The New York Times reported on government and academic projections of an increased number of coronavirus infections and deaths as social distancing measures are eased in some areas, the Senate fully reconvened again, and House leaders reportedly signaled that committees will begin assembling proposals for the next package of response measures this week.

Republican leaders defended the decision to bring the Senate back to session and Democrats continued to criticize the Senate's near-term focus on nominations. Democratic leader Chuck Schumer (D-NY) said the public would prefer lawmakers to be focused on urgent virus-related issues like an inadequate national strategy on testing, which should be the subject of hearings. The reconvening of the chamber, for remarks by some senators then a nomination vote, was marked by the new optics of the crisis as many members wore masks. The Intelligence Committee will hold the Senate's first socially-distanced hearing today, on the nomination of John Ratcliffe to be the Director of National Intelligence.

Speaker Nancy Pelosi (D-CA) has said she plans to reconvene the House next week, though that remains uncertain. The Washington Post reported House Majority Leader Steny Hoyer (D-MD) as providing members no firm date for the chamber on a call yesterday but saying committees would begin assembling the new response bill early this week.

The Wall Street Journal reported on Republican demands for an employer liability shield in the next round of legislation alongside Democratic proposals for new OSHA requirements to protect workers. While Speaker Pelosi has said Democrats wouldn't be inclined to support immunity from liability, Rep. Ro Khanna (D-CA) said he would be open to such a shield for companies who comply with strong virus protection plans.

On May 4, Senators Chris Coons (D-D), Pat Roberts (R-KS), Catherine Cortez Masto (D-NV), Todd Young (R-IN), Maggie Hassan (D-NH) and Steve Daines (R-MT), along with Reps. Suzan DelBene (D-Wash.) and Jackie Walorski (R-IN), introduced legislation (S. 3593) to provide expanded tax support for American companies that invest in research and development of new products and technologies. Many of the members are on tax committees.

Several trade associations announced the creation of the America's Recovery Fund Coalition, which brings together more than 100 members across retail, restaurants, theaters, the travel industry and financial services to advocate for a fund to help businesses recover. The group told leaders in Washington in a letter that "Congress must urgently create a federal direct assistance fund to provide rapid liquidity to businesses impaired by the COVID-19 national emergency."

Implementation

Senate Finance Committee Chairman Chuck Grassley (R-IA), Ranking Member Ron Wyden (D-OR) and House Ways & Means Committee Chairman Richard Neal (D-MA) on May 4 wrote to Treasury Secretary Mnuchin regarding the employee retention credit, saying they "disagree with the determination that employers who continue providing qualified health benefits to their employees do not qualify for the retention credit unless they continue paying other qualifying wages."

In a Fox Business interview May 4, Secretary Mnuchin said he does not plan to change Paycheck Protection Program (PPP) loan forgiveness terms that require 75% of loans to be spent on payroll, saying "this was not designed as a loan, it was really designed as a grant, and people who … want to use more money for overhead, they can go out and borrow an idle loan."

Secretary Mnuchin also affirmed IRS guidance that that no tax deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan under the PPP, which some members said is inconsistent with congressional intent. "The guidance is correct … the money coming in the PPP is not taxable. So, if the money that's coming is not taxable, you can't double dip. You can't say you're going to get deductions for workers that you didn't pay for, that taxpayers didn't pay for," he said.

PPP FAQs were updated May 3, with new questions 40-42. The new questions address issues including: forgiveness terms if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer; required certifications for certain seasonal employers; and whether nonprofit hospitals exempt from taxation qualify as "nonprofit organizations" under section 1102 of the CARES Act.

On May 4, IRS released Notice 2020-25, which temporarily expands the circumstances and time periods in which a tax-exempt bond that is purchased by its state or local governmental issuer is treated as continuing in effect without resulting in a reissuance or retirement of the purchased tax-exempt bond solely for purposes of IRC Section 103 and IRC Sections 141 through 150. Also, Revenue Procedure 2020-21 provides temporary guidance regarding the public approval requirement under IRC Section 147(f) for tax-exempt qualified private activity bonds. Specifically, in light of COVID-19, hearings held by teleconference will be treated as held in a location that is convenient for residents of the approving governmental unit.

Section 2202 of the CARES Act enacted March 27 provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans. IRS has posted FAQs on coronavirus-related relief for retirement plans and IRAs.

In Revenue Procedure 2020-19, the IRS modified the safe harbor in Revenue Procedure 2017-45 to temporarily reduce the minimum amount of cash that shareholders of publicly offered REITs and RICs may receive for IRC Section 301 to apply from 20% to 10% of the total declared distribution. This temporary reduction, allowing REITS and RICs to offer more stock and less cash to satisfy their distribution requirements, will allow them to conserve capital and enhance their liquidity. The new procedures apply for distributions made from April 1 through December 31.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through May 4.

EY Webcasts this week include:

• Tuesday, May 5. Tax in a disrupted market: Update on major foreign tax developments, 12:00 p.m. ET. This sixth webcast in the series will cover tax-related COVID-19 stimulus measures around the globe and other key recent foreign tax legislative developments and proposals. The panelists will discuss areas of risk and concern, as well as opportunities that multinational enterprises should be considering. Register.
• Friday, May 8. Tax in the Time of COVID-19, 12:00 p.m. ET. This week's panelists will explore: (i) global developments; (ii) more on the employee retention credit — what's new, what you've asked; (iii) the latest from the IRS; and (iv) any breaking developments. Click here to register.

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