Regulatory and Tax Updates
COVID-19 Stimulus Executive Order and Memoranda Summarized
- On August 8, 2020, President Trump issued an executive order and three memoranda that provide or extend COVID-19 relief to individuals and organizations.
- At this time, it is uncertain whether the executive order and three memoranda will be legally challenged. Stay tuned for more information.
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On August 8, 2020, President Trump issued an executive order and three memoranda to his Cabinet and executive agency heads that provide or extend COVID-19 relief to individuals and organizations. The three memoranda provide for supplemental unemployment payments, the deferral of collection of payroll taxes, and an extension of student loan payment deferments and reduction of interest rates for student loans. The executive order directs various Cabinet and executive agency heads to find means of limiting evictions and foreclosures.
At this time, the constitutionality of these actions has been questioned, and legal challenges may be instituted. A summary of each of the President’s actions is below.
Disaster relief/unemployment insurance benefits
The CARES Act provided $600 per week of federally funded unemployment compensation assistance to eligible unemployed individuals in addition to standard state unemployment benefits. That benefit expired July 31, 2020.
The disaster relief memorandum directs the Federal Emergency Management Agency (FEMA) to provide benefits from the Department of Homeland Security’s Disaster Relief Fund and directs states to use their Coronavirus Relief Fund allocation to provide financial relief to unemployed Americans affected by COVID-19, principally through an up to $400-per-week supplemental unemployment compensation benefit. 75% of the cost of the benefit shall come from those federal funds. State governments will be responsible for the remaining 25%, subject to an agreement between the federal government and the state with regard to the program and funding.
The disaster relief memorandum makes two significant changes in eligibility compared to the $600 supplemental benefit under the CARES Act.
- First, the memorandum limits eligibility to individuals who receive at least $100 per week in unemployment compensation assistance.
- Second, the memorandum requires the individual to certify that his or her lost wages are attributable to disruptions caused by COVID-19.
Payroll tax deferral
The payroll tax memorandum directs the Secretary of the Treasury to defer the withholding, deposit, and payment of the employee portion of social security tax (but not Medicare tax) on wages or compensation paid during the period from September 1, 2020 through December 31, 2020, if the employee’s wage or compensation payable during any biweekly payroll period is generally less than $4,000, calculated on a pre-tax basis, or the equivalent amount during other payroll periods. Amounts deferred will be without penalties, interest, additional amounts, or additions to tax. The payroll tax memorandum directs the Secretary of the Treasury to issue guidance to implement the memorandum and to also find ways to eliminate the deferred tax entirely.
It should be noted that the payroll tax memorandum provides only for the deferral of the employee portion of social security tax and, in the event the Secretary of Treasury does not eliminate the deferred tax entirely, an affected employee will ultimately be required to pay any remaining deferred tax. However, until further guidance is issued, it is unclear how an employee would pay the deferred tax following the end of the deferral period.
Student loan payment relief
The student loan memorandum directs the Secretary of Education to effectuate waivers of and modifications to the requirements and conditions of economic hardship deferments and to provide such deferments as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020. This memorandum further provides that student loan borrowers may continue to make payments if they wish to do so.
The housing executive order directs certain members of the Cabinet to consider, identify, review, and take action necessary to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency.
President Trump directs the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider whether any temporary halting of evictions for failure to pay rent are reasonably necessary to prevent further spread of COVID-19.
President Trump directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify Federal funds that could be used to provide temporary financial assistance to renters and homeowners who are struggling to make monthly payments as a result of financial hardships caused by COVID-19.
President Trump also directs the HUD Secretary to take action to promote the ability of renters and homeowners to avoid eviction or foreclosure, including providing Federal funds to landlords.
Finally, President Trump directs the Director of the Federal Housing Finance Agency, in consultation with the Secretary of the Treasury, to review existing authorities and resources that may be used to limit evictions.
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Regulations and rules continue to change rapidly. CLA is here to help guide you through the latest developments and how they could impact you.