The House is planning to pass its next coronavirus response bill as soon as next week with a focus on topping up CARES Act funding while laying out other Democratic priorities, perhaps in part as a bid to bring thus-far reluctant Senate Republicans to the negotiating table. Like the Senate GOP, the Administration is urging a pause before additional response legislation but has reportedly circled back to including capital gains relief among its menu of proposals amid a broader pivot to the economic effects of the crisis.

The prospect of House action was first reported by Politico, who said Speaker Nancy Pelosi (D-CA) outlined a plan for additional state and local funding — she has called for as much as $1 trillion, split between state and local — and shoring up public assistance programs. Mortgage/rent assistance, food assistance, additional unemployment benefits, additional stimulus payments, childcare assistance for frontline workers and multiemployer pension provisions are among items that could reportedly be included. The report noted that some parts could represent a policy wish list like a bill released by Democrats in the run-up to the CARES Act. The Speaker weeks ago called for a next bill to be crafted in "four corners" bipartisan, bicameral negotiations, but Republicans resisted due to concerns over the deficit and over Democratic priorities.

The Washington Post reported that among items that could be in the House bill, House Energy and Commerce Committee Chairman Frank Pallone (D-NJ) is advocating an increase in federal matching funds for Medicaid and more money for facilities that provide Medicaid services; a ban on water, electric and gas utility shut-offs; and an expansion of broadband access.

In terms of timing, the Politico report said committees are expected to tie up their portions of the House bill May 11 in anticipation of a House vote next. That could slip amid uncertainty over whether the chamber will reconvene with the continued presence of the virus in the Capital region and members' concerns over traveling and convening. Leaders have not indicated exactly when members will be expected to return.

Asked about Vice President Pence's comments that the White House task force may be winding down, President Trump said, "we'll have something in a different form … and that form is safety and opening. And we'll have a different group probably set up for that." He said, "one of the reasons we have more cases than any other country by far is because we test much more." Asked if now is the right time to wind down the task force, President Trump said, "we can't keep our country closed for the next five years," and "we're bringing our country back," but that Drs. Fauci and Birx will still be providing guidance.

The President tweeted this morning, in part, "the Task Force will continue on indefinitely with its focus on SAFETY & OPENING UP OUR COUNTRY AGAIN. We may add or subtract people … … to it, as appropriate. The Task Force will also be very focused on Vaccines & Therapeutics. Thank you!"

Regarding a next bill, the New York Times reported that the Administration is considering "a reduction in the capital gains tax rate and measures that would allow companies to deduct the full costs of any investments they make now or in the future" by making expensing permanent. Reversing the TCJA requirement for amortization of R&D expense beginning in 2022 is also under consideration. Business or investment tax cuts are already facing resistance from Democrats, with the report quoting Rep. Don Beyer (D-VA), a Ways & Means member, saying, "It's extraordinarily naïve to think that tax cuts are going to bring this economy back faster."

That skepticism and Democratic blowback over the CARES Act excess business losses provision clouds prospects for the inclusion of major tax provisions in the forthcoming House Democratic bill, though there could at least be proposals to change existing provisions that tax writers have highlighted.

On May 5, for the second day in a row, Senate Finance Committee Chairman Chuck Grassley (R-IA), Ranking Member Ron Wyden (D-OR), and House Ways & Means Committee Chairman Richard Neal (D-MA) wrote to Treasury Secretary Mnuchin with tax concerns, this time calling for Treasury to allow deductions for expenses associated with Paycheck Protection Program (PPP) loans that are ultimately forgiven. IRS said last week in Notice 2020-32 that no tax deduction is allowed for an expense — like wages — that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan under the PPP. Secretary Mnuchin has defended that interpretation as preventing "double dipping" by taking deductions for money that is not taxable. They previously wrote to the Secretary regarding the employee retention credit.

In addition to business and investment tax relief, President Trump is pushing for a payroll tax cut and has said another bill won't happen without it. Democrats have been skeptical of the proposal and now apparently are some top Republicans. Politico reported Chairman Grassley as saying he doesn't think much of the proposal, worrying it could drain retirement funds or leave older Americans with the view that Congress doesn't take "seriously" the plight of the Social Security Trust Fund. Still, "I'm going to give it due consideration, if I can see a strong group of people who think it's the right thing to do," he said.

In a Washington Post op-ed, former Obama administration economic adviser and Clinton-era Treasury Secretary Lawrence Summers warned against overemphasizing the economic impact of the crisis and underinvesting in health measures, saying that "hope is not a strategy." He advocated investment in testing, contact tracing, and spending on masks and potential therapies and vaccines.

EY Alerts and other resources are here.

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

The EY Webcast "Tax in the Time of COVID-19" is this Friday, May 8, 12:00 p.m. ET. Events like the spread of the coronavirus (COVID-19) have made reacting to trade disputes and continued implementation of the Tax Cuts and Jobs Act much more difficult. After a review of the legislative and economic landscape, 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) breaking developments. Register

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