On the Senate floor yesterday (June 8), Majority Leader Mitch McConnell (R-KY) said "new data showed that the economic fallout from this pandemic may have bottomed out and begun to turn around weeks earlier than had been predicted," referring to Friday jobs numbers showing employment rose by 2.5 million in May, and the unemployment rate declined to 13.3% (but would have been 3 points higher if not for an error). Senator McConnell acknowledged the "long way to go to rebuild and recover," but his comments were taken as signals of continued reluctance to act on a next response bill and were delivered alongside praise of the peaceful turn protests took over the weekend.

The Majority Leader cited peaceful remembrances and protests in Kentucky, said he still values the traditional role of police in apprehending criminals, and said he is "hopeful that, with unity and mutual respect, we can continue this important national discussion to ensure justice and equal protection under the law."

Also yesterday, Democrats unveiled their "Justice in Policing Act of 2020," with provisions including: changing the criminal statute to prosecute police misconduct; improvements in transparency of policing, misconduct and use-of-force; improvements in police training and practices, like banning chokeholds; and making it a federal crime to conspire to violate existing federal hate crimes law. Politico Playbook said Republicans are discussing what they can support and "low-hanging fruit for Republicans includes a ban on chokeholds, declaring lynching a federal crime, creating a national reporting mechanism for police officers who get in trouble and beefed-up training programs for law enforcement."

A Washington Post editorial called the measure a "good start" and likely beginning of a legislative process.

On coronavirus response, Politico said "if the economic recovery isn't as strong as they predict, [Republicans] risk being blamed by voters in November that they and President Donald Trump didn't do enough" on the pandemic and recession. "End of July … is frankly my sense of when I think we'll have all the information we need to put the next bill together. And it might be about the time when all of the money from the [previous] bills has been spent," said fourth-ranking Senate Republican Roy Blunt (R-MO).

The Senate Finance Committee holds a hearing on unemployment benefits today at 2:30 p.m. In an op-ed, Alan Blinder, formerly of the Federal Reserve, now at Princeton, and who has testified before Congress, said "return to work" bonuses are one way to reprogram expanded unemployment benefits.

Also in an op-ed, former CBO and OMB director Peter Orszag said more stimulus will be needed because recent positive job gains were sector-concentrated and much of the already allotted government support will expire. He said, "My bet: By the end of the summer, we will see that without enormous additional fiscal stimulus (whether or not it's focused on building the future) or getting lucky on the virus (either because it mutates into a less potent form or because effective drugs become available sooner than anticipated), we still face a very long ordeal ahead."

Distribution of funds

Today's Washington Post reported the money already spent on the coronavirus response is "slow to be distributed;" cited Committee for a Responsible Federal Budget estimates that about half of the roughly $3 trillion in relief funds have been obligated or committed; and quoted former longtime Senate GOP budget staffer Bill Hoagland, now at the Bipartisan Policy Center, as saying, "When you have a great deal of funds to try to get out quickly, the system just only has a certain amount it can do."

Today's Wall Street Journal reported the Administration's distribution of $175 billion in health funding "has channeled more of that money to profitable hospitals and less to struggling facilities that most need the support," and cited lawmakers' concerns about funding being distributed to Medicaid-dependent providers.

Implementation & regulations

Newly listed as under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) are proposed rules on "Consolidated Net Operating Losses [TCJA]." A previous review of net operating loss (NOL) rules was completed by OIRA in March.

Yesterday, IRS released proposed regulations addressing the treatment of certain medical care arrangements under IRC Section 213, which allows individuals to take an itemized deduction for expenses for medical care, including insurance for medical care, to the extent the expenses exceed 7.5% of adjusted gross income. The proposed regulations address direct primary care (DPC) arrangements and health care sharing ministry (HCSM) memberships.

Also yesterday, the Federal Reserve announced that its planned Main Street Lending Program, intended for mid-sized business damaged by the coronavirus pandemic, will be expanded "to allow more small and medium-sized businesses to receive support and provide businesses with greater flexibility in repaying the loans," their statement said.

EY Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through June 5.

EY tax COVID-19 Webcasts:

• Today, June 9. Domestic tax quarterly webcast series: A focus on state tax matters, 4:00 p.m. ET. The state tax edition of this quarterly webcast series provides you with information on major tax law changes in the 50 states and District of Columbia, as well as current state and local tax topics of interest. Also planned for this edition is a discussion on state responses to COVID-19 and the CARES Act. Register.
• Friday, June 12. Tax in the time of COVID-19, 12:00 p.m. ET. This week's panelists will explore: (i) what's happening in Congress and with the economy; (ii) what's new with the states; (iii) IRS developments — what's open(ing); and (iv) any breaking developments. Register

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