19 March 2020 Senate Republicans release coronavirus bill #3 Senate Republicans March 19 released their version of a roughly $1 trillion third congressional bill to address the coronavirus, highlighted by $1,200 per-individual mailed payments and business tax provisions addressing net operating losses (NOLs), the business interest limitation under IRC Section 163(j), and qualified improvement property (QIP). The bill also includes health, retirement, and charitable provisions, and would postpone the tax filing deadline until July 15. To put the release of the package into context, this is the recommended proposal of Senate Republicans, and leaders have acknowledged that they will need to negotiate with Democrats to move a "phase 3" bill through the chamber, which requires 60 votes for approval of most legislation (there are 53 Republican members). The House is set to remain out of session until there is a third package on which to vote, though senators will undoubtedly have an eye toward what Speaker Nancy Pelosi (D-CA) is willing and able to move through the House. House Republican leaders have expressed support for the Senate bill. Senate Democratic leader Chuck Schumer (D-NY) and Speaker Pelosi issued a joint statement stating in part that, "[t]o earn Democratic support in the Congress, any economic stimulus proposal must include new, strong and strict provisions that prioritize and protect workers, such as banning the recipient companies from buying back stock, rewarding executives and laying off workers," suggesting that Democrats will seek changes to the current proposal. Below is a summary of some of the key provisions in the bill. The legislation and summaries are attached. The "2020 recovery rebates for individuals" under the bill would provide $1,200 checks to individuals ($2,400 for married filing jointly), phased out beginning at $75,000 in adjusted gross income for a single taxpayer and $150,000 for joint filers. Those amounts increase by $500 for every child. On the heels of the Trump administration announcement earlier this week that it is permitting individuals to defer until July 15 the payment of up to $1 million in 2019 income tax liabilities and 2020 first quarter estimated tax liabilities otherwise due on April 15, the bill also would permit taxpayers to delay until July 15 the filing of income tax returns otherwise due on April 15. In addition, the bill would permit individuals to defer until October 15 the payment of estimated tax liabilities due from the date of enactment, without limitation. Corporations could postpone estimated tax payments due after the date of enactment until October 15, and employers and self-employed individuals could defer payment of the 6.2% employer share of Social Security taxes on employee wages, with half required to be paid by the end of 2021 and the rest by the end of 2022. The bill would restore some of the NOL curbs in the TCJA (it limited the deduction to 80% of taxable income and repealed carryback provisions), restoring carrybacks such that a loss from 2018, 2019, or 2020 could be carried back five years and temporarily removing the taxable income limitation to allow an NOL to fully offset income. "These changes will allow companies to utilize losses and amend prior years' returns, which will provide critical cash flow and liquidity during the COVID-19 emergency," the Senate Finance Committee said in a summary. The bill also would repair an effective date drafting error in the TCJA pertaining to the changes to the NOL carryback and carryforward periods that were made in TCJA. The business interest limitation under IRC Section 163(j), currently set at 30% of adjusted taxable income based on EBITDA, would be set at 50% for 2019 and 2020. The bill would address two TCJA technical corrections, which Democrats have thus far been reluctant to support without gaining some of their own favored provisions. The first is the QIP correction (the so-called retail glitch), to clarify that it is 15-year property under the modified accelerated cost recovery system and 20-year property under the alternative depreciation system, and eligible for 100% bonus depreciation. The second would restore the limitation on downward attribution of stock ownership in applying constructive ownership rules to clarify that certain foreign subsidiaries should not be subject to those requirements. Both corrections would be retroactive to the enactment of the TCJA. Consistent with past disaster-related legislation, the draft would waive early withdrawal penalties on coronavirus-related distributions of up to $100,000. It would allow tax payments on distributions to be spread out over three years and would allow individuals to return distributions to the retirement account over three years, with such redeposits not subject to annual contribution limits. The bill includes no relief for defined benefit plans that have been adversely affected by the dramatic declines in plan assets and the reductions in interest rates that have accompanied the coronavirus emergency, nor relief related to required minimum distributions for individuals whose retirement accounts have greatly declined. The bill would provide an above-the-line deduction of up to $300 for charitable contributions made in cash during 2020 for taxpayers that do not itemize deductions. Existing income limits would not apply to the new deduction. The new deduction would not be available for contributions to a donor-advised fund. Health provisions under the bill generally try to improve stockpiling of certain medical supplies, mitigate drug shortages, prevent medical device shortages, and improve COVID-19 testing.
Education provisions include suspending student loan payments for three months and potentially allowing for another three months. Small business provisions generally provide emergency, 100% guaranteed loans of up to $10 million to small businesses, and allow businesses to be eligible for loan forgiveness for the portion of a loan spent on payroll and payments on debt obligations between March 1 and June 30, conditional upon businesses retaining their employees during this time. In previewing the plan, Senator Marco Rubio (R-FL) emphasized the goal of keeping employees connected to their employers.
Document ID: 2020-0611 | |||||
