the federal government on the critical tasks of acquiring necessary supplies, and removing roadblocks posed by burdensome regulations. In addition, another crucial task is ensuring the CARES Act is implemented correctly and that these massive federal resources actually reach Alaskans who are struggling to make ends meet. There will be bureaucratic frustrations and snafus during this process so please reach out to my office for help. Finally, I am working closely with state and local governments, elected officials, and community leaders, and I stand ready to run interference with the federal government to remove roadblocks for you.

I hope you and your family are staying healthy. I want to reiterate the importance of following the CDC guidelines – and those set forth by our federal and state medical experts, like Dr. Anthony Fauci, Dr. Deborah Birx, and Alaska’s Chief Medical Officer, Dr. Anne Zink – to keep our families, friends, and fellow Alaskans safe. We are resilient and self-sufficient. And we will emerge stronger and more resilient from this crisis. For up-to-date information directly from me and my team, please refer to our website at: www.sullivan.senate.gov.

If you have any more questions or concerns, please feel free to contact me or my staff. My office can be reached at 202-224-3004, or online at the link above.In this time of crisis, it’s important for me as your Senator to provide Alaskans with an in-depth account of what your federal government is doing to help you get through the ongoing COVID-19 global pandemic. I am committed to providing you with the most recent information about the virus and am continually updating my website at https://www.sullivan.senate.gov/coronavirus with useful information and links related to the programs created by Congress to respond to this pandemic.

     I.     Introduction

I want to begin by recognizing how difficult this has been for all Alaskans. The COVID-19 virus is an evolving pandemic, spreading worldwide, severely disrupting life across America and our state. Alaskans are worried not only about their personal health and the impacts on our health systems, but also the short- and long-term economic impacts on working families, jobs, and small businesses across the state.

This pandemic is, without a doubt, one of the greatest crises this country has confronted in living memory. We are facing an unprecedented challenge as a nation – much like a natural disaster or even a war. We are fighting this battle on many fronts, and everyone has a role to play, particularly the federal government.

Your congressional delegation is working closely with the Governor and his team, other elected officials in Alaska, our tribes, and the executive branch of the federal government. One team, one fight, as we say in the Marine Corps.

The Senate is also very much focused on legislation to help Americans get through these unprecedented challenges. This letter lays out the different pieces of legislation passed by Congress and signed into law during the month of March: Phase 1 – The Coronavirus Preparedness & Response Supplemental Appropriations Act; Phase 2 – The Families First Coronavirus Response Act; and Phase 3 – The Coronavirus Aid, Relief, and Economic Security (CARES) Act. This letter highlights the details of the CARES Act, which provides approximately $2 trillion in relief to American families, individuals, small businesses, states, tribes, hospitals, community health centers, and frontline medical professionals. In each section, I include links for more information on specific elements of this legislation.

This is a general information letter primarily focused on the CARES Act. If you have specific casework-related issues that relate to you individually, your small business, or your unemployment benefits that are not addressed in this letter, please reach out directly to my office at (907) 271-5915 or https://www.sullivan.senate.gov/contact/email and we will work with you directly.

A.     Coronavirus Preparedness & Response Supplemental Appropriations Act

Passed in early March, the first phase of Congress’ legislative response was the Coronavirus Preparedness & Response Supplemental Appropriations Act. This bill included a total of $8.3 billion to help prevent, prepare for, and respond to COVID-19. This legislation strengthened the federal response to the coronavirus outbreak and allowed for necessary precautions, prevention, and treatment at the local, state, national, and international level.

This legislation provided $2.2 billion to the Centers for Disease Control and Prevention (CDC) to support state and local governments. This includes $1 billion for state and local preparedness and response, half of which went to states, cities, and tribes, including millions of dollars to the State of Alaska. Included in this section is a set-aside of at least $40 million for tribes, tribal organizations, and tribal health service providers that also significantly benefits our state.

Additionally, the Coronavirus Preparedness and Response Supplemental Appropriations Actincludes $3.1 billion for procurement of medical supplies to supplement the Strategic National Stockpile and to support federal and state response efforts; research and development of vaccines, therapeutics, and diagnostics; and hospital and health system preparedness. An additional $300 million is made available for the purchase of vaccines, therapeutics, and diagnostics; and $100 million for community health centers, of which we have many in Alaska.

Finally, this bill confronts the global pandemic by providing $300 million for the CDC’s Infectious Diseases Rapid Response Fund, which is critical to the health and security of the United States by confronting the coronavirus on a global level. It also provides the Department of State and United States Agency for International Development (USAID) with $1.25 billion to address the global pandemic.

For more information, see this link for a section-by-section breakdown: https://www.appropriations.senate.gov/imo/media/doc/Coronavirus%20Emergency%20Supplemental%20Summary.pdf

B.     Families First Coronavirus Response Act

Phase 2 of congressional action was the passage of the Families First Coronavirus Response Act, which provided $105 billion to bolster the federal government’s response to the COVID-19 pandemic. This bill addresses the severe health and economic impacts of the outbreak by: ensuring that testing is free for Americans; paid sick leave as well as family and medical leave; enhancing unemployment insurance to help workers; and ensuring that students, seniors, and low-income households can continue to access nutrition assistance.

Specifically, the Families First Coronavirus Response Act:

Requires insurers to cover coronavirus tests and related services, such as provider visits for testing, without cost-sharing or prior authorization requirements. The cost-sharing prohibition also applies to Medicaid, Medicare, TRICARE, veterans’ health programs, the Indian Health Service, and coverage provided to federal civilian employees. It also provides $1 billion to allow the National Disaster Medical System to reimburse provider costs associated with testing uninsured individuals.
Streamlines regulations regarding the manufacturing of personal respiratory protective devices, such as N95 masks.
Provides $500 million in emergency funding for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program, as well as $400 million for the Commodity Assistance Program for the Emergency Food Assistance Program (TEFAP), which often funds food banks and other non-profits delivering nutrition assistance.
Reduces hurdles to accessing Supplemental Nutrition Assistance Programs (SNAP) to provide additional aid to households in need.
Creates temporary, emergency paid sick leave for individuals who become ill with COVID-19 or are seeking a diagnosis. The legislation creates a temporary paid family leave program for individuals with a minor child in the event of the closure of the child’s school or place of care. Expenses from impacted employers are covered fully by the federal government through a refundable payroll tax credit.
Provides $250 million for Health and Human Services (HHS) Department programs that aid elderly Americans, divided as follows:
$160 million for home-delivered nutrition services.
$80 million for congregate nutrition services that provide food in group settings, such as adult day care centers and meal sites.
$10 million for nutrition services for American Indians.
Provides $64 million to the Indian Health Service for items and services related to COVID-19. Additionally, all states, including Alaska, are eligible for a 6.2% increase in their federal medical assistance percentages (FMAP) for Medicaid. For Alaska, this means an increase in over $60 million for Medicaid. States will receive a 100% FMAP to cover the cost of tests for uninsured people through their Medicaid programs.
For a detailed breakdown, please follow this link: https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Families%20First%.

C.     Coronavirus Aid, Relief, and Economic Security (CARES) Act

Phase 3 of congressional action was the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is focused on 4 key areas:

Putting cash directly in the hands of struggling families in Alaska and throughout the country;
Delivering rapid relief to small businesses that are being crushed by this pandemic and having to lay off their workers;
Stabilizing key sectors of the economy experiencing significant stress in order to avoid massive layoffs that are starting to happen in America; and
Sending a surge of new resources to states, tribes, medical professionals, hospitals, and community health centers who are on the frontlines in battling this pandemic.
I would like to provide more details on these areas of the CARES Act.

      II.     Direct Assistance to Alaskan Families

      A.     Individual Checks to Alaskan Families

The CARES Act provides a check to taxpayers who need it most by providing $1,200 for individuals ($2,400 for couples), plus $500 for each child. These benefits are phased-out beginning at $75,000 for individuals, $112,500 for heads of household, and $150,000 for joint filers. The amount is completely phased-out for incomes exceeding $99,000, $146,500, and $198,000 respectively. The Tax Policy Center estimates that 90% of Americans will receive some benefit. For more information about this program, please see the Senate Finance Committee’s FAQ:  https://www.sullivan.senate.gov/imo/media/doc/SFC%20Recovery%20Check%20FAQ.pdf.

The vast majority of Americans and Alaskans will receive this benefit automatically if they have filed a tax return for 2018, 2019, or if they receive Social Security benefits. The benefit will be directly deposited into the bank account associated with the tax filing or Social Security payment. If an individual does not receive direct deposits for tax refunds or Social Security then a physical check will be sent to their address. There is also no minimum income requirement; if you did not file a 2018 or 2019 tax return because you did not have income, we encourage you to file in order to make receipt of your check as easy as possible. If this applies to you, please file at this address: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. The Treasury Department is anticipating that these deposits and checks will be distributed as early as mid-April. For more information about this program, please go to the Internal Revenue Service’s webpage at: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments.

B.     Tax Relief for Individuals 

The Internal Revenue Service (IRS) and the Administration recently deferred federal income taxes for 90 days to July 15, 2020 – with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income. We still encourage Alaskans to file if they will be receiving a refund check. More information from the IRS: https://www.irs.gov/coronavirus.

C.     Student Loan Relief

The CARES Act defers payment of all student loans – principal and interest – for six months. With the prevalence of student loan debt in this country, this deferment will provide major relief to students and graduates who are seeking to enter the workforce. More information from the U.S. Department of Education: https://studentaid.gov/announcements-events/coronavirus.

D.     Expanded Unemployment Insurance

The CARES Act also provides for $250 billion in additional unemployment insurance to be delivered through state unemployment offices. It expands benefits to those who are unable to work due to the coronavirus and related government responses – whether they have the illness, are caring for family who has it, or they cannot reach their job due to quarantine measures. Importantly, it also expands benefits to those who are traditionally not eligible, such as the self-employed, those with limited work history, and independent contractors, including our fishermen. It provides a total of 39 weeks of unemployment (13 weeks more than most state laws) and provides for four months of significantly increased weekly benefits ($600 above current state law) for which the state is 100% reimbursed by the federal government. The Senate Finance Committee has also provided an FAQ for this program: https://www.finance.senate.gov/chairmans-news/cares-act-unemployment-insurance-faq.

These unemployment insurance benefits, while being funded by the federal government, will be distributed through the State of Alaska’s unemployment insurance program. To file and apply, please go to: https://labor.alaska.gov/unemployment/. 

     III.     Rapid Relief for Alaska’s Small Businesses

     A.     The Paycheck Protection Program (PPP)

This provision is the economic heart of the CARES Act. The goal of this program is to provide much-needed relief to our small business sector – the engine of Alaska’s economy – so that these businesses can navigate this trying time and keep their employees on the payroll. Keeping the employer/employee relationship is crucial and one of the key elements of this economic relief package that should allow our economy to bounce back faster once the virus threat has passed.

After the Great Recession of 2008 and 2009, one of the reasons the economic recovery took so long was that so many Americans were laid off and out of the workforce for extended periods of time. The PPP includes $350 billion in low-interest loans, implemented through Federal Deposit Insurance Corporation (FDIC)-insured local Alaska banks and credit unions. It is designed to allow small businesses to stay afloat and to keep people employed throughout the crisis. These loans have a maximum of $10 million, are 100% federally guaranteed, and are forgivable for the 8-week period after origination to the extent they are used for certain qualified expenses – most importantly payroll – along with other fixed expenses. Essentially, these loans morph into grants if these businesses keep their employees employed.

The forgiveness amount must be at least 75% payroll expenses, while 25% may be spent on the other qualified expenses such as mortgage interest, rent, and utilities. The qualified expenses were expanded slightly to include “interest payments on debt obligation that were incurred before February 15, 2020.” For example, this should cover fishing vessels if mortgage interest does not. However, a maximum of 25% of the forgiveness amount can be directed toward these other purposes.

For sole proprietorships or independent contractors, you must submit documentation to establish your eligibility such as payroll, 1099s, income/expenses from the proprietorship, or even “supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.” Independent contractors are not included in an employer’s loan calculations because they can apply for the PPP themselves.

The calculation of the loan amount for each borrower is equal to 2.5 times the average monthly wages from the previous year subject to the $10 million cap. Other qualified forgivable expenses include family or sick leave, health care benefit payments, retirement payments, mortgage interest, rent, and utilities. The amount forgiven will be reduced proportionally by any reductions in an employer’s payroll during the 8-week forgiveness period, in order to provide the maximum incentive for businesses to retain their workers. Importantly, for those small businesses that have unfortunately already been forced to lay off workers, the CARES Act allows them until June 30 for the borrower to return to February 15 payroll levels without a forgiveness penalty.

At the end of the 8-week forgiveness period, the borrower will provide to the lender documentation that verifies their qualified forgivable expense payments. The lender then reports their expected loan forgiveness amount for a loan or pool of loans to the U.S. Small Business Administration (SBA), and the SBA will purchase that amount of the loan from the lender. The forgiven amount is tax free – no gift tax penalty applies. Lenders will not be subject to enforcement action or penalties by the SBA relating to loan forgiveness for eligible uses. This helps ensure that lenders will originate loans without liability concerns. 

For more information on assistance to small business owners, please visit the following: 

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp 
https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
To ensure the money is distributed more efficiently and quickly, with minimal government bureaucracy, the program makes the loans available through FDIC-insured Alaska banks and credit unions. These lenders are given delegated authority to quickly determine borrower eligibility, which is based on whether or not the business was operational on February 15 and had employees, or independent contractors on the payroll. Ability to repay is irrelevant.

On April 2, the Treasury and SBA released an interim final rule that outlines the key provisions of SBA’s implementation of the PPP and requested public comment. The updated terms are:

1% interest rate cap (lenders also receive fee compensation from the government)
2-year max loan term
No collateral or personal guarantees
No borrower or lender fees
Additionally, the SBA created an application on the SBA website, at this link: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp. Small businesses and sole proprietorships could apply starting April 3, and independent contractors and the self-employed could apply starting April 10.

Eligible small businesses for the PPP benefit are those with less than 500 employees or otherwise considered a “small business concern” according to the SBA’s website here: https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.

There are several notable small-business size standards for Alaska that will qualify:

Scheduled Passenger Air Carriers: 1,500 employees
Unscheduled Charter Air Carriers: 1,500 employees
Crude Petroleum Extraction: 1,250 employees
Natural Gas Extraction: 1,250 employees
Pipeline Transportation of Crude: 1,500 employees
Pipeline Transportation of Natural Gas: 1,500 employees
Gold Mining: 1,500 employees
Eligibility is also expanded to include the self-employed, sole-proprietors, certain nonprofits, and tribally-owned businesses, and Alaska Native regional and village corporations.

One frequent criticism about the PPP is that it doesn’t do enough to aid seasonal small businesses that typically hire many employees during the summer tourist season, but do not have many employees now. This is a legitimate concern that we are trying to rectify either through executive action or legislation.

      B.     Expedited Economic Injury Disaster Loans (EIDL)

On March 21, Alaska was approved for SBA’s Economic Injury Disaster Loans (EIDLs), which provide low-interest loans to small businesses suffering economic injury as a result of the coronavirus. These loans are issued at a maximum of $2 million and can be used to pay fixed debts, payroll, accounts payable, and other normal operating expenses. The CARES Act expands this EIDL program with an additional $10 billion in appropriations, and by making sole-proprietors, independent contractors, cooperatives, and tribally-owned businesses eligible.

Many Alaska businesses are already applying for these loans and are in dire need of working capital quickly. Under the CARES Act, an eligible entity that has applied for an EIDL loan can request an advance of up to $10,000, which the SBA is trying to distribute as quickly as possible. This advance does not have to be repaid, even if the borrower is denied for the EIDL. This is essentially a small, one-time grant to eligible small businesses. Importantly, an EIDL may also be refinanced into the forgivable PPP once a borrower is approved, and the advance would be deducted from the amount forgiven.

This program is already inundated with applications; and while the SBA is working to improve capacity, they have been considering different methods to stretch the current available funding to meet demand. In order to prevent reduced benefits under this program, Congress will need to look at increasing appropriations.

For more information on the EIDL and PPP programs, please see the SBA’s website here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

C.     Income Tax Relief

Small businesses also received tax relief from the Administration’s decision to defer federal income taxes for 90 days, with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31 through December 31 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

E.     Fishermen

To illustrate the benefits under the CARES Act for small businesses in Alaska, I will focus on our fishermen, the ultimate small businessmen and women in Alaska.

Under the CARES Act, the self-employed, including our fishermen, qualify under the definition of a small business, which makes them eligible for the expanded programs I mentioned. That means they can take advantage of the PPP as well as the SBA’s Economic Injury Disaster Loans (EIDL). They are also eligible for the expanded unemployment insurance described in more detail above.

I have also been working with federal agencies on common-sense regulatory relief; for example, the National Marine Fisheries Service recently announced a temporary waiver for on-board fishery observer coverage for Alaska’s small boat fleet. Many of these vessels have very tight quarters and this decision will reduce the number of individuals travelling from outside to our small coastal communities.

Finally, the CARES Act appropriates $300 million in direct assistance for commercial, charter, and subsistence fishermen, processors, fishery dependent businesses, and coastal communities. This assistance is structured similarly to fishery disaster payments, but the provision is specifically drafted to speed up the delivery of the funds by allowing the money to be awarded on a rolling basis, even while a season is still underway, and forgoing the usual requirement for the Governor to declare a disaster. The Department of Commerce is quickly developing this program and will soon provide information on how to apply for this assistance, which has already been appropriated.

F.     Nonprofits

Certain nonprofits such as 501(c)(3) and 501(c)(19) veteran organizations with less than 500 employees are eligible for the PPP. However, they are subject to SBA’s affiliation rules, meaning in many cases, a large parent organization will be disqualifying. More information can be found at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

The CARES Act specifies that larger nonprofits be included in the mid-sized business Federal Reserve lending facility for entities with between 500 and 10,000 employees, which is described in more detail below. Nonprofit employees are also eligible for the expanded federal unemployment benefits.

To encourage continued charitable giving to nonprofits, the CARES Act:

Allows taxpayers who take the standard deduction and do not itemize to take a charitable deduction up to $300;
Suspends the limit for charitable deductions for taxpayers who do itemize; and
Increases the corporate limitation on charitable giving to 25% of taxable income.
Appropriations are included for a variety of programs important to nonprofits, such as $150 million for the National Endowment for the Arts and the National Endowment for the Humanities; $50 million for museums and libraries; $45 million for domestic violence shelters; $2 million for the National Domestic Violence Hotline; and $25 million for runaway and homeless youth programs.

     IV.     Stabilizing Key Sectors of the Economy

This section of the CARES Act provides $500 billion to the U.S. Treasury Exchange Stabilization Fund for direct loans from Treasury to specific sectors of the economy. It also provides loans, loan guarantees, and other investments through Federal Reserve lending facilities to other large and mid-sized businesses, as well as state and local governments.

     A.     Direct Loans from the U.S. Treasury

This section includes up to $25 billion in direct loans from the U.S. Treasury for passenger air carriers, which includes small Part 135 carriers as we have in Alaska. Additionally, it includes up to $4 billion for cargo air carriers and up to $17 billion for “businesses critical to maintaining national security.” For more information, please visit the Treasury’s website: https://home.treasury.gov/cares.

The rate of these loans will be determined by the Secretary of the Treasury. Both collateralized and uncollateralized loans are available, and the duration of the loan or loan guarantee is no longer than 5 years. Recipients of the loans must maintain employee levels as of March 24, 2020, to the extent practicable and not reduce employee levels by more than 10% until September 30, 2020. These loans cannot be forgiven.

Aviation loans require a warrant, equity interest, or a senior debt instrument issued by the eligible business to the Secretary of the Treasury. The Secretary of Transportation is authorized to require, to the extent practicable, that air carriers receiving financial support continue services to any point served by that carrier before March 1, 2020. Further, the Secretary is required to take into consideration the air transportation needs of small and remote communities, and health care and pharmaceutical supply chain concerns. This is something I pushed hard for as we wrote the CARES Act in the Senate.

The CARES Act also provides grants for air carriers for financial assistance for the exclusive use of employee wages, salaries, and benefits in amounts of up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for airline contractors. Alaska’s small Part 135 carriers are eligible. Grants would be distributed based on salaries and benefits of the carrier between April 1 and September 30, 2019. Please see the Treasury’s website at: https://home.treasury.gov/cares for more information.

The Secretary of the Treasury shall make initial payments to carriers within 10 days of enactment, with subsequent payments to meet the verified payment history data, as submitted. Grant recipients must agree to not cut pay or benefits, or issue involuntary furloughs, until after September 30, 2020. The Secretary of the Treasury may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients, which, at the discretion of the Secretary, provide appropriate compensation to the federal government for the provision of the financial assistance.

The CARES Act also authorizes the Secretary to require, to the extent practicable, that air carriers receiving grant support continue services to any point served by that carrier before March 1, 2020. It also requires the Secretary to take into consideration the air transportation needs of small and remote communities.

     B.     Federal Reserve Lending Facilities for Other Businesses, States, and Municipalities

The remaining $454 billion goes to fund the Federal Reserve’s authority through special lending facilities that will be available to eligible businesses, states, and municipalities. These lending facilities can purchase interests directly, in the secondary market, or make direct loans in order to provide much-needed liquidity and stabilization to these markets. They must be “broad based,” meaning “designed for the purpose of providing liquidity to an identifiable market or sector of the financial system” and not designed to assist individual failing entities (Federal Reserve rules clarify that a lending facility where more than five entities are eligible qualifies as “broad based”). A participant must not be able to secure adequate credit elsewhere, and a participant must not be insolvent. For more information, please visit Treasury’s website: https://home.treasury.gov/cares.

Because the Federal Reserve expects that borrowers will pay them back, the Federal Reserve can lend and invest more than just the dollar amount. The Treasury estimates that this $454 billion infusion can be leveraged into over $4 trillion of liquidity into the U.S. economy. Much of the Federal Reserve’s activity under this authority will require, among other things, that recipients limit executive compensation and limit stock repurchases. A congressionally appointed oversight committee and a designated inspector general will monitor these lending facilities. Additionally, to prevent conflicts of interest, companies may not receive relief under this section if certain members of the administration, members of Congress, or their families own more than 20% of the company.

The CARES Act requires one of these lending facilities to be targeted specifically at nonprofit organizations and businesses with between 500 and 10,000 employees, subject to additional loan criteria and obligations on the recipient, such as:

Maintaining 90% of their workforce through the fiscal year;
Not outsourcing any jobs for 2 years after repayment;
Will receive interest rate of no more than 2% per annum; and 
For at least 6 months, no interest or principal payments are required.
This section of the CARES Act has been criticized by some for being a “bailout” or “slush fund” for businesses with over 500 employees. I believe such arguments mischaracterize the intent of this legislation. This is not like the Troubled Asset Relief Program (TARP) bills and other spending by the Congress in 2008 and 2009 during the Great Recession. That was more of a classic bailout resulting from Wall Street firms’ reckless and irresponsible business and lending practices that threatened the financial stability and main street economy of the Unites States, and therefore required hundreds of billions of dollars to stabilize these firms. What is happening now is a fundamentally different dynamic. The current situation is more like a natural disaster or a war and is causing massive dislocation in the U.S. economy and massive job losses in sectors of the U.S. economy that, until just a few months ago, were very strong. For example, the airline industry didn’t do anything wrong in this crisis, but now it has seen a 90% drop in bookings and revenue. I believe the federal government has an important role to play in helping avoid massive layoffs in these sectors of the economy as we get through this pandemic.

     C.     Income Tax Relief:

Corporations and other larger businesses benefit from the IRS and the Administration’s recent deferral of federal income taxes for 90 days—with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

     D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31, 2020 through December 31, 2020 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

     V.     Surge of Funding for States, Tribes, Hospitals, Community Health Centers, and Medical Professionals

     A.     A Surge in Funding for States, Cities, and Municipalities

The coronavirus has dramatically impacted the financial wherewithal of our state and local communities. A major portion of the CARES Act provides $150 billion in funding for these entities. Generally, this is distributed according to per capita population; however, a minimum payment of $1.25 billion is required per state.

The State of Alaska will receive slightly more than the minimum after our population calculation is taken into account. States have a great deal of discretion on how to spend these funds, so long as the funding is used for “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19)” that “were not accounted for in the budget most recently approved as of the date of enactment of this section for the State or government” and were incurred during 2020. 

     B.     $8 Billion Stabilization Fund for Tribes

The CARES Act includes an $8 billion fund available to tribes throughout the United States to assist in their response to the COVID-19 crisis. There is also $1.03 billion for the Indian Health Services, $450 million of which goes directly to tribal health entities. There is an additional $1.5 billion for the CDC’s state and local preparedness grants, which includes a provision that allocates no less than $125 million of these funds to tribes, tribal organizations, urban Indian Health organizations, or health services provided to tribes. The Departments of Interior and Treasury are devising a formula on the most equitable way in which to distribute these tribal funds. Your congressional delegation fought hard for this tribal provision to be included in the CARES Act, and we are thankful that Department of Interior and our Alaska Native people are there as a resource for Treasury. For more information, please see this page provided by the Senate Finance Committee: https://www.finance.senate.gov/chairmans-news/rural-resources-in-the-coronavirus-aid-relief-and-economic-security-cares-act.

     C.     A Massive Surge of Resources for Hospitals, Community Health Centers, and Medical Professionals on the Front Lines

The federal government has a responsibility to fund the medical equipment and research needed to combat this virus. The CARES Act provides urgent funding for emergency medical supplies to hospitals, additional ventilators and protective equipment, and supports an $11 billion “Manhattan Project” effort toward discovering new treatments and even a vaccine. 

The CARES Act provides $150 billion to ensure health care providers and hospitals continue to receive the support they need for COVID-19-related expenses and lost revenue, as well as $1.32 billion in additional funding for community health centers. The CARES Act expands access to telehealth services provided by community health centers and makes changes to Medicare to bolster our health system. Additionally, it addresses liability issues to assist with supply shortages for critical equipment, such as medical masks, and encourages the development and testing of new vaccines and treatments. It also includes $14 billion for VA medical services.

Additionally, on April 3, 2020, President Trump announced he will be issuing an executive order to provide $100 billion to reimburse hospitals for the cost of treating uninsured COVID-19 patients. Under this order, healthcare providers will be reimbursed for the cost of treating uninsured Americans suffering from COVID-19 at current Medicare rates.

     Conclusion

Your congressional delegation is battling this pandemic on multiple fronts. We are working to stabilize the global energy markets, bring home Alaskans stranded overseas and, importantly, bring as many resources to Alaskans, families, workers, small businesses, communities, health care professionals, and tribes as possible.I am in constant communication with the Governor and his team, assisting the State of Alaska’s work with the federal government on the critical tasks of acquiring necessary supplies, and removing roadblocks posed by burdensome regulations. In addition, another crucial task is ensuring the CARES Act is implemented correctly and that these massive federal resources actually reach Alaskans who are struggling to make ends meet. There will be bureaucratic frustrations and snafus during this process so please reach out to my office for help. Finally, I am working closely with state and local governments, elected officials, and community leaders, and I stand ready to run interference with the federal government to remove roadblocks for you.

I hope you and your family are staying healthy. I want to reiterate the importance of following the CDC guidelines – and those set forth by our federal and state medical experts, like Dr. Anthony Fauci, Dr. Deborah Birx, and Alaska’s Chief Medical Officer, Dr. Anne Zink – to keep our families, friends, and fellow Alaskans safe. We are resilient and self-sufficient. And we will emerge stronger and more resilient from this crisis. For up-to-date information directly from me and my team, please refer to our website at: www.sullivan.senate.gov.

If you have any more questions or concerns, please feel free to contact me or my staff. My office can be reached at 202-224-3004, or online at the link above.In this time of crisis, it’s important for me as your Senator to provide Alaskans with an in-depth account of what your federal government is doing to help you get through the ongoing COVID-19 global pandemic. I am committed to providing you with the most recent information about the virus and am continually updating my website at https://www.sullivan.senate.gov/coronavirus with useful information and links related to the programs created by Congress to respond to this pandemic.

     I.     Introduction

I want to begin by recognizing how difficult this has been for all Alaskans. The COVID-19 virus is an evolving pandemic, spreading worldwide, severely disrupting life across America and our state. Alaskans are worried not only about their personal health and the impacts on our health systems, but also the short- and long-term economic impacts on working families, jobs, and small businesses across the state.

This pandemic is, without a doubt, one of the greatest crises this country has confronted in living memory. We are facing an unprecedented challenge as a nation – much like a natural disaster or even a war. We are fighting this battle on many fronts, and everyone has a role to play, particularly the federal government.

Your congressional delegation is working closely with the Governor and his team, other elected officials in Alaska, our tribes, and the executive branch of the federal government. One team, one fight, as we say in the Marine Corps.

The Senate is also very much focused on legislation to help Americans get through these unprecedented challenges. This letter lays out the different pieces of legislation passed by Congress and signed into law during the month of March: Phase 1 – The Coronavirus Preparedness & Response Supplemental Appropriations Act; Phase 2 – The Families First Coronavirus Response Act; and Phase 3 – The Coronavirus Aid, Relief, and Economic Security (CARES) Act. This letter highlights the details of the CARES Act, which provides approximately $2 trillion in relief to American families, individuals, small businesses, states, tribes, hospitals, community health centers, and frontline medical professionals. In each section, I include links for more information on specific elements of this legislation.

This is a general information letter primarily focused on the CARES Act. If you have specific casework-related issues that relate to you individually, your small business, or your unemployment benefits that are not addressed in this letter, please reach out directly to my office at (907) 271-5915 or https://www.sullivan.senate.gov/contact/email and we will work with you directly.

A.     Coronavirus Preparedness & Response Supplemental Appropriations Act

Passed in early March, the first phase of Congress’ legislative response was the Coronavirus Preparedness & Response Supplemental Appropriations Act. This bill included a total of $8.3 billion to help prevent, prepare for, and respond to COVID-19. This legislation strengthened the federal response to the coronavirus outbreak and allowed for necessary precautions, prevention, and treatment at the local, state, national, and international level.

This legislation provided $2.2 billion to the Centers for Disease Control and Prevention (CDC) to support state and local governments. This includes $1 billion for state and local preparedness and response, half of which went to states, cities, and tribes, including millions of dollars to the State of Alaska. Included in this section is a set-aside of at least $40 million for tribes, tribal organizations, and tribal health service providers that also significantly benefits our state.

Additionally, the Coronavirus Preparedness and Response Supplemental Appropriations Actincludes $3.1 billion for procurement of medical supplies to supplement the Strategic National Stockpile and to support federal and state response efforts; research and development of vaccines, therapeutics, and diagnostics; and hospital and health system preparedness. An additional $300 million is made available for the purchase of vaccines, therapeutics, and diagnostics; and $100 million for community health centers, of which we have many in Alaska.

Finally, this bill confronts the global pandemic by providing $300 million for the CDC’s Infectious Diseases Rapid Response Fund, which is critical to the health and security of the United States by confronting the coronavirus on a global level. It also provides the Department of State and United States Agency for International Development (USAID) with $1.25 billion to address the global pandemic.

For more information, see this link for a section-by-section breakdown: https://www.appropriations.senate.gov/imo/media/doc/Coronavirus%20Emergency%20Supplemental%20Summary.pdf

B.     Families First Coronavirus Response Act

Phase 2 of congressional action was the passage of the Families First Coronavirus Response Act, which provided $105 billion to bolster the federal government’s response to the COVID-19 pandemic. This bill addresses the severe health and economic impacts of the outbreak by: ensuring that testing is free for Americans; paid sick leave as well as family and medical leave; enhancing unemployment insurance to help workers; and ensuring that students, seniors, and low-income households can continue to access nutrition assistance.

Specifically, the Families First Coronavirus Response Act:

Requires insurers to cover coronavirus tests and related services, such as provider visits for testing, without cost-sharing or prior authorization requirements. The cost-sharing prohibition also applies to Medicaid, Medicare, TRICARE, veterans’ health programs, the Indian Health Service, and coverage provided to federal civilian employees. It also provides $1 billion to allow the National Disaster Medical System to reimburse provider costs associated with testing uninsured individuals.
Streamlines regulations regarding the manufacturing of personal respiratory protective devices, such as N95 masks.
Provides $500 million in emergency funding for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program, as well as $400 million for the Commodity Assistance Program for the Emergency Food Assistance Program (TEFAP), which often funds food banks and other non-profits delivering nutrition assistance.
Reduces hurdles to accessing Supplemental Nutrition Assistance Programs (SNAP) to provide additional aid to households in need.
Creates temporary, emergency paid sick leave for individuals who become ill with COVID-19 or are seeking a diagnosis. The legislation creates a temporary paid family leave program for individuals with a minor child in the event of the closure of the child’s school or place of care. Expenses from impacted employers are covered fully by the federal government through a refundable payroll tax credit.
Provides $250 million for Health and Human Services (HHS) Department programs that aid elderly Americans, divided as follows:
$160 million for home-delivered nutrition services.
$80 million for congregate nutrition services that provide food in group settings, such as adult day care centers and meal sites.
$10 million for nutrition services for American Indians.
Provides $64 million to the Indian Health Service for items and services related to COVID-19. Additionally, all states, including Alaska, are eligible for a 6.2% increase in their federal medical assistance percentages (FMAP) for Medicaid. For Alaska, this means an increase in over $60 million for Medicaid. States will receive a 100% FMAP to cover the cost of tests for uninsured people through their Medicaid programs.
For a detailed breakdown, please follow this link: https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Families%20First%.

C.     Coronavirus Aid, Relief, and Economic Security (CARES) Act

Phase 3 of congressional action was the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is focused on 4 key areas:

Putting cash directly in the hands of struggling families in Alaska and throughout the country;
Delivering rapid relief to small businesses that are being crushed by this pandemic and having to lay off their workers;
Stabilizing key sectors of the economy experiencing significant stress in order to avoid massive layoffs that are starting to happen in America; and
Sending a surge of new resources to states, tribes, medical professionals, hospitals, and community health centers who are on the frontlines in battling this pandemic.
I would like to provide more details on these areas of the CARES Act.

      II.     Direct Assistance to Alaskan Families

      A.     Individual Checks to Alaskan Families

The CARES Act provides a check to taxpayers who need it most by providing $1,200 for individuals ($2,400 for couples), plus $500 for each child. These benefits are phased-out beginning at $75,000 for individuals, $112,500 for heads of household, and $150,000 for joint filers. The amount is completely phased-out for incomes exceeding $99,000, $146,500, and $198,000 respectively. The Tax Policy Center estimates that 90% of Americans will receive some benefit. For more information about this program, please see the Senate Finance Committee’s FAQ:  https://www.sullivan.senate.gov/imo/media/doc/SFC%20Recovery%20Check%20FAQ.pdf.

The vast majority of Americans and Alaskans will receive this benefit automatically if they have filed a tax return for 2018, 2019, or if they receive Social Security benefits. The benefit will be directly deposited into the bank account associated with the tax filing or Social Security payment. If an individual does not receive direct deposits for tax refunds or Social Security then a physical check will be sent to their address. There is also no minimum income requirement; if you did not file a 2018 or 2019 tax return because you did not have income, we encourage you to file in order to make receipt of your check as easy as possible. If this applies to you, please file at this address: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. The Treasury Department is anticipating that these deposits and checks will be distributed as early as mid-April. For more information about this program, please go to the Internal Revenue Service’s webpage at: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments.

B.     Tax Relief for Individuals 

The Internal Revenue Service (IRS) and the Administration recently deferred federal income taxes for 90 days to July 15, 2020 – with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income. We still encourage Alaskans to file if they will be receiving a refund check. More information from the IRS: https://www.irs.gov/coronavirus.

C.     Student Loan Relief

The CARES Act defers payment of all student loans – principal and interest – for six months. With the prevalence of student loan debt in this country, this deferment will provide major relief to students and graduates who are seeking to enter the workforce. More information from the U.S. Department of Education: https://studentaid.gov/announcements-events/coronavirus.

D.     Expanded Unemployment Insurance

The CARES Act also provides for $250 billion in additional unemployment insurance to be delivered through state unemployment offices. It expands benefits to those who are unable to work due to the coronavirus and related government responses – whether they have the illness, are caring for family who has it, or they cannot reach their job due to quarantine measures. Importantly, it also expands benefits to those who are traditionally not eligible, such as the self-employed, those with limited work history, and independent contractors, including our fishermen. It provides a total of 39 weeks of unemployment (13 weeks more than most state laws) and provides for four months of significantly increased weekly benefits ($600 above current state law) for which the state is 100% reimbursed by the federal government. The Senate Finance Committee has also provided an FAQ for this program: https://www.finance.senate.gov/chairmans-news/cares-act-unemployment-insurance-faq.

These unemployment insurance benefits, while being funded by the federal government, will be distributed through the State of Alaska’s unemployment insurance program. To file and apply, please go to: https://labor.alaska.gov/unemployment/. 

     III.     Rapid Relief for Alaska’s Small Businesses

     A.     The Paycheck Protection Program (PPP)

This provision is the economic heart of the CARES Act. The goal of this program is to provide much-needed relief to our small business sector – the engine of Alaska’s economy – so that these businesses can navigate this trying time and keep their employees on the payroll. Keeping the employer/employee relationship is crucial and one of the key elements of this economic relief package that should allow our economy to bounce back faster once the virus threat has passed.

After the Great Recession of 2008 and 2009, one of the reasons the economic recovery took so long was that so many Americans were laid off and out of the workforce for extended periods of time. The PPP includes $350 billion in low-interest loans, implemented through Federal Deposit Insurance Corporation (FDIC)-insured local Alaska banks and credit unions. It is designed to allow small businesses to stay afloat and to keep people employed throughout the crisis. These loans have a maximum of $10 million, are 100% federally guaranteed, and are forgivable for the 8-week period after origination to the extent they are used for certain qualified expenses – most importantly payroll – along with other fixed expenses. Essentially, these loans morph into grants if these businesses keep their employees employed.

The forgiveness amount must be at least 75% payroll expenses, while 25% may be spent on the other qualified expenses such as mortgage interest, rent, and utilities. The qualified expenses were expanded slightly to include “interest payments on debt obligation that were incurred before February 15, 2020.” For example, this should cover fishing vessels if mortgage interest does not. However, a maximum of 25% of the forgiveness amount can be directed toward these other purposes.

For sole proprietorships or independent contractors, you must submit documentation to establish your eligibility such as payroll, 1099s, income/expenses from the proprietorship, or even “supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.” Independent contractors are not included in an employer’s loan calculations because they can apply for the PPP themselves.

The calculation of the loan amount for each borrower is equal to 2.5 times the average monthly wages from the previous year subject to the $10 million cap. Other qualified forgivable expenses include family or sick leave, health care benefit payments, retirement payments, mortgage interest, rent, and utilities. The amount forgiven will be reduced proportionally by any reductions in an employer’s payroll during the 8-week forgiveness period, in order to provide the maximum incentive for businesses to retain their workers. Importantly, for those small businesses that have unfortunately already been forced to lay off workers, the CARES Act allows them until June 30 for the borrower to return to February 15 payroll levels without a forgiveness penalty.

At the end of the 8-week forgiveness period, the borrower will provide to the lender documentation that verifies their qualified forgivable expense payments. The lender then reports their expected loan forgiveness amount for a loan or pool of loans to the U.S. Small Business Administration (SBA), and the SBA will purchase that amount of the loan from the lender. The forgiven amount is tax free – no gift tax penalty applies. Lenders will not be subject to enforcement action or penalties by the SBA relating to loan forgiveness for eligible uses. This helps ensure that lenders will originate loans without liability concerns. 

For more information on assistance to small business owners, please visit the following: 

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp 
https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
To ensure the money is distributed more efficiently and quickly, with minimal government bureaucracy, the program makes the loans available through FDIC-insured Alaska banks and credit unions. These lenders are given delegated authority to quickly determine borrower eligibility, which is based on whether or not the business was operational on February 15 and had employees, or independent contractors on the payroll. Ability to repay is irrelevant.

On April 2, the Treasury and SBA released an interim final rule that outlines the key provisions of SBA’s implementation of the PPP and requested public comment. The updated terms are:

1% interest rate cap (lenders also receive fee compensation from the government)
2-year max loan term
No collateral or personal guarantees
No borrower or lender fees
Additionally, the SBA created an application on the SBA website, at this link: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp. Small businesses and sole proprietorships could apply starting April 3, and independent contractors and the self-employed could apply starting April 10.

Eligible small businesses for the PPP benefit are those with less than 500 employees or otherwise considered a “small business concern” according to the SBA’s website here: https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.

There are several notable small-business size standards for Alaska that will qualify:

Scheduled Passenger Air Carriers: 1,500 employees
Unscheduled Charter Air Carriers: 1,500 employees
Crude Petroleum Extraction: 1,250 employees
Natural Gas Extraction: 1,250 employees
Pipeline Transportation of Crude: 1,500 employees
Pipeline Transportation of Natural Gas: 1,500 employees
Gold Mining: 1,500 employees
Eligibility is also expanded to include the self-employed, sole-proprietors, certain nonprofits, and tribally-owned businesses, and Alaska Native regional and village corporations.

One frequent criticism about the PPP is that it doesn’t do enough to aid seasonal small businesses that typically hire many employees during the summer tourist season, but do not have many employees now. This is a legitimate concern that we are trying to rectify either through executive action or legislation.

      B.     Expedited Economic Injury Disaster Loans (EIDL)

On March 21, Alaska was approved for SBA’s Economic Injury Disaster Loans (EIDLs), which provide low-interest loans to small businesses suffering economic injury as a result of the coronavirus. These loans are issued at a maximum of $2 million and can be used to pay fixed debts, payroll, accounts payable, and other normal operating expenses. The CARES Act expands this EIDL program with an additional $10 billion in appropriations, and by making sole-proprietors, independent contractors, cooperatives, and tribally-owned businesses eligible.

Many Alaska businesses are already applying for these loans and are in dire need of working capital quickly. Under the CARES Act, an eligible entity that has applied for an EIDL loan can request an advance of up to $10,000, which the SBA is trying to distribute as quickly as possible. This advance does not have to be repaid, even if the borrower is denied for the EIDL. This is essentially a small, one-time grant to eligible small businesses. Importantly, an EIDL may also be refinanced into the forgivable PPP once a borrower is approved, and the advance would be deducted from the amount forgiven.

This program is already inundated with applications; and while the SBA is working to improve capacity, they have been considering different methods to stretch the current available funding to meet demand. In order to prevent reduced benefits under this program, Congress will need to look at increasing appropriations.

For more information on the EIDL and PPP programs, please see the SBA’s website here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

C.     Income Tax Relief

Small businesses also received tax relief from the Administration’s decision to defer federal income taxes for 90 days, with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31 through December 31 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

E.     Fishermen

To illustrate the benefits under the CARES Act for small businesses in Alaska, I will focus on our fishermen, the ultimate small businessmen and women in Alaska.

Under the CARES Act, the self-employed, including our fishermen, qualify under the definition of a small business, which makes them eligible for the expanded programs I mentioned. That means they can take advantage of the PPP as well as the SBA’s Economic Injury Disaster Loans (EIDL). They are also eligible for the expanded unemployment insurance described in more detail above.

I have also been working with federal agencies on common-sense regulatory relief; for example, the National Marine Fisheries Service recently announced a temporary waiver for on-board fishery observer coverage for Alaska’s small boat fleet. Many of these vessels have very tight quarters and this decision will reduce the number of individuals travelling from outside to our small coastal communities.

Finally, the CARES Act appropriates $300 million in direct assistance for commercial, charter, and subsistence fishermen, processors, fishery dependent businesses, and coastal communities. This assistance is structured similarly to fishery disaster payments, but the provision is specifically drafted to speed up the delivery of the funds by allowing the money to be awarded on a rolling basis, even while a season is still underway, and forgoing the usual requirement for the Governor to declare a disaster. The Department of Commerce is quickly developing this program and will soon provide information on how to apply for this assistance, which has already been appropriated.

F.     Nonprofits

Certain nonprofits such as 501(c)(3) and 501(c)(19) veteran organizations with less than 500 employees are eligible for the PPP. However, they are subject to SBA’s affiliation rules, meaning in many cases, a large parent organization will be disqualifying. More information can be found at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

The CARES Act specifies that larger nonprofits be included in the mid-sized business Federal Reserve lending facility for entities with between 500 and 10,000 employees, which is described in more detail below. Nonprofit employees are also eligible for the expanded federal unemployment benefits.

To encourage continued charitable giving to nonprofits, the CARES Act:

Allows taxpayers who take the standard deduction and do not itemize to take a charitable deduction up to $300;
Suspends the limit for charitable deductions for taxpayers who do itemize; and
Increases the corporate limitation on charitable giving to 25% of taxable income.
Appropriations are included for a variety of programs important to nonprofits, such as $150 million for the National Endowment for the Arts and the National Endowment for the Humanities; $50 million for museums and libraries; $45 million for domestic violence shelters; $2 million for the National Domestic Violence Hotline; and $25 million for runaway and homeless youth programs.

     IV.     Stabilizing Key Sectors of the Economy

This section of the CARES Act provides $500 billion to the U.S. Treasury Exchange Stabilization Fund for direct loans from Treasury to specific sectors of the economy. It also provides loans, loan guarantees, and other investments through Federal Reserve lending facilities to other large and mid-sized businesses, as well as state and local governments.

     A.     Direct Loans from the U.S. Treasury

This section includes up to $25 billion in direct loans from the U.S. Treasury for passenger air carriers, which includes small Part 135 carriers as we have in Alaska. Additionally, it includes up to $4 billion for cargo air carriers and up to $17 billion for “businesses critical to maintaining national security.” For more information, please visit the Treasury’s website: https://home.treasury.gov/cares.

The rate of these loans will be determined by the Secretary of the Treasury. Both collateralized and uncollateralized loans are available, and the duration of the loan or loan guarantee is no longer than 5 years. Recipients of the loans must maintain employee levels as of March 24, 2020, to the extent practicable and not reduce employee levels by more than 10% until September 30, 2020. These loans cannot be forgiven.

Aviation loans require a warrant, equity interest, or a senior debt instrument issued by the eligible business to the Secretary of the Treasury. The Secretary of Transportation is authorized to require, to the extent practicable, that air carriers receiving financial support continue services to any point served by that carrier before March 1, 2020. Further, the Secretary is required to take into consideration the air transportation needs of small and remote communities, and health care and pharmaceutical supply chain concerns. This is something I pushed hard for as we wrote the CARES Act in the Senate.

The CARES Act also provides grants for air carriers for financial assistance for the exclusive use of employee wages, salaries, and benefits in amounts of up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for airline contractors. Alaska’s small Part 135 carriers are eligible. Grants would be distributed based on salaries and benefits of the carrier between April 1 and September 30, 2019. Please see the Treasury’s website at: https://home.treasury.gov/cares for more information.

The Secretary of the Treasury shall make initial payments to carriers within 10 days of enactment, with subsequent payments to meet the verified payment history data, as submitted. Grant recipients must agree to not cut pay or benefits, or issue involuntary furloughs, until after September 30, 2020. The Secretary of the Treasury may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by recipients, which, at the discretion of the Secretary, provide appropriate compensation to the federal government for the provision of the financial assistance.

The CARES Act also authorizes the Secretary to require, to the extent practicable, that air carriers receiving grant support continue services to any point served by that carrier before March 1, 2020. It also requires the Secretary to take into consideration the air transportation needs of small and remote communities.

     B.     Federal Reserve Lending Facilities for Other Businesses, States, and Municipalities

The remaining $454 billion goes to fund the Federal Reserve’s authority through special lending facilities that will be available to eligible businesses, states, and municipalities. These lending facilities can purchase interests directly, in the secondary market, or make direct loans in order to provide much-needed liquidity and stabilization to these markets. They must be “broad based,” meaning “designed for the purpose of providing liquidity to an identifiable market or sector of the financial system” and not designed to assist individual failing entities (Federal Reserve rules clarify that a lending facility where more than five entities are eligible qualifies as “broad based”). A participant must not be able to secure adequate credit elsewhere, and a participant must not be insolvent. For more information, please visit Treasury’s website: https://home.treasury.gov/cares.

Because the Federal Reserve expects that borrowers will pay them back, the Federal Reserve can lend and invest more than just the dollar amount. The Treasury estimates that this $454 billion infusion can be leveraged into over $4 trillion of liquidity into the U.S. economy. Much of the Federal Reserve’s activity under this authority will require, among other things, that recipients limit executive compensation and limit stock repurchases. A congressionally appointed oversight committee and a designated inspector general will monitor these lending facilities. Additionally, to prevent conflicts of interest, companies may not receive relief under this section if certain members of the administration, members of Congress, or their families own more than 20% of the company.

The CARES Act requires one of these lending facilities to be targeted specifically at nonprofit organizations and businesses with between 500 and 10,000 employees, subject to additional loan criteria and obligations on the recipient, such as:

Maintaining 90% of their workforce through the fiscal year;
Not outsourcing any jobs for 2 years after repayment;
Will receive interest rate of no more than 2% per annum; and 
For at least 6 months, no interest or principal payments are required.
This section of the CARES Act has been criticized by some for being a “bailout” or “slush fund” for businesses with over 500 employees. I believe such arguments mischaracterize the intent of this legislation. This is not like the Troubled Asset Relief Program (TARP) bills and other spending by the Congress in 2008 and 2009 during the Great Recession. That was more of a classic bailout resulting from Wall Street firms’ reckless and irresponsible business and lending practices that threatened the financial stability and main street economy of the Unites States, and therefore required hundreds of billions of dollars to stabilize these firms. What is happening now is a fundamentally different dynamic. The current situation is more like a natural disaster or a war and is causing massive dislocation in the U.S. economy and massive job losses in sectors of the U.S. economy that, until just a few months ago, were very strong. For example, the airline industry didn’t do anything wrong in this crisis, but now it has seen a 90% drop in bookings and revenue. I believe the federal government has an important role to play in helping avoid massive layoffs in these sectors of the economy as we get through this pandemic.

     C.     Income Tax Relief:

Corporations and other larger businesses benefit from the IRS and the Administration’s recent deferral of federal income taxes for 90 days—with no interest or penalties. This includes a deferral for individual, corporate, partnership, S-corp, and self-employed income.

     D.     Additional Tax Relief Opportunities

There are additional tax relief opportunities for businesses of various sizes made available by the CARES Act. First, any business that pays payroll taxes can defer them until the end of the year, with half of the amount being due in 2021 and 2022 respectively. However, an entity cannot elect to do this if they participate in the PPP. There are no penalties and interest assessed for deferring payroll taxes for the 2020 tax year.

Second, businesses and nonprofits can elect to take an employee retention tax credit if they are fully or partially suspended due to a government order related to coronavirus, or if they experience a 50% decline in gross receipts from March 31, 2020 through December 31, 2020 versus the previous year. This refundable tax credit is equal to 50% of the employer’s payroll taxes for qualified wages up to $10,000 per employee. Again, an eligible entity cannot elect to receive this credit if they participate in PPP.

Third, the CARES Act relaxes the limitations on the ability of companies to write off net operating losses (NOLs). NOLs occur when a company’s business deductions are greater than its taxable income. Specifically, the legislation allows NOLs from 2018, 2019, and 2020 to be carried back 5 years by amending previous tax returns, and to fully offset income on those previous returns. Pass-through businesses and sole-proprietorships can also take advantage of this NOL look-back.

Fourth, the CARES Act provides a technical correction to the Tax Cuts and Jobs Act of 2017 (TCJA), which allows businesses, including hospitals, to immediately write-off the costs associated with qualified improvement property (QIP) as was originally intended, rather than having to depreciate those assets over a 39-year life of the property. QIP is improvements to the interior of a building.

Finally, the CARES Act also increases the business interest expense deduction from 30% to 50% for 2019 and 2020, which provides liquidity and encourages further business investment.

     V.     Surge of Funding for States, Tribes, Hospitals, Community Health Centers, and Medical Professionals

     A.     A Surge in Funding for States, Cities, and Municipalities

The coronavirus has dramatically impacted the financial wherewithal of our state and local communities. A major portion of the CARES Act provides $150 billion in funding for these entities. Generally, this is distributed according to per capita population; however, a minimum payment of $1.25 billion is required per state.

The State of Alaska will receive slightly more than the minimum after our population calculation is taken into account. States have a great deal of discretion on how to spend these funds, so long as the funding is used for “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19)” that “were not accounted for in the budget most recently approved as of the date of enactment of this section for the State or government” and were incurred during 2020. 

     B.     $8 Billion Stabilization Fund for Tribes

The CARES Act includes an $8 billion fund available to tribes throughout the United States to assist in their response to the COVID-19 crisis. There is also $1.03 billion for the Indian Health Services, $450 million of which goes directly to tribal health entities. There is an additional $1.5 billion for the CDC’s state and local preparedness grants, which includes a provision that allocates no less than $125 million of these funds to tribes, tribal organizations, urban Indian Health organizations, or health services provided to tribes. The Departments of Interior and Treasury are devising a formula on the most equitable way in which to distribute these tribal funds. Your congressional delegation fought hard for this tribal provision to be included in the CARES Act, and we are thankful that Department of Interior and our Alaska Native people are there as a resource for Treasury. For more information, please see this page provided by the Senate Finance Committee: https://www.finance.senate.gov/chairmans-news/rural-resources-in-the-coronavirus-aid-relief-and-economic-security-cares-act.

     C.     A Massive Surge of Resources for Hospitals, Community Health Centers, and Medical Professionals on the Front Lines

The federal government has a responsibility to fund the medical equipment and research needed to combat this virus. The CARES Act provides urgent funding for emergency medical supplies to hospitals, additional ventilators and protective equipment, and supports an $11 billion “Manhattan Project” effort toward discovering new treatments and even a vaccine. 

The CARES Act provides $150 billion to ensure health care providers and hospitals continue to receive the support they need for COVID-19-related expenses and lost revenue, as well as $1.32 billion in additional funding for community health centers. The CARES Act expands access to telehealth services provided by community health centers and makes changes to Medicare to bolster our health system. Additionally, it addresses liability issues to assist with supply shortages for critical equipment, such as medical masks, and encourages the development and testing of new vaccines and treatments. It also includes $14 billion for VA medical services.

Additionally, on April 3, 2020, President Trump announced he will be issuing an executive order to provide $100 billion to reimburse hospitals for the cost of treating uninsured COVID-19 patients. Under this order, healthcare providers will be reimbursed for the cost of treating uninsured Americans suffering from COVID-19 at current Medicare rates.

     ConclusionSenator Dan Sullivan

Your congressional delegation is battling this pandemic on multiple fronts. We are working to stabilize the global energy markets, bring home Alaskans stranded overseas and, importantly, bring as many resources to Alaskans, families, workers, small businesses, communities, health care professionals, and tribes as possible.I am in constant communication with the Governor and his team, assisting the State of Alaska’s work with the federal government on the critical tasks of acquiring necessary supplies, and removing roadblocks posed by burdensome regulations. In addition, another crucial task is ensuring the CARES Act is implemented correctly and that these massive federal resources actually reach Alaskans who are struggling to make ends meet. There will be bureaucratic frustrations and snafus during this process so please reach out to my office for help. Finally, I am working closely with state and local governments, elected officials, and community leaders, and I stand ready to run interference with the federal government to remove roadblocks for you.

I hope you and your family are staying healthy. I want to reiterate the importance of following the CDC guidelines – and those set forth by our federal and state medical experts, like Dr. Anthony Fauci, Dr. Deborah Birx, and Alaska’s Chief Medical Officer, Dr. Anne Zink – to keep our families, friends, and fellow Alaskans safe. We are resilient and self-sufficient. And we will emerge stronger and more resilient from this crisis. For up-to-date information directly from me and my team, please refer to our website at: www.sullivan.senate.gov.

If you have any more questions or concerns, please feel free to contact me or my staff. My office can be reached at 202-224-3004, or online at the link above.

Sincerely,

 
Dan Sullivan 
United States Senator