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By Thomas J. Salerno STINSON LLP

With a change in administration likely within the next two months, and Congress scrambling to agree on another rescue package for millions of Americans facing yet more pandemic related economic hardship as many of the government subsidies and stimulus plans are set to expire the end of December, Senators Rubio and Collins have revamped S. 4321 initially introduced on July 27, 2020 ("Initial Proposed PPP III Legislation"), which would (finally) make the Payroll Protection Program loans ("PPP Loans") available to debtors in bankruptcy. The PPP expired in early August 2020, and S. 4321 became bogged down in neverending partisan politics, and, ultimately, put on the back burner by the Götterdämmerung that was the presidential election. The Initial Proposed PPP III Legislation still had issues, but was, at least, a step in the right direction.

On October 1, 2020, Senators Rubio and Collins apparently reintroduced a different version of the Initial Proposed PPP III Legislation, S. 4773 (the "Amended PPP III Legislation"). One of the first lessons all lawyers learn (some the hard way) is that the devil is always in the details, and you gotta read the fine print! Click here to read the full analysis. 

There is widespread agreement that the $1.8-trillion economic recovery package that went into effect in March — the CARES Act — averted economic disaster after the coronavirus pandemic began, according to a Bloomberg commentary. With each passing month, the evidence mounts that the CARES Act performed better than even its strongest advocates thought it would. Perversely, its success is undermining the perceived need for Congress to provide additional support, according to the commentary. There are signs that the cushion is losing air. The pace of monthly job gains has slowed considerably since the spring. This fall, consumers pulled back on spending, and their confidence in the economy fell in November to a three-month low. The savings rate has fallen by 20 percentage points as households burn through their reserves. Lines at food banks are growing as nutritional insecurity worsens. If Congress does not pass another stimulus, then the first quarter of 2021 could easily see a shrinking economy and increasing unemployment. Deeper problems could take root. Millions of businesses could be wastefully lost. Labor demand could weaken over the medium term, keeping unemployment higher for longer. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The Small Business Administration has begun asking some Paycheck Protection Program borrowers to document why they needed the loans, drawing concern from advocacy and trade groups that say such disclosures weren’t required when the businesses applied for aid, the Wall Street Journal reported. The Loan Necessity questionnaire is aimed at borrowers that took loans of $2 million or more under PPP, the federal government’s main coronavirus-aid initiative for small businesses. It directs them to answer questions about business activity and liquidity. The form says the questions will help the SBA evaluate a certification borrowers made when they applied for aid. The certification stated that economic uncertainty made the loan request necessary to support business operations. But the loan application didn’t specify what the SBA meant by “economic uncertainty” or how borrowers would demonstrate their need, according to Mike Kennedy, general counsel at the Associated General Contractors of America, a trade group.

A slew of expiring emergency programs are setting up an economic “COVID cliff” come 2021, which could see millions of people lose unemployment insurance and get evictions, while a growing wave of small businesses close shop, The Hill reported. March's CARES Act set up myriad programs to give people economic relief in the earliest days of the COVID-19 pandemic, many of which are set to expire on Dec. 31. Unless a divided Congress can reach a deal to extend the programs, the country's economic suffering could skyrocket. Come New Years, one program that extended traditional unemployment benefits from the standard 26 weeks by another 13 weeks, and another program that made self-employed and gig economy workers eligible, will expire. At the same time, provisions meant to shore up tax benefits for low-income earners, such as the Earned Income Tax Credit and Child Credit, are scheduled to go up in smoke, potentially pulling money out of the paychecks of the poorest people who are still working. On top of it all, an evictions moratorium from the CDC is set to expire, teeing up a wave of evictions and homelessness. “We know that eviction filings have been able to continue during this period even with maraotira in place, so certainly the cases are there and ready to be processed and adjudicated,” said Samantha Batko, an expert on housing insecurity at the Urban Institute. The most recent data from the Census Household Pulse Survey, covering the last days of October and early November, painted a grim picture. Nearly a third of all households (32.9 percent) said they were behind on housing payments and rated the chances of eviction or foreclosure within two months as somewhat or very likely. Some 25.9 percent expected a household earner to lose employer income in the coming month, and 12 percent said they didn’t have enough to eat. An analysis by Stout found that absent a moratorium, as many as 6.4 million evictions filed in recent months could take effect on Jan. 1.

Bill Clinton, the 42nd President of the United States, said that the federal government likely needs to provide at least one more coronavirus relief package to help American workers and families still reeling from the pandemic, FoxBusiness.com reported. "We need at least one more, and perhaps two more, rounds of significant public assistance," Clinton said Wednesday during the ABI's virtual International Insolvency Forum. He cited it as one of the key priorities that the incoming Biden-Harris administration should address immediately, noting there are still more than 10 million Americans who are unemployed compared to February, before the crisis began. "In terms of employment and we have huge numbers of businesses that may or may not be able to come back," Clinton said. "And in that context, we have to prioritize what we're going to do and then we need to prioritize areas of growth." While the Federal Reserve has taken a range of extraordinary actions to support the economy, including slashing interest rates to near-zero during an emergency meeting in March, purchasing an unlimited amount of Treasurys and launching nine lending facilities to ensure that credit flows to businesses and Wall Street banks, the central bank "has done about all that it could," Clinton said. "Now, government investments are going to have to pick up a lot of the slack," he said. "And as the result of that, we actually are in one of those rare periods where supply-side economics can work, where you can deficit spend and actually get more return on it because interest rates are so low." Read more. 

In related news, Sen. Chuck Schumer (D-N.Y.) said that Senate Majority Leader Mitch McConnell (R-Ky.) has agreed to resume negotiations with Democrats over a potential new COVID-19 relief bill as cases continue to surge around the country, CNBC.com reported. “Last night, they’ve agreed to sit down and the staffs are going to sit down today or tomorrow to try to begin to see if we can get a real good Covid relief bill,” the minority leader said during a news conference yesterday. “So there’s been a little bit of a breakthrough in that McConnell’s folks are finally sitting down and talking to us.” Republican and Democratic congressional aides, however, told NBC News that Schumer might have oversold the development, as both sides begin negotiations on government funding to stave off a government shutdown on Dec. 11. Read more.

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) yesterday criticized new Treasury Department guidance about the tax treatment of expenses related to Paycheck Protection Program (PPP) loans, asking the department to revisit its approach, The Hill reported. "We encourage Treasury to reconsider its position on the deductibility of these expenses, and the timing of those deductions, to provide relief to the small businesses that need it most,” Grassley and Wyden said in a statement. The PPP is a coronavirus relief program under which small businesses received loans that can be forgiven if the proceeds are used to maintain payroll. The legislation that created the PPP includes a provision stating that the loan forgiveness is not considered taxable income. Under guidance Treasury and the IRS issued on Wednesday, if a business hasn't had its PPP loan forgiven at the end of the year but expects the loan to be forgiven in the future, the company cannot deduct expenses related to the loan, even if the business hasn't yet filed for forgiveness. The guidance follows a notice Treasury and the IRS issued in the spring stating that expenses associated with loan forgiveness under the PPP are not deductible.