How Schools Can Take Advantage of Funds for HVAC Improvements

Through Section 313 of the Coronavirus Response and Relief Supplemental Appropriations Act, Congress approved $82 billion for the Elementary and Secondary School Emergency Relief Fund to make adjustments to help deal with the pandemic including updates and maintenance to HVAC equipment.

Under this bill schools will be able to inspect, test, maintain, repair, replace, or upgrade their HVAC systems with the intention to improve indoor air quality in school facilities. These Section 313 funds can be used for HVAC systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacements.

All public and charter schools are eligible to receive these funds.

The funds will be transferred from the federal government to state governments by the end of January and states are expected to provide the funds directly to the school districts to use the funds for approved purposes including HVAC projects.

States have one year to spend these funds before they will be returned to the federal government. 

We partnered with AHRI to deliver The Anatomy of a Healthy School, an HVAC Primer for safety, comfort, and productivity. This infographic explains different ways schools can utilize these federal funds for HVAC system improvements to help combat COVID-19.  

Wholesale Distributors should pass these resources onto their Contractor customers to proactively reach out to local school districts and let them know they are available to provide these upgrades.

7 Things To Know About The COVID Relief Package and AIM Act

Congress’s end of year package contained many provisions that HARDI members can utilize in the coming months. In the bill Congress extended the Paycheck Protection Program and created a second draw option for businesses with a drop on revenue, allows qualifying PPP participants to use the Employee Retention Tax Credit, expanded the disaster loan and small business lending programs, and returned the business meal and entertainment provisions to 100% deductibility. In addition to COVID relief, the package signed by President Trump last Sunday contained the American Innovation and Manufacturing Act which regulates the phase-down of HFC production and use. Below are important details and timelines for utilizing these programs.

1. Paycheck Protection Program:

Congress has authorized a total of $806.5 billion through March 31, 2021 for the Paycheck Protection Program, $284.5 billion is new funding available for businesses. The legislation allows small businesses to take a second round of forgivable loans under the Paycheck Protection Program. SBA is required to release regulations for the updated program within 10 days of the bill signing (Signed into law on Dec. 27). Originally SBA planned to reopen lending before the end of the year, however the delay in bill signing has slowed re-opening but lenders should be able to open applications within the next few weeks, if any HARDI members are interested in new or second draw PPP loans, it is best to talk to your lender before the program re-opens.

The legislation expanded the use of PPP funding to include additional non-payroll costs:

• Payments for software or cloud computing services that facilitate operations, product delivery, payroll expenses, and other functions.
• Costs related to property damage, vandalism, or looting due to public disturbances in 2020, if the damage wasn’t covered by insurance.
• Payments made to suppliers of essential goods under contracts and purchase orders in effect before a PPP loan was issued.
• Purchases of personal protective equipment.
• Adaptations such as drive-through windows, ventilation systems, sneeze guards, and screening capabilities to comply with social distancing, sanitation, and other requirements related to Covid-19.

Second Draw Loans: Qualifying businesses will be able to receive 2.5 times their average monthly payroll with a maximum of $2 million loans. To qualify for a second loan, entities would have to:

• Employ 300 or fewer workers, instead of the current 500-employee threshold.
• Demonstrate that they had at least a 25% reduction in gross revenue during a quarter in 2020 compared with the same period in 2019, with some exceptions.
• Exhaust their first loan before receiving a second one.

PPP borrowers will be allowed to choose a loan forgiveness period ranging from eight to 24 weeks. Existing borrowers that received PPP loans of less than $150,000 will be allowed to submit simplified applications for forgiveness with limited documentation.

2. PPP Deductibility:

The legislation reversed a decision made by the IRS that would have limited the ability of businesses using PPP funds to deduct the value of business expenses paid with PPP funds. With this provision any business expenses that would normally be deductible will continue to be deductible for the upcoming tax season. HARDI joined over 700 trade associations in asking Congress for this fix.

3. Employee Retention Tax Credit:

The legislation extends and expands the CARES Act employee retention tax credit (ERTC). ERTC allows businesses to take a tax credit from the employer’s portion of payroll taxes for up to $10,000 per quarter of qualifying employees’ wages. Overall, this provision is much better for qualifying small businesses including those that previously took PPP loans like many HARDI members. The bill also lowered the qualification requirements but did retain an annual revenue decrease which is different from the quarterly decreased used by second draw PPP loans. The bill made some changes retroactive, while others are only prospective.

Beginning on January 1, 2021 and through June 30, 2021, the provision:

• Increases the credit rate from 50 percent to 70 percent of qualified wages.
• Expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50 percent to 20 percent and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
• Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter.
• Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
• Provides rules to allow new employers who were not in existence for all or part of 2019 to be able to claim the credit.

Retroactive to the effective date included in section 2301 of the CARES Act, the provision:

• Provides that employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
• Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.

4. Disaster Loans:

The CARES Act expanded the SBA’s Economic Injury Disaster Loan (EIDL) program and authorized the agency to advance as much as $10,000 for recipients to pay sick leave to workers affected by Covid-19, retain employees, and make other covered payments.

The legislation would double the authorization for advance funds to $40 billion, from $20 billion, and extend it through Dec. 31, 2021. For companies that did not receive the full $10,000 emergency grant, the bill would provide $20 billion for these businesses to receive the difference between $10,000 and the advance funds they received under the CARES Act. Eligible recipients would include those with 300 or fewer employees that are located in low-income communities and that had economic losses of at least 30% over eight weeks compared with a similar period before the pandemic.

The measure also would repeal a provision from the CARES Act that requires PPP forgiveness amounts to be reduced based on EIDL advances.

5. SBA’s 7(a) and 504 Loan Programs:

In addition to PPP and EDIL, the Small Business Administration has been using some long-term lending programs to help businesses during the pandemic including the 7(a) and 504 loan programs. Congress provided and additional $1.92 billion for the SBA to:

• Increase its maximum guarantees for 7(a) loans to 90% through Sept. 30, 2021.
• Temporarily increase 7(a) express loans.
• Temporarily waive certain fees associated with the 7(a) and 504 loan programs.
• Allow eligible small businesses to use 504 program funds to refinance existing debt equal to 100% of the cost to expand those businesses.
• Support as much as $7.5 billion each year in debt refinancing for 504 program projects that don’t involve expanding a small business.

6. Additional Tax Changes:

Business Meal and Entertainment Deduction: For 2021 and 2022, businesses can deduct the full value of business meals and entertainment. The Tax Cuts and Jobs Act previously limited this deduction to 50%.

Payroll Tax Deferral: Workers who’ve had their payroll taxes deferred since September would be given until Dec. 31, 2021, to pay back the government, instead of through April 30, 2021, as originally directed by the Treasury Department.

Paid Leave Credits: The measure would extend credits for unused paid sick and family leave provided under the Families First Coronavirus Relief Act through March 31, 2021. However, the requirement for businesses to offer paid sick and family leave un FFCRA is no longer required.

7. Families First Coronavirus Response Act:

The Families First Coronavirus Response Act (FFCRA) created in March of 2020 required businesses with fewer than 500 employees to offer paid sick and family leave to employees with coronavirus or family with coronavirus. The end of year package did not extend these requirements, however as previously mentioned the tax credits for voluntarily providing these leave options, if an employee has not used up the allowable leave, is still available through March 31, 2021.

American Innovation and Manufacturing Act:

Starting next year HARDI and the rest of the industry will work with the incoming EPA Administrator and our contacts within the Stratospheric Protection Division, which currently regulates refrigerants under the Clean Air Act, to determine next steps in regulating how the different industries using hydrofluorocarbons will phase-down their use. President-elect Biden has chosen Michael Regan, North Carolina’s top environmental regulator to lead the EPA during the next administration, it was also rumored Mary Nichols the outgoing California Air Resources Board chair was a possible pick. Regan as North Carolina’s Department of Environmental Quality was one of the few states in the US Climate Alliance to not adopt any HFC rules in recent years. HARDI’s goal is to ensure enough HFCs are retained to meet future service needs for the installed base of air-conditioning and commercial refrigeration.

State HFC Phasedown Update

HARDI supports the federal HFC phase-down legislation that will provide an organized scheduled phase-down across the United States. Several states have pledged to regulate HFCs due to the lack of federal regulations.

HARDI has been tracking the progress of legislation and regulations in the states. So far California, Colorado, New Jersey, Vermont, and Washington have passed HFC phasedowns into state law based on EPA’s SNAP Rule 20 and Rule 21. Other states have proposed adopting similar phasedowns. Below is a summary of state actions:

California: California has the most regulations of any state working to regulate HFCs. In 2018, California adopted EPA SNAP Rules 20 and 21 which impacted foams, aerosols, chillers (in 2024), domestic appliances and some commercial refrigeration products exactly as noted in the EPA’s Rules. Additionally, the state legislature has set an overall goal to reduce HFC emissions by 40 percent in 2030 using 2013 as a baseline. This more ambitious commitment has led California Air Resources Board to finalize regulations for commercial refrigeration sectors and air conditioning. CARB staff is making final changes to the regulations, however the Board has delegated final approval to CARB executives. The current regulations:

• Commercial Refrigeration: All new facilities installing commercial refrigeration with more than 50lbs of refrigerant must transition to a refrigerant below 150 GWP starting on January 1, 2022. Existing facilities must reduce their GHG potential or their weighted average GWP as they retrofit existing facilities.
• Stationary air-conditioning: Ban on sale of air-conditioning equipment using refrigerant greater than 750 GWP manufactured after January 1, 2025. Require manufacturers to use reclaim as 10% of gases used between 2023 and 2025. Develop a stronger reclaim program to be used as a model for the rest of the country.

See HARDI’s analysis here. A full overview of California’s regulations is available here.

Colorado: The Colorado Air Quality Commission approved a rule following EPA’s SNAP 20 and 21 on May 22, 2020. The rule can be seen here.

Connecticut: Has announced intent to regulate HFCs.

Delaware: Has passed the House Concurrent Resolution NO. 60 in support of the Natural Resources and Environmental Control (DNREC) to enact regulation that will phasedown the use of HFCs in Delaware. Additional information on the upcoming regulation can be found on DNREC’s rulemaking website. The state expects to finalize HFC regulations in early 2021.

Hawaii: Introduced legislation (HB 2492 and SB 3078) to implement SNAP 20 and 21

Maine: The state has announced they intend to adopt an HFC phasedown.

Maryland: Maryland has finalized regulations to adopt SNAP rules 20 and 21 with the intent to begin regulating HFCs in 2021 for stationary refrigeration and 2024 for chillers. Additional information on the regulation can be found on MDE’s website.

Massachusetts: Massachusetts has started the regulatory process to regulate the HFC refrigerants listed in SNAP 20 and 21 and similar to Delaware and Maryland, plans to use dates that regulate refrigeration beginning in 2021 and chillers in 2024. In addition to adopting SNAP 20 and 21, Massachusetts is looking at implementing a refrigerant management program which would require additional disclosure of refrigerant sales by distributors and require all technicians to obtain a Section 608 refrigerant certification.

New Jersey: Has passed SB 3919 to adopt SNAP rules 20 and 21 to phase down the use of HFCs in specific end use areas.

New York: Regulators have adopted 6 NYCRR Part 494 to prohibit use of HFCs in the end uses listed in SNAP rules 20 and 21.

Oregon: The state has announced they intend to adopt an HFC phasedown.

Pennsylvania: The state has announced they intend to adopt an HFC phasedown.

Rhode Island: The state Department of Environmental Management has released its draft regulation “Prohibition of Hydrofluorocarbons in Specific End-Uses.” DEM will host a virtual stakeholder workshop on December 11.

Vermont: The Vermont Senate passed S. 30 on which would adopt SNAP Rules 20 and 21 with the goal of reducing the use of HFCs by 40 percent by 2030 using 2013 as a baseline. Vermont has begun the process of developing regulations to meet the requirements of S. 30.

Virginia: The Virginia legislature included a requirement for the Air Pollution Control Board to adopt an HFC phasedown in their annual budget that was signed by Governor Northam.

Washington: Has passed legislation (House Bill 1112) that would adopt SNAP Rules 20 and 21 to meet the Governor’s goal of reducing GHG emissions of 25% by 2035. State regulators have finalized rules for disclosure of equipment containing HFCs and disclosure requirements. In addition, the WA Code Council has voted to fully adopt ASHRAE 15-2019 and the 3rd edition of UL 60335-2-40 which would allow for the use of flammable refrigerants in occupied buildings. Additional information can be found here.