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COVID-19: US Developments, Implementation and Oversight of CARES Act – May 21, 2020

The legislative process in the US Congress is beginning to take on a more familiar look as policymakers work to shape the next steps in the federal response to COVID-19 and the resulting economic crisis. The US House of Representatives will be back in session again next week, albeit with temporary proxy voting measures in place that allow some Members of Congress to cast votes without being physically present in the US Capitol.

Legislators on both sides of the aisle are publicly floating proposals, many of them bipartisan, in hopes they will gain the support of colleagues and become candidates for inclusion when the next coronavirus response package is eventually negotiated by Democratic and Republican leaders. Committee leaders are also leaning forward with their ideas for the next package, sensing an opportunity in the coming weeks to address national priorities that have long been stalled due to partisan gridlock.

The aforementioned movement is particularly evident this week in the area of infrastructure policy. Senate Majority Leader Mitch McConnell (R-KY) has discouraged his GOP colleagues from indulging President Donald Trump’s vision of helping to rescue the economy through enactment of a US$2 trillion national investment in transportation and infrastructure construction initiatives. House Speaker Nancy Pelosi (D-CA), who earlier this spring articulated ambitions similar to those of the president, conspicuously declined to include any major infrastructure components in House Democrats’ US$3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Yet the idea of seizing the moment and harnessing the pandemic crisis to “go big” on long-delayed national infrastructure objectives remains alive.

In the House, a bipartisan group of 135 Members of Congress – more than one-quarter of the chamber’s membership – sent a letter this week to Speaker Pelosi and House Minority Leader Kevin McCarthy (R-CA) urging that nearly US$50 billion be included in the next COVID-19 response measure. House Committee on Transportation & Infrastructure Chairman Peter DeFazio (D-OR) has been gearing up for early June committee action on a significant infrastructure overhaul and reauthorization package. The White House last week identified infrastructure reform as one of the president’s priorities for a future economic stabilization and recovery bill. And CNN reports several Senate Republican committee leaders are publicly pressing Leader McConnell to put aside his misgivings and give Congress a chance to work in a bipartisan way to support economic recovery by passing a long-awaited large-scale national infrastructure bill.

Congress also appears to be moving quickly toward potential passage of targeted legislation that would change the March 27 CARES Act’s Paycheck Protection Program (PPP). Speaker Pelosi has announced the House will vote next week on a bipartisan bill by Representatives Dean Phillips (D-MN) and Chip Roy (R-TX) that would provide greater flexibility in the program so that PPP loans can be more effectively accessed by restaurants, hotels and enterprises in the hospitality industry. Senator Marco Rubio (R-FL), the chairman of the Senate Committee on Small Business, has called for similar changes. This strong bipartisan support has raised the possibility that a targeted PPP fix could be quickly passed as a stand-alone bill and signed into law by President Trump in the coming days, while Congress continues partisan deliberations over the composition of another major COVID-19 omnibus bill. It could also establish a template for focused action on other pandemic-related consensus priorities as the two parties remain far apart on their broad visions for future coronavirus response legislation.

Tax and Economic Development Updates

The Federal Reserve yesterday released the minutes from its April 28-29 Federal Open Market Committee meeting. A review of the minutes shows that Federal Reserve officials are concerned about the “substantial likelihood” of additional COVID-19 outbreaks in the United States, which “could lead to a protracted period of severely reduced economic activity.” Likely stemming from these concerns, the Federal Reserve is continuing to play a leading role in implementing various economic stimulus measures. In fact, just yesterday, the New York Federal Reserve Bank announced that its Term Asset-Backed Securities Loan Facility (TALF) will be operational and begin receiving loan applications on June 17, with the first loans expected to close on June 25.

Another key program receiving attention from policymakers – including from members of the Congressional Oversight Commission – is the Main Street Lending Program (MSLP). While Federal Reserve Chairman Jay Powell and Treasury Secretary Steven Mnuchin have suggested that the MSLP will be operational by June, a growing number of lawmakers and other key stakeholders are expressing concern that the 13(3) facility is not already up and running. There are also concerns about the MSLP requirement that borrowers make “commercially reasonable” efforts to not lay off employees. According to Representative French Hill (R-AR), who serves on the Congressional Oversight Commission and is seeking clarity as to the meaning of “commercially reasonable,” “[t]he principal mission of the Main Street Lending Program is to bridge companies cash-flow needs across this coronavirus impact on the economy and keep as many Americans employed as possible.”

As reported yesterday, the House is expected as early as next week to vote on and pass bipartisan legislation to make a number of improvements to the PPP. Specifically, it appears that the House will consider H.R. 6886, the Paycheck Protection Flexibility Act, which is the result of efforts by Representatives Phillips and Roy to allow businesses receiving forgivable PPP loans additional flexibility in using their loan proceeds. According to sources referencing a recent Dear Colleague, the House is focused on making changes to the PPP that would:

  • Allow forgiveness for expenses beyond the 8-week covered period;

  • Eliminate restrictions limiting non-payroll expenses to 25% of loan proceeds;

  • Eliminate restrictions that limits loan terms to 2 years;

  • Ensure full access to payroll tax deferment for businesses that take PPP loans; and

  • Provide a rehiring safe harbor for businesses unable to rehire employees due to the effects of enhanced Unemployment Insurance

Given that Senate Republicans – including Senate Committee on Small Business Chairman Rubio – and the Trump Administration have gone on record in support of similar changes to the PPP, it seems increasingly likely that the PPP will be revised in the not-too-distant future.

Health Updates

With one of the first major COVID-19 outbreaks in the United States occurring in a nursing home – and a rapid increase in coronavirus cases in these types of facilities since that time – lawmakers are examining current and potential laws and policies focused on these entities. Yesterday, the Government Accountability Office (GAO) released a report titled “Infection Control Deficiencies Were Widespread and Persistent in Nursing Homes Prior to COVID-19 Pandemic.” GAO conducted this study at the request of Senator Ron Wyden (D-OR), Ranking Member of the Senate Committee on Finance. It found “most nursing homes were cited for infection prevention and control deficiencies (82% of those surveyed from 2013-2017) [prior to the pandemic]. About half of these homes had persistent problems and were cited across multiple years.” GAO stated future reports will review infection prevention and control and emergency preparedness in nursing homes more broadly, as well as the Centers for Medicare & Medicaid Services’s (CMS’s) response to the pandemic. Several weeks ago, President Trump announced the establishment of the Coronavirus Commission for Safety and Quality in Nursing Homes, which is to be composed of industry experts, doctors, scientists, resident and patient advocates, family members, infection and prevention control specialists and state and local authorities. CMS Administrator Seema Verma has also proposed a five-part plan to ensure safety and quality in nursing homes, which focuses on strengthening oversight, enhancing enforcement, increasing transparency, improving quality and removing regulations that providers identify as costly, challenging and not providing significant benefit. House Democrats’ HEROES Act includes several sections aimed at nursing homes, including protections to manage safety and quality care for patients, as well as manage outbreaks and allow for infection control as needed.

Representative Michael Burgess, MD (R-TX), Ranking Member of the House Committee on Energy and Commerce Health Subcommittee, led a letter to Department of Health and Human Services (HHS) Secretary Alex Azar, requesting HHS consider nursing homes, skilled nursing centers, senior living communities, independent living communities, assisted living communities, memory care facilities and continuing care retirement communities for additional Provider Relief Fund allocations. The lawmakers stressed the importance of these facilities in caring for seniors, explaining, “Even when our country is not facing a pandemic, these facilities face staffing difficulties, and they are particularly hard pressed as their nursing and other professionals have become infected with COVID-19. Additionally, they are having difficulty obtaining basic medical supplies, including masks, gowns, and hand sanitizer.” On the other side of the Capitol, the Senate Special Committee on Aging will hold a hearing today titled “Caring for Seniors Amid the COVID-19 Crisis.” Senators will hear from witnesses from the New York University Grossman School of Medicine, the University of Chicago and the Visiting Nurses Association Health Group.

HHS issued a reminder on the Provider Relief Fund to eligible providers yesterday, stating these providers must act by June 3, 2020, to receive additional relief funds from the general distribution allocation. The notices explains, “[Eligible providers] have until June 3, 2020, to accept the Terms and Conditions and submit their revenue information to support receiving an additional payment from the Provider Relief Fund US$50 billion General Distribution. All providers who automatically received an additional General Distribution payment prior to 5:00 pm, Friday, April 24th, must provide HHS with an accounting of their annual revenues by submitting tax forms or financial statements. These providers must also agree to the program Terms and Conditions if they wish to keep the funds.” HHS also states, “The submission of tax forms or financial statements to the portal will also serve as an application for additional funding for those providers that have not already received an additional General Distribution payment. If these providers do not submit their revenue information by June 3, they will no longer be eligible to receive potential additional funding from the US$50 billion General Distribution.”

Trade Updates

On Wednesday, a bipartisan group of senators sent a letter to Treasury Secretary Mnuchin expressing concerns that companies owned or directed by the People’s Republic of China (PRC) may take advantage of the economic crisis caused by the COVID-19 pandemic to acquire distressed US companies. The letter – which included long-time China critic and acting chair of the Senate Select Committee on Intelligence, Senator Rubio – urged the administration to “ensure countering the PRC’s predatory economic behavior both at home and abroad continues to be featured in policy deliberations. It was important six months ago, remains important today, and must continue to be a US priority in the future.” They outline specific requests for actions by the administration, including “to investigate and, if appropriate, block PRC state-owned and -directed enterprises from purchasing or otherwise investing in distressed companies to include sale and leaseback agreements for high-value equipment and capital goods.”

Also on Wednesday, US Customs and Border Protection confirmed that it would be extending current limits on nonessential travel across US land borders and through ferry services until June 22. These restrictions on passenger travel from Canada and Mexico have been in place since March 21 but do not apply to goods trade.

Oversight Updates

Today, the House Select Subcommittee on the Coronavirus Crisis will hold a member briefing on the impact of the coronavirus crisis on medical staff, first responders, grocery store workers, drivers, custodians and other frontline heroes.

The Washington Post reports that next Tuesday the House Committee on Oversight and Reform will hold a member briefing at which Christi Grimm, the HHS Principal Deputy IG, will testify. Grimm authored the report that found hospitals in crisis as COVID-19 diagnoses were increasing, which President Trump characterized as “wrong” and “Another Fake Dossier!” Shortly thereafter, the President announced his intent to nominate Jason Weida to be the HHS’s IG. If confirmed by the Senate, Weida will replace Grimm. According to a draft notice of the hearing, Grimm is expected to testify about her office’s work in response to the pandemic.

© Copyright 2020 Squire Patton Boggs (US) LLP

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Brandon Roman, Corporate Attorney, Squire Patton Boggs Law Firm
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Brandon Román advises domestic and international clients on a range of legal, legislative, and regulatory issues. Mr. Román helps clients develop comprehensive strategies to address legislative and regulatory interests as well as legal concerns. His work includes identifying client needs and helping them navigate the legal, legislative, and regulatory landscape, focusing primarily on government investigations, financial services and products, tax, and real estate. 

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Beth Goldstein, Health care Attorney Squire Patton Boggs
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Beth Goldstein draws from a multifaceted background in health law and policy to counsel clients on legislative, regulatory, and legal matters relating to the health care sector.

Beth formed a deep understanding of Congress by serving for four years on the legislative staff of a committee in the U.S. House of Representatives, where she assisted the chairman in shepherding legislation through all stages of the legislative process, including a presidential veto override. Beth worked with outside stakeholders and across chambers to build strategic coalitions and advance the chairman’s agenda. Her responsibilities included policy research and development, speechwriting, legislative drafting, and advising the chairman and committee members on policy issues. 

During law school, Beth expanded her legislative experience by serving as a legal intern to another congressional committee, focusing on oversight and investigations of healthcare and environmental health matters. She was also a senior staff member on The Tax Lawyer, a law fellow for the Legal Research and Writing curriculum, and a graduate intern for a healthcare nonprofit organization.

Beth gained a global perspective on health care issues through her graduate studies. Her coursework focused on comparative international health policy, health financing, aging and long-term care, and social policy innovations. Her dissertation discussed the history of American health care legislation, with particular emphasis on the procedural and political obstacles the Democratic Party has faced when attempting large-scale health reform. 

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Ludmilla Kasulke International Trade Attorney
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Ludmilla (Milla) Kasulke draws on her experience in both domestic and international policy to assist clients on trade matters. Milla provides multinational corporations, sovereign governments and entities, and quasi-government entities with advice on a wide range of trade policy, legal, and regulatory issues. She has been actively engaged in all aspects of the Section 232 process, including the exclusion petition process, and regularly advises clients on the impacts of current and potential new actions. Milla also regularly counsels clients on the impacts of current and potential new trade...

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Kristina Arianina represents companies and executives in internal investigations, enforcement actions and commercial litigation. Her investigation practice includes bribery and securities fraud allegations and violations of US economic sanctions and the Foreign Corrupt Practices Act (FCPA). She conducts internal investigations and due diligence in the US and globally, assists clients with disclosures of potential violations to relevant authorities, represents clients in enforcement matters, and helps companies develop and implement compliance policies and strategies for their domestic and...

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