The House Democratic version of the CARES 2/COVID 4 coronavirus response bill could be released early next week and is expected to reflect a multitrillion dollar approach to 'go big' on many of the same areas covered under the CARES Act, including state and local government funding, unemployment insurance and reupping and revising the Paycheck Protection Program (PPP) and Employee Retention Tax Credit (ERTC). A vote is possible next week but looking less likely, and timing is one of several open questions regarding the plan along with exactly what will be included. Work to assemble the package may continue through the weekend.

House Speaker Nancy Pelosi (D-CA) told members the package will be expensive but dismissed concerns, saying of paying for the bill, "no one asked that question with the $2 trillion tax cut" in 2017, Politico reported. "We have an emergency of such magnitude that no one has ever seen before. This is probably the worst situation that is only getting worse and should be getting better," Pelosi told reporters. Senate Democratic leader Chuck Schumer (D-NY) said yesterday, "Speaker Pelosi and I are working on a big, bold plan that will deal with the magnitude of the problem," and called the forthcoming proposal "Rooseveltian."

Senator Schumer continued to question Republican calls for a break in coronavirus legislating. Unemployment figures out this morning could strengthen the case for more relief, showing the rate at 14.7% — "Worst Since Great Depression," the New York Times headline blared.

The Washington Post reported that the plan could include a guaranteed income proposal for worker salaries at businesses of all sizes, without going through banks. Additional direct payments may also be proposed.

Ways and Means members Rep. Stephanie Murphy (D-FL) and Suzan DelBene (D-WA) and others have proposed an expansion of the ERTC value per employee per quarter from $5,000 for the remainder of the year to $12,000 by increasing the credit percentage from 50% to 80% of qualified wages and increasing the per-employee limitation from $10,000 for all calendar quarters to $15,000 per calendar quarter ($45,000 for all calendar quarters).

Other areas in the mix for the Democratic bill include testing, mortgage/rent assistance, food assistance, childcare assistance for frontline workers, pension relief, more money for federal matching funds for Medicaid and for facilities that provide Medicaid services, a ban on utility shut-offs, expansion of broadband access, and student loan relief.

No telling how Republicans will react to release of a Democratic bill that will likely represent a negotiating position for eventual talks — and, some say, partially a Democratic wish list — but the Administration is considering sidestepping Congress and doing some things on its own, including pushing the already extended tax filing deadline from July 15 to September 15 or December 15, NBC News reported.

Implementation

The Treasury Department told 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 7 that it would be revising ERTC guidance in response to their concerns that employers who continue providing qualified health benefits to their employees do not qualify unless they continue paying other qualifying wages. The IRS has updated its FAQs #64-65 to address the issue. Also, the IRS has added a new FAQ #79 regarding businesses that repay their PPP loan by May 14.

On another matter, deductibility of payments of expenses that result in loan forgiveness under the PPP, Treasury said that they appreciate the lawmakers sharing their concerns and will take their views under consideration. The members asked Treasury to allow deductions for expenses associated with PPP loans that are ultimately forgiven, which IRS prohibited in Notice 2020-32, a position Secretary Mnuchin has defended as preventing "double dipping" by taking deductions for money that is not taxable.

Also May 7, IRS Revenue Procedure 2020-30 provided that certain activities are not taken into account for purposes of IRC Section 1503(d) or Form 8858. As a result of travel restrictions and disruptions resulting from the global outbreak of the virus that causes COVID-19, individuals may temporarily conduct activities in a foreign country that would not otherwise have been conducted there, the IRS said.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through May 7.

The EY Webcast "Tax in the Time of COVID-19" is today, May 8, at 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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