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Legislation impacting private clubs during the COVID-19 crisis

The Latest NCA Legislative Updates

White House negotiations with Senate Democratic Leader Chuck Schumer (D-New York) and House Speaker Nancy Pelosi (D-Calif.) have reportedly made progress, but a deal remains elusive this week. The parties have a goal of reaching an agreement by the end of the week, but are currently far apart on major issues such as aid for schools, funding for the postal service and assistance to state and local governments. One area the parties are in fairly close proximity is enhancement of the Employee Retention Tax Credit (ERTC).

The ERTC was created by the Coronavirus Aid, Relief and Economic Security (CARES) Act. The program allows employers with fewer than 100 workers to claim a refundable tax credit against payroll taxes of up to 50 percent of an eligible worker’s first $10,000 in wages. In late May, the House of Representatives passed the HEROES Act, which expanded and enhanced the program significantly by increasing the wage cap to $36,000 per employee and increasing the percentage eligible for the refundable credit to 80 percent. It also increases the limit on working employees to 1,500. The legislation recently released by Senate Republicans called the HEALS Act increases the credit up to $30,000 per employee and the percentage of wages paid to 65 percent. It also increases the limit on working employees to 500.

While it is unclear exactly what will be in the final deal once negotiations are completed, but it is clear there is bipartisan agreement that the ERTC should and will be expanded and enhanced. For clubs around the country, this will likely be a preferable program that will provide the most flexibility in the months ahead.

Late Monday afternoon, Senate Majority Leader Mitch McConnell (R-Ky.) rolled out a long-anticipated package of coronavirus relief legislation that would allocate another $1 trillion toward supporting the economy and providing resources to the fight against COVID-19. The HEALS package of bills largely follows the structure of the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act. There are numerous provisions contained within the relief package, but several are of significance to the club community.

 

The Employee Retention Tax Credit (ERTC), which allows employers to claim a refundable tax credit of up to 50 percent of the first $10,000 of qualified wages per employee against payroll taxes, has been a relatively successful means of support for clubs around the country. The HEALS package announced on Monday would enhance this program and make it available to clubs who may not have been able to benefit from it by allowing employers with up to 500 employees to participate fully in the program. It also increases the percentage of wages allowed under the ERTC to 65 percent of the first $30,000 for qualified employees. This one provision alone could save individual clubs hundreds of thousands of dollars in the midst of diminished revenues lost due to operational restrictions due to the coronavirus. The NCA, along with allied associations in the club community urged House and Senate Leadership to enhance this program in a letter delivered last week.

 

The HEALS Act package also makes some changes to the Paycheck Protection Program (PPP) by allowing 501(c)(6) organizations to qualify for low-interest and potentially forgivable loans, but it does not allow 501(c)(7) to be eligible as was requested in the letter to House and Senate Leadership last week. However, NCA and our allies will continue to push for inclusion based on the principal that Congress should not be selecting winners and losers by including one type of business and excluding another from assistance simply based on an IRS classification. The House-passed HEROES Act included all 501(c) organizations in the PPP and the NCA will continue to push for the House version.

 

The HEALS Act also includes a section limiting liability for businesses, schools and universities for five years. There has been an uptick in coronavirus liability suits and by including some protection for businesses, schools and universities who are implementing CDC-recommended measures to prevent the spread of the virus it will cut down on frivolous lawsuits that cost us all money and could impede economic recovery.

 

These are just a few of the items contained in the package of bills, but they represent a starting point for negotiations to occur on what I expect will ultimately be a larger package likely to be less than the HEROES Act level of $3.5 trillion and the HEALS Act $1 trillion. The major sticking points are the liability provision, the $600 per week supplemental unemployment payment and state and local assistance. Republicans and Democrats are very far apart on these issues and it will take some time to find a path forward. The political dynamics are uncertain and because there is dissention among the Senate Republican Conference it weakens Majority Leader McConnell’s leverage in negotiations. Those negotiations are largely taking place between the White House through Treasury Secretary Stephen Mnuchin, Chief of Staff Mark Meadows and House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-New York).

 

NCA is tuned in on the negotiations and will be pushing for the House version of PPP extension and expansion be included in the final package. There is also potentially room for further enhancement of the ERTC with bipartisan legislation endorsed by the NCA that would increase the credit to 80 percent of up to a total of $45,000 in wages per employee through the end of the year. The next week will be critical in determining what direction these negotiations will take in nearing a final package. Expect a “deal” to blow up at least a couple of times before solidifying into passable legislation.

NEW Legislative Alert (7/22)

The Senate is in the process of putting together a bill aimed at providing additional relief for businesses and individuals who continue to be impacted by the coronavirus. The National Club Association joined with allied associations to send a letter to House and Senate Leadership and is urging clubs to reach out to their Senators to urge them to do three things:

  • Expand the Paycheck Protection Program to make 501(c)(7) social and recreational clubs eligible
  • Enhance and extend the Employee Retention Tax Credit through the end of the year
  • Provide additional assistance to state and local governments

Please email or call to make your voice heard.

Find Your Senator Here

$2 Trillion Stimulus Package Update: What Help Did Clubs Get?

The National Club Association is working to ensure clubs receive relief funding during the COVID-19 crisis.

3 Benefits for Clubs:

Critical Walkthrough: The CARES Act: A Guide to the Resources for Nonprofit Organizations

We are continuing to advocate to Congress to provide critical relief for our industry, like 501(c)7  inclusion in the SBA’s Payment Protection Program (PPP), and will update you on future developments. NCA sent out letters on April 2 to the Senate, House, House Small Business Committee and Senate Small Business Committee urging members to include 501(c)(7) organizations in upcoming relief and PPP inclusion efforts.

For additional guidance on this urgent issue, please contact NCA Vice President of Government Relations Joe Trauger at trauger@nationalclub.org.

NCA Legislative Update: House leadership has included 501(c)7 clubs in the Payment Protection Plan in the fifth round of relief funding.

The bill has yet to pass but the proposed bill includes 501(c)7 organizations in the funding for the Payment Protection Plan. Joe Trauger, NCA’s Vice President for Government Relations, provides a legislative update at the beginning of each NCA webinar aimed at keeping clubs informed to what is happening on Capitol Hill. See all upcoming webinars here.

Listen (2:00 mark): What language we use to advocate to Congress and how you can engage club members to contact their representatives

NCA held a webinar on March 31 where the Deputy Policy Director of the Minority Whip discusses the emergency legislation that’s been passed so far and the impact it will have on private clubs.

RECENT LEGISLATION

CARES Act ($2.2 Trillion Stimulus)

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed on March 28 and provides $2.2 trillion of relief to Americans and businesses throughout the country. See the 3 benefits for private clubs in the CARES Act. The National Club Association is working to ensure clubs receive relief funding during the COVID-19 crisis. Access the CARES Act walk-through for nonprofits here.

The CARES Act allows private clubs to take a credit against their payroll tax for 50% of employee wages if they were partially or fully shut down due to COVID-19. Learn more by accessing our FAQs at the bottom of this page and by listening to a full explanation of the Tax Credit here

As referenced in the March 25 COVID-19 Update for Clubs, while 501(c)7 organizations were not included in the SBA Paycheck Protection Program in the CARES Act, low-interest, non-forgivable SBA loans called Emergency Injury Disaster Loans (EIDL) may be available for private clubs that are in states that have declared a disaster by the governor of that state.

NCA received questions from clubs regarding how to fill out the ownership section of the application to access SBA Economic Injury Disaster Loans (Note:This is different from the Paycheck Protection Program). In response, NCA contacted the SBA and we received guidance over the weekend to help 501(c)7 clubs navigate this issue. Here is the guidance:

(1) Affiliation based on ownership. For determining affiliation based on equity ownership, a concern is an affiliate of an individual, concern, or entity that owns or has the power to control more than 50% of the concern’s voting equity. If no individual, concern, or entity is found to control, SBA will deem the Board of Directors or President or Chief Executive Officer (CEO) (or other officers, managing members, or partners who control the management of the concern) to be in control of the concern. SBA will deem a minority shareholder to be in control, if that individual or entity has the ability, under the concern’s charter, by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders.

FAMILY FIRST CORONAVIRUS RESPONSE Act (FFCRA)

The Family First Coronavirus Response Act rapidly moved through Congress to provide relief to businesses impacted by COVID-19. Here is a User’s Guide to Implementation.

See Guidance from the IRS on implementing the Families First Act.

Provisions Most Likely to Impact Clubs

Coronavirus testing is made cost-free for the uninsured and insurance companies are required to provide the test and related services such as office visits with no co-payment or prior-authorization.

Coronavirus Emergency Leave is provided in the bill for employees of businesses with fewer than 500 workers.

  • Employers would have to provide as many as 12 weeks of job-protected Family and Medical Leave for employees who have to:
    • Comply with a requirement or recommendation to quarantine because of exposure to or symptoms of the virus.
    • Provide care to a family member who’s complying with such a requirement or recommendation.
    • Provide care for a child younger than 18 who school or day care has closed due to the virus.
  • The first 14 days of the leave could be unpaid, though a worker could choose to use accrued vacation days, personal leave or other paid time off.
  • Following the 14 day period, workers would receive a benefit from their employers that would be at least two-thirds of their normal pay rate.
  • FMLA is also amended so employees could use unpaid leave if they are diagnosed with the virus, caring for a family member or child due to closures.
  • Department of Labor is authorized to issue regulations that would exempt small businesses with fewer than 50 employees and exclude certain health care providers and emergency responders from paid leave benefits.

 

Emergency Sick Leave

Emergency sick leave for employees of businesses with fewer than 500 employees would be a total of 80 hours for full-time employees and the equivalent of the normal number of hours a part-time employee would work over a two-week period.

Sick leave would be made available for those who:

  • Self-quarantine.
  • Obtain a medical diagnosis or care for coronavirus.
  • Provide care for a family member who has been diagnosed or is in quarantine or for a child who school or day care has closed due to coronavirus.

Employers with similar existing paid leave policies would be required to provide workers with the emergency paid sick time and cannot require a worker to use any other available paid leave before using the sick time:

  • Employers would be prohibited from requiring a worker to find a replacement to cover their hours during time off.
  • Discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer.

This is the provision that had a significant error that requires the House to pass the legislation again. It has to do with the pay caps that are set at $511 per day to care for themselves or $200 a day to care for a family member or child.

An employer could be subject to civil penalties for a violation of paid sick leave requirements.

 

Employer Tax Credits

Employment Tax Credit is Now Available for Businesses subject to mandated paid leave under the Family First Coronavirus Response Act. The legislation provides payroll tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s sick leave and family leave programs. The credit is refundable if it exceeds the amount the employer owed in payroll taxes and would be in effect for wages through the end of 2020.

The bill also contains additional unemployment benefits.

To access the credit, eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

FAMILIES FIRST CORONAVIRUS RESPONSE Act Resources

IRS FAQs: COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs (IRS)

Employee Credit FAQs: Employee Retention Credit available for many businesses financially impacted by COVID-19

DOL FAQs: Families First Coronavirus Response Act: Questions and Answers

DOL Guidance: Department Of Labor Announces New Paid Sick Leave And Expanded Family and Medical Leave Implementation  

The Wage and Hour Division (WHD) offers a number of plain-language compliance assistance materials to explain FFCRA’s benefits and requirements, including:

WHD provides additional information on common issues employers and employees face when responding to COVID-19 and its effects on wages and hours worked under the Fair Labor Standards Act and job-protected leave under the Family and Medical Leave Act at https://www.dol.gov/agencies/whd/pandemic.

Social Clubs and Families First Coronavirus Response Act (COMD)

HR 6201 Update: Families First Coronavirus Response Act: Forms of Paid Leave (AALRR)

Keeping American Workers Paid and Employed Act: A Section-by-Section Review

Employment Tax Credit is Now Available for Businesses Subject to Mandated Paid Leave Under the Family First Coronavirus Response Act (AALRR)

Employer’s Quick Guide to the Families First Coronavirus Response Act (Nelson Mullins)

State Level

Wisconsin Guidance for Golf Courses (See page 6, Section C)

Denver, Colorado Guidance for Golf

A Guide to State Coronavirus Lockdowns (WSJ)

National Governor’s Association regarding COVID-19 includes State Action Tracking Chart and State/Territorial Resource Page.

National Conference of State Legislatures State Action on Coronavirus

Restaurant Industry: California, Illinois and New York.

State bills related to the COVID-19

Series of Maps shows how states are responding to COVID-19

Frequently Asked Questions

Questions and answers are for informational purposes and not for the purposes of providing legal advice. Viewers should not rely upon the information shared as legal advice.

Low-interest SBA loans called Emergency Injury Disaster Loans (EIDL) that offer up to $2 million in assistance are available for private clubs. These loans are not forgiveable.

Listen to NCA explanation of the EIDL here.

Clubs can also apply an EIDL advance of up to $10,000 that is forgivable.

These loans are different from the SBA’s Paycheck Protection Program (PPP) loans. NCA is working with Congress to have clubs nationwide included for SBA PPP loans.

See the 3 benefits clubs received in the $2.2 trillion CARES Act here. Read an in-depth walk-through of the benefits for nonprofits here.

Section 2301 of the CARES Act allows private clubs to take a credit against their payroll tax for 50% of employee wages if they were partially or fully shut down due to COVID-19.

While 501(c)(7) organizations were not included in the SBA Paycheck Protection Program in the CARES Act, low-interest SBA loans (EIDL) are available for private clubs.

Last, clubs may delay payments of the employer’s portion of 2020 Social Security taxes, instead paying 50% by the end of 2021 and the remaining 50% by the end of 2022.

501(c)(7) organizations are eligible to receive Economic Injury Disaster Loans (EIDL) from the SBA. These loans are not forgivable and offer up to $2 million in assistance. EIDLs may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 2.75% for nonprofits. The EIDL also has a $10,000 grant that is paid out within 3 days of the application regardless of whether the loan is offered.

Paycheck Protection Program (PPP) loans are forgivable if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Currently, 501(c)(7) organizations are not eligible for PPP loans.

NCA is working diligently to have clubs included in this program. If clubs are included in the Paycheck Protection Program, clubs can convert their EIDLs into PPP loans.

Listen to an explanation of the Tax Credit here.

Relief legislation provides payroll tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s sick leave and family leave programs. The credit is refundable if it exceeds the amount the employer owed in payroll taxes and would be in effect for wages through the end of 2020.

The bill also contains additional unemployment benefits.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

For more information, see “How to Claim the Credits” on the IRS website.

The total credit that can be taken per employee (not per quarter, but per employee) is $5,000.  It is 50% of the qualified wages up to $10,000, so a maximum credit of $5,000 per employee. (AALRR)

Qualifying wages are based on the average number of a business’s employees in 2019.

Employers with less than 100 employees: If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.

Employers with more than 100 employees: If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

Qualified sick leave wages are wages that the FFCRA requires an employer to pay to an employee who is unable to work or telework because of either the employee’s personal health status (that is, the employee is under COVID-19 quarantine or self-quarantine or has COVID-19 symptoms and is seeking a medical diagnosis) or the employee’s need to care for others (that is, the employee is caring for someone with COVID-19 or for a child whose school or place of care is closed or child care provider is unavailable).

For more information, see “What is included in “qualified sick leave wages”?” – IRS

Qualified family leave wages are wages that the FFCRA requires an employer to pay to an employee who is unable to work or telework because the employee is caring for a child whose school or place of care is closed or child care provider is unavailable due to COVID-19-related reasons.

For more information, see “What is included in “qualified family leave wages”?” – IRS

Qualified health plan expenses are amounts paid or incurred by an Eligible Employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code) that are allocable to the employee’s qualified leave wages.

For more information, see “Determining the Amount of Allocable Qualified Health Plan Expenses.” – IRS

After the CARES Act we expect there will be additional bills. The situation is very volatile and fluid right now, but NCA is trying to stay on top of everything. NCA sent letters to Congress urging the inclusion of associations and nonprofit entities in any legislation ahead.

NCA has drafted language for clubs to use to advocate for their representative for the inclusion of 501(c)7 organizations in future relief bills. You can find your Congressperson here.

Coronavirus testing is made cost-free for the uninsured and insurance companies are required to provide the test and related services such as office visits with no co-payment or prior authorization.

Coronavirus Emergency Leave is provided in the bill for employees of businesses with fewer than 500 workers.

Employers would have to provide as many as 12 weeks of job-protected Family and Medical Leave for employees who have to:

  • Comply with a requirement or recommendation to quarantine because of exposure to or symptoms of the virus
  • Provide care to a family member who’s complying with such a requirement or recommendation
  • Provide care for a child younger than 18 who school or day care has closed due to the virus

The first 14 days of the leave could be unpaid, though a worker could choose to use accrued vacation days, personal leave or other paid time off.

Following the 14 day period, workers would receive a benefit from their employers that would be at least two-thirds of their normal pay rate

FMLA is also amended so employees could use unpaid leave if they are diagnosed with the virus, caring for a family member or child due to closures.

  • Department of Labor is authorized to issue regulations that would exempt small businesses with fewer than 50 employees and exclude certain health care providers and emergency responders from paid leave benefits

Emergency sick leave for employees of businesses with fewer than 500 employees would be a total of 80 hours for full-time employees and the equivalent of the normal number of hours a part-time employee would work over a two-week period.

– Sick leave would be made available for those who:

  • Self-quarantine
  • Obtain a medical diagnosis or care for coronavirus
  • Provide care for a family member who has been diagnosed or is in quarantine or for a child who school or day care has closed due to coronavirus.

Employers with similar existing paid leave policies would be required to provide workers with the emergency paid sick time and cannot require a worker to use any other available paid leave before using the sick time

  • Employers would be prohibited from requiring a worker to find a replacement to cover their hours during time off and;
  • Discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer

This is the provision that had a significant error that requires the House to pass the legislation again. It has to do with the pay caps that are set at $511 per day to care for themselves or $200 a day to care for a family member or child.

An employer could be subject to civil penalties for a violation of paid sick leave requirements.

The credit is against the employer portion of the Social Security liability, but the IRS has issued guidance that employers can fund the credit by deducting it from the total amount of federal employment taxes that are to be deposited for the quarter. (AALRR)

If you have replied in full and were sent a confirmation that it has been received, then you do not need to reapply. EIDLs are processed on a  first-come-first-serve basis.

If you have not received any confirmation, you may need to reapply to access the EIDL.

Listen to NCA’s full explanation here.