On June 3, the Senate approved for the President's signature a House-passed bill (H.R. 7010) that would extend the CARES Act Paycheck Protection Program (PPP) loan forgiveness covered period from eight weeks to 24 weeks and require that 60% of funds be used for payroll expenses, rather than 75%. The move clears a pressing matter of coronavirus response business — restaurant executives told President Trump last month that PPP changes were their top legislative priority — and Senate action on the House bill eliminates the need for bicameral negotiations or a House re-vote. The next major coronavirus response package is still seen as about a month out, with the July 4th recess a target deadline.

Late objections to the bill in the Senate were overcome with a bipartisan letter clarifying that an extension of the PPP to the end of December would apply only to spending and would not extend the deadline for applying for PPP loans, which will remain June 30.

Looking forward - New this morning (June 4) are Labor Department unemployment figures showing 1.9 million additional filings, for an 11-week total of 42.6 million. Politico last night reported that Republicans face a dilemma in their objections to extending the $600/week unemployment benefit expansion past its July expiration over concerns it provides an incentive for employees to stay out of work. There has been GOP interest in Senator Rob Portman's (R-OH) proposal for a temporary $450-a-week bonus for returning to work. Politico cited the perception of leaving jobless Americans high and dry 3 months before the election, and second-ranking Senate Republican John Thune (R-SD) as saying high unemployment is likely to linger, "So I suspect the program will be needed for a while. We'll have to come up [with] some sort of solution."

House Ways & Means Committee Ranking Member Kevin Brady (R-TX), who has a proposal like Senator Portman's, said it is 'gaining steam,' and also yesterday said the R&D credit should be doubled and the TCJA requirement relating to amortization of R&D expense beginning in 2022 reversed, according to Politico.

Health hearing - Today (at 11 a.m.), the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies holds a hearing on COVID-19 Response with the CDC's Robert Redfield. The hearing comes on the heels of:

• The release of a CDC report May 29, "Evidence for Limited Early Spread of COVID-19 Within the United States, January-February 2020," following which Redfield told reporters the agency was "never really blind when it came to surveillance" for COVID-19 and even if widespread diagnostic testing had been in place, it would have been like "looking for a needle in a haystack."
• A New York Times story asserting, "The C.D.C., long considered the world's premier health agency, made early testing mistakes that contributed to a cascade of problems that persist today as the country tries to reopen. It failed to provide timely counts of infections and deaths, hindered by aging technology and a fractured public health reporting system. And it hesitated in absorbing the lessons of other countries, including the perils of silent carriers spreading the infection."

Fed - The Federal Reserve said on Wednesday that it is expanding the reach of its Municipal Liquidity Facility (MLF), a credit facility supporting the municipal securities market that is one of the emergency vehicles the central bank started in response to the pandemic. The change will allow state governors to designate two issuers in their states "whose revenues are generally derived from operating government activities" — such as transit agencies, airports, utilities and other institutions — to borrow under the MLF. The Fed also said it is expanding the MLF to allow all US states to be able to have at least two cities or counties eligible to directly issue notes to the MLF, regardless of population. Currently only US states and cities with a population of at least 250,000 residents, or counties with a population of at least 500,000 residents, have been able to make use of the short-term borrowing program. The move addresses criticisms of the program's availability to smaller cities by Senate Banking Committee Chairman Mike Crapo (R-ID), among others. The Fed's statement and a new term sheet for the Municipal Liquidity Facility are posted here.

Highway bill - Amid some suggestions a broader infrastructure package could be part of future coronavirus response stimulus legislation, House Transportation & Infrastructure Committee Democrats June 3 released a nearly $500 billion/5 years surface transportation bill that was part of a broader infrastructure package rolled out in January, with plans to mark up the measure on Wednesday, June 17. The current surface transportation authorization expires September 30. In addition to enabling projects on roads, bridges, and transit, the INVEST in America Act prioritizes carbon pollution reduction. The bill does not include revenue provisions, and the Ways & Means Committee could be expected to mark up a tax title at some point.

A Senate panel approved a different five-year highway bill in July 2019, though the Finance Committee has not put forward a tax title providing the revenue portion. Majority Leader Mitch McConnell (R-KY) has said before and since the pandemic that a highway bill would be the extent of infrastructure legislation in Congress, citing cost concerns over a broader plan. Democrats and President Trump have at various times said they wanted to act on a major infrastructure plan and Ways & Means Committee Chairman Richard Neal (D-MA) said he is set to discuss the issue with House Democratic leaders and Treasury Secretary Mnuchin.

Implementation

Retirement — On June 3, the IRS issued Notice 2020-42, providing temporary administrative relief to help certain retirement plan participants or beneficiaries who need to make participant elections by allowing flexibility for remote signatures. The change relates to signatures of the individual making the election to be witnessed in the physical presence of a plan representative or notary public, including a spousal consent (the physical presence requirement).

A Labor Department Information Letter released June 3 allows private equity investment as designated investment defaults in 401(k) plans.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through June 2.

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