The Paycheck Security Act, Sens. Warner, Sanders, Jones & Blumenthal

Summary

A summary of the Paycheck Security Act from Sens. Warner, Sanders, Jones & Blumenthal, which would use the Employee Retention Tax Credit (ERTC) to keep workers on payroll and help small businesses cover fixed operating costs over the next six months. It cites nearly 39 million unemployment filings and more than 20 million jobs lost in April. Businesses with at least a 15 percent drop in revenues compared to the same quarter in 2019 would get a refundable credit covering pay and benefits up to $90,000 per year for laid off and furloughed workers. Businesses with less than $45 million in 2019 gross receipts could get a credit of 5 percent of those receipts for fixed costs, and sole proprietors with less than $1 million an income credit of 30 percent, up to $75,000. Recipients must commit to conditions including capping CEO compensation at 50 times the median wage.

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The Paycheck Security Act
Sens. Warner, Sanders, Jones & Blumenthal

Since the COVID-19 pandemic began, nearly 39 million workers have filed for
unemployment1. More than 20 million people lost their jobs in the month of April
alone, the most in a single month on record2. An estimated 27 million people have
already lost their employer-provided health insurance coverage, and millions more
could lose coverage before this crisis is over3. The unemployment rate is likely close to
20 percent and could exceed the depths of the Great Depression in the coming
months.

The pandemic has also devastated small businesses and sole proprietors. A recent
study found that more than 100,000 small businesses have already closed permanently
as a result of the health and economic crisis4. A recent survey showed that 52 percent
of small businesses expect to go out of business within the next six months5. Allowing
millions of small and independent businesses to fail will have a devastating impact on
the economy and will make the road to recovery longer and harder.

Other countries have avoided the massive job losses and corresponding high
unemployment rates seen in the United States primarily because their governments
have adopted programs to keep workers on payroll and attached to their employers
until this crisis is over6. These programs not only provide greater certainty for the
worker, they also position the economy to recover more quickly once the crisis abates.

The Paycheck Security Act would help keep workers attached to their jobs by
leveraging the Employee Retention Tax Credit (ERTC) as the delivery mechanism to
secure the paychecks and benefits of workers throughout the country and provide
small businesses with the financial assistance they need to cover fixed operating costs
over the next six months.

1 “Unemployment Insurance Weekly Claims.” Bureau of Labor Statistics. May 21, 2020.
2 “The Employment Situation – April 2020.” Bureau of Labor Statistics. May 8, 2020.
3 Claxton, Gary; Damico, Anthony; Garfield, Rachel; and Levitt, Larry. “Eligibility for ACA Health Coverage Following

Job Loss.” Kaiser Family Foundation. May 13, 2020.
4 Long, Heather. “Small business used to define America’s economy. The pandemic could change that forever.”

Washington Post. May 12, 2020.
5 “Survey: COVID-19 Could Shutter Most Small Businesses.” Society for Human Resource Management. May 6, 2020.
6 Birnbaum, Michael. “Coronavirus hits European economies but governments help shield workers.” Washington Post.

April 30, 2020.

1
The ERTC is an existing mechanism that can be scaled to efficiently deliver timely
benefits to struggling workers and firms without the need for third party
intermediaries.

The bill provides businesses experiencing significant financial hardship as a result of
the virus with a refundable tax credit big enough to rehire and pay laid off and
furloughed workers up to $90,000 per year, including health care benefits. It will also
provide small and mid-sized businesses with the funds they need to pay for rent,
mortgages, utilities and other operating costs until they can reopen safely and sales
begin to recover.

In the midst of this unprecedented economic crisis we must take to take
unprecedented action to prevent a prolonged recession.

Who is eligible for this program?

• All businesses that have experienced at least a 15 percent drop in revenues
compared to the same quarter in 2019 will be eligible for a tax credit to cover
payroll for laid off and furloughed employees.

• Additionally, eligible businesses with less than $45 million in gross receipts in
2019 will also be eligible for a credit of 5 percent of 2019 gross receipts to pay
fixed operating costs such as rent, mortgages, utilities, and debt service.

• Sole proprietors with less than $1 million in gross receipts in 2019 will be
eligible for an income credit of 30 percent of 2019 gross receipts, up to
$75,000.

• This program will last for two consecutive quarters, ending in December 2020.

How will it secure worker paychecks?

• This legislation substantially expands the Employee Retention Tax Credit
established in the CARES Act to cover the wages, salaries and health care
benefits up to $90,000 annualized for workers who have been laid off or
furloughed.

2
What conditions apply to this program?

• Companies receiving funds through this program must commit to:
o Not buying back stock;
o Not paying out dividends;
o Protecting collective bargaining agreements;
o Staying neutral in union organizing efforts;
o Capping CEO compensation at 50 times the median wage of their
workforce.

Implementation

• The IRS will use the existing forms and mechanisms of the Employee
Retention Tax Credit established in the CARES Act to carry out this program.

• The IRS will be instructed to prioritize the applications of businesses with
fewer than 100 employees.

Oversight
• The Treasury Inspector General for Tax Administration (TIGTA) will oversee
this program.

• The TIGTA will disclose the names of the businesses that benefitted from this
program and how many workers received a paycheck as a result of it.

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Original: www.warner.senate.gov