The Administration's focus on reopening the economy was on display during White House events and during a Senate Banking Committee hearing that aired contrasting views over the pace of lifting shutdown orders and whether Congress needs to provide more funding to ease economic woes, following which it doesn't seem like bipartisan talks on future action are imminent.

In testimony, Treasury Secretary Steven Mnuchin talked of the importance of "bringing people back to work in a safe way," said "we are optimistic about the progress being made on vaccines, antiviral therapies and testing," and that "Working closely with the governors, we are beginning to open the economy in a way that minimizes risk to workers and customers." Fed Chairman Jerome Powell cautioned that the public regaining confidence will require them "believing that it's safe to go back to work and go out" through "a sensible, thoughtful reopening of the country" that we're in the early stages of now.

Some members of the Committee challenged the safety of the pace of reopening advocated by the Administration, but Senator Pat Toomey (R-PA) reminded them that the "very specific reason and that was to prevent the virus from spreading so rapidly that so many people would get sick so quickly that we would overwhelm our hospitals," and "it's been clear for weeks now we're not going to overwhelm our hospitals." Secretary Mnuchin said there is the risk of permanent damage if shutdown orders continue for too long.

Senator Mark Warner (D-VA) said that losing a job in a recession could be devastating and asked the witnesses to talk about "the long-term scars this would present if we don't take aggressive action." Powell said there's "clear evidence that when people are unemployed for long periods of time, that can permanently weigh both on their careers and their ability to go back to work, and also weigh on the economy for years." He said this has been the "biggest response by Congress ever and the fastest, and the biggest from [the Federal Reserve]. And still this is the biggest shock we've seen in living memory. And the question looms in the air, is it enough?"

Senator Toomey laid bare the Republican position of letting the unprecedented level of aid work more before Congress passes another bill, saying, "we authorized something on the scale of $3 trillion to round things off of direct spending and lending, and then authorized the Fed to complement that with another roughly $3 trillion," which is about 30% of the nation's annual economic output and "actually more than half of it has not yet been spent or lent. So, I think you can make a pretty strong case that, before we rush out and do another spending bill, we actually let some of this stuff go to work and understand the consequences of what we've already done."

White House

At the White House, President Trump declared, "We're going to safely re-open our country and our economy and it's happening very rapidly and it's happening interestingly where numbers are actually going down," citing Florida and Georgia. Addressing an issue Democrats have challenged the Administration over, the President said, "In our drive to crush the virus, the U.S. has completed nearly 12 million tests and that test - that number today is almost 14 million." The comments came during a cabinet meeting where the President seemed to foretell that the Administration expects another round of stimulus payments, asking Secretary Mnuchin regarding the transmittal of the first round of payments, "Do I sign the letter again or not?" Mnuchin responded, "The next time we send money, you'll get to send another letter." The President concluded by saying, "the numbers are coming down all over the United States very rapidly, very rapidly. It's a beautiful thing to watch. But it's left behind serious death. And it shouldn't have happened."

The President separately made remarks on supporting farmers, ranchers and the food supply chain, saying reopening is "happening very fast — much faster and with much better numbers than anybody would have thought." President Trump highlighted the "historic tax cuts" he signed in the Tax Cuts & Jobs Act, and especially noted estate tax relief. The President got into the particulars of certain aspects of agriculture, saying of one White House guest, "He gave me a little education on potatoes." He said Republicans were going after the Virginia governorship: "They want to take your Second Amendment away. You know that, right? You'll have nobody guarding your potatoes."

Onshoring

The Administration has not formally rolled out tax proposals for a next congressional bill, but National Economic Council Director Larry Kudlow told reporters yesterday, "We've offered a payroll tax holiday so that you come back to work (and) those folks will get a higher after-tax wage - 7.6% higher." He continued to express interest in "onshoring" proposals after having previously floated the idea of a 10.5% rate for companies that bring operations back from overseas "We're going to look at the numbers and assess what we think is necessary and not necessary," Kudlow said, as reported by Reuters. "I'm being vague because I can't commit."

Law360 reported House Ways and Means Committee Chairman Richard Neal (D-MA) as saying he wanted to examine targeted incentives to provide rewards to corporations that move factories and jobs to the US in negotiations over possible further legislation. "I'm very interested in it," he said, adding that he has some skepticism that the TCJA had been as successful in returning operations to the US as promised. Ranking Member Kevin Brady (R-TX) said he planned to push for a targeted incentive aimed at companies that move overseas production to the US, such as a possible lowering of the 21% corporate income tax rate or a tax credit. "The top-line rate may stay the same, but they may get a credit underneath it. We haven't decided on whether it will be a credit or a rate reduction," Brady told Law360.

Senator Debbie Stabenow (D-MI) is reviving her "Bring Jobs Home Act" from previous Congresses to (1) grant business taxpayers a tax credit for up to 20% of insourcing expenses incurred for eliminating a business located outside the US and relocating it within the US, and (2) deny a tax deduction for outsourcing expenses incurred in relocating a US business outside the US.

The Senate will be out next week, but the House is expected to reconvene in some fashion (on May 27) to consider Foreign Intelligence Surveillance Act (FISA) reauthorization legislation as well as a bill to make changes to the CARES Act Paycheck Protection Program (PPP).

Administration actions

An Executive Order released May 19 on Regulatory Relief to Support Economic Recovery said in part: "The heads of all agencies shall identify regulatory standards that may inhibit economic recovery and shall consider taking appropriate action, consistent with applicable law, including by issuing proposed rules as necessary, to temporarily or permanently rescind, modify, waive, or exempt persons or entities from those requirements, and to consider exercising appropriate temporary enforcement discretion or appropriate temporary extensions of time as provided for in enforceable agreements with respect to those requirements, for the purpose of promoting job creation and economic growth, insofar as doing so is consistent with the law and with the policy considerations identified in section 1 of this order."

The Small Business Administration yesterday released an interim final rule on "Business Loan Program Temporary Changes: Paycheck Protection Program — Treatment of Entities with Foreign Affiliates," that is seen as a clean-up of some language in the FAQs on the PPP.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through May 18.

An EY Webcast on Thursday, May 21 (at 9:00 a.m. ET), is "Corporate Tax amid a Pandemic: Insights on running a tax function in challenging times." Around the world, heads of tax are having to navigate a labyrinth of tax implications like availing of global stimulus and tax incentives, technological dependencies and demands, and changing supply chains. Please join Kate Barton, EY's Global Vice Chair - Tax, and prominent Tax business leaders as they discuss what needs to be considered now to increase resilience and thrive in what comes next and beyond. Other panelists include: Dan Goff, Corporate Vice President, Worldwide Tax and Trade, Microsoft; Janine Juggins, Executive Vice President, Global Tax & Treasury, Unilever; Louise Weingrod, Vice President, Global Taxation, Johnson & Johnson; and Mark Weisz, Senior Vice President, Global Tax, Walgreens Boots Alliance. Link

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