Together with our colleague Teresa N. Taylor from the partner Washington office, we bring you an overview of the legal and tax measures implemented by the USA in the fight against the pandemic and its economic impact.
On March 19, 2020, the United States government issued a key CISA Directive. In the Directive, the government recommended measures to be taken by the federal states to prevent the spread of coronavirus. The directive also defined key infrastructure sectors whose workers should not be subject to most of the restrictions related to the COVID-19 pandemic.
Because American society is very sensitive to restrictions of citizens' rights (although it may seem proportional), most restrictions are issued at the local level, resp. at the level of the individual states of the federation. At the same time, a number of labor law measures have been taken to combat the effects of the coronavirus pandemic. In particular, the government sought to use these measures to protect employees and prevent their dismissal in this exceptional situation. Legislation in the USA is traditionally relatively less protective in relation to employees than in EU countries.
The US has significantly reduced international and domestic travel. First, President Trump announced a ban on entry into the United States from China in February, and in March, entry from other countries, including Mexico and Canada, was gradually restricted. At the same time, most states have introduced mandatory 14 days long quarantine for all citizens who have arrived from elsewhere within the United States.
Most states of the federation have ordered quarantine under their own jurisdiction. These restrictions began to loosen during May. Likewise, the closure of establishments and the conditions for their operation are always regulated at the level of individual states. In general, however, the restrictions do not apply to key workers as defined in the CISA Directive.
Because more than 20 million Americans lost their jobs as a result of the coronavirus pandemic and related measures, the government has set aside more than $ 2 trillion to support entrepreneurship under the Coronavirus Aid, Assistance and Economic Stability Act (CARES Act). This package aims, among other things, to secure employees' wages and protect jobs. Under it, small businesses with less than 501 employees that have been negatively affected by a pandemic can take a soft loan for 8 weeks. If the company does not dismiss any employee during this period and uses the borrowed funds exclusively to cover the salaries of its employees, the loan will be forgiven. Another measure under the CARES Act is operating loans, which the government wants to help small and medium-sized enterprises. Operating loans can be drawn up to $ 2 million.
Under US government legislation on coronavirus, small businesses must provide some employees with paid leave. Wages paid to these employees within the set limit will be returned to companies in the form of a tax rebate reimbursed by the government. The provision of paid leave takes place in various modes. One scheme instructs companies to pay wage compensation to employees affected by school closures, whether in the form of job losses or the need to care for a child in the household, for a period of 12 weeks. Wage compensation is paid at two-thirds of the wage (maximum two hundred dollars per day) up to a total of $ 10,000. The second regime obliges companies to give employees in the ordered quarantine or with symptoms of COVID-19 up to 80 hours of paid leave. These employees are entitled to full pay.
The government is trying to help households as part of the measures taken. The Department of Housing and Housing construction has declared a moratorium freezing the possibility of evicting families from their homes for non-payment for 60 days, if they have a mortgage insured by the Federal Housing Administration. Additional measures for entrepreneurs and families with mortgages have also been issued by individual states. In California, for example, there is an absolute ban on eviction from residential areas until the end of May. Similar measures have been taken in the area of leases - both commercial and non-commercial. As in other countries, it will be possible in some cases to invoke a pandemic as force majeure and the reason for the impossibility of fulfilling the lease.
In the area of taxation, the Internal Revenue Service (IRS) has allowed a 3-month deferral of the period for payment and filing of federal income tax returns, ie a deferral until July 15, 2020. The period for federal gift and intergenerational taxes have been deferrer to the same date.. At the same time, employers and self-employed persons were given the opportunity under the CARES Act to apply for delays with social security contributions and taxes on self-employment until 31 December 2021.
The article was prepared in collaboration with Teresa N. Taylor, a partner at the American law firm Butzel Long's Washington D.C. office. More at https://www.butzel.com/ or taylortn@butzel.com.
