The Senate's plan to go out of session today (May 21) and stay out next week virtually assured Republican leaders' longtime indications that any next coronavirus legislation wouldn't begin to come together until June, after the Memorial Day recess. However, additional proposals are emerging from the Senate and one Republican, Cory Gardner (R-CO), may object to a consent agreement to adjourn, saying yesterday, "It's unfathomable that the Senate is set to go on recess without considering any additional #COVID19 assistance for the American people. Anyone who thinks now is the time to go on recess hasn't been listening."

Senator Gardner, previous chairman of the Senate GOP re-election committee who is himself in a competitive race this year, said in a series of tweets that the chamber should stay to consider issues including changes to the CARES Act Paycheck Protection Program (PPP), "a stimulus bill to address growing unemployment & help states reopen," and providing state and local government funding. Gardner also mentioned Senator Josh Hawley's (R-MO) government wage guarantee proposal that he's signed onto.

The call for near-term action, including on state and local funding, runs counter to the message Republican leaders have been sending about a pause in action, and second-ranking Senate Republican John Thune (R-SD) said yesterday he is not sure how Senator Gardner taking advantage of procedural tactics to try and block the scheduled recess or at least shine a light on the matter will be dealt with, Politico reported.

PPP changes have wide support. President Trump was receptive to calls for changes from restaurant industry representatives this week, and Treasury Secretary Mnuchin has been saying changes are in the works. A bill (H.R. 6886) to extend the loan forgiveness deadline from eight weeks to 24 weeks and make other changes is on the schedule when the House reconvenes next week (on May 27, and with a remote/proxy voting option) along with a Foreign Intelligence Surveillance Act (FISA) bill.

A New York Times story this morning observed that the PPP, meant to cover eight weeks of expenses with a forgiveness requirement that 75% of loans be spent on payroll, "is more tailored to what the crisis looked liked when shutdowns first took place in the olden times of March 2020, when it seemed that business closures would be a short-term blip and everyone might be able to get back to normal by summer." Senators Michael Bennet (D-CO) and Todd Young (R-IN) — coincidentally Gardner's successor as current chair of the Senate GOP re-election committee — are planning to unveil a bill providing for businesses to receive loans to finance six months' worth of fixed operating costs and payroll, offered at a low interest rate, no payments for 12 months, and a seven-year term, the report said, adding that the government would forgive the share of the loan devoted to payroll, rent and other fixed expenses based on the company's revenue decline.

The Washington Post reported that Senator Marco Rubio (R-FL) is finalizing legislation to give businesses up to 16 weeks to use PPP loans. "What I have found is that up here, if we just had a straight-up vote on whether or not we should extend or change the bill to say instead of eight weeks you have 12 weeks or 16 weeks to spend money on payroll, it would probably get 99 or 98 votes," Senator Rubio said. "I think the only issue in question now is, number one, will some Democrats insist that in order to agree on something that they support, they must get something else in return unrelated to that, something that is not uncontroversial? … And, number two, can we get the House to take it up and pass it as well?"

During a news conference yesterday, House Speaker Nancy Pelosi (D-CA) appeared unworried that addressing that issue could undermine efforts for a broader bill and said of the PPP bill, "what it does is extend the time in which you can re-hire people, extend the time in which you pay back and also undo the 75/25, which was debilitating." The Speaker continued to say she feels public opinion should compel Republicans to negotiate on the Democratic HEROES Act opening bid for a next bill, saying "everyone is suffering from loss of revenue. So, whether it's that or the scientific support for testing, tracing, treating, et cetera, or those who care about people having enough to eat, or being able to pay their rent, or to have money in the pockets of the American people, which is a stimulus."

On the tax side, the Senate Finance Committee is reportedly considering new incentives for businesses to hire workers, perhaps as an alternative to the employee retention credit and to address concerns that the $600 increase in weekly unemployment benefits is a disincentive for employees to return to work. Senate Majority Leader Mitch McConnell (R-KY) said yesterday an extension of expanded unemployment benefits past their July expiration will not be included in a next coronavirus bill. The Labor Department this morning reported an additional 2.4 million unemployment claims for a nine-week total of about 39 million. A spokesman for Chairman Chuck Grassley (R-IA) said employers' concerns that the beefed-up unemployment payments can be a disincentive for hiring "will have to be taken into consideration in a couple months as Congress considers next steps."

Chairman Grassley also took to the Senate floor yesterday to criticize the House Democratic HEROES Act rollback of CARES Act net operating loss carryback provisions. "Imposing a quarter of a trillion dollar retroactive tax increase on businesses in need of cash to restart their operations as states begin to lift shut-down orders is a recipe for disaster," he said.

EY Alerts and other resources are here.

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

Join EY tax professionals on Friday, May 29, from 12:00-1:00 p.m. EDT for the next webcast in our series discussing Tax in the time of COVID-19. This week's panelists will explore: (i) bonus depreciation (qualified improvement property), Alternative Minimum Tax Credit refunds and Section 165(i); (ii) the Employee Retention Credit; (iii) IRS operations and guidance; and (iv) any breaking developments. Click here to register.

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