This week (June 15-19)

Congress: The Senate is in session next week, but the House is not planning to hold votes. The Senate is adjourned until Monday June 15 at 3 p.m. and will likely spend the first half of next week completing consideration of the Great American Outdoors Act (H.R. 1957), which addresses issues like land and water conservation and national park and forest maintenance. Hearings continue in both chambers, with a tax hearing in a Ways & Means subpanel and both tax-writing committees holding trade hearings.

SRM tax hearing: The House Ways and Means Select Revenue Measures Subcommittee will hold a hearing on "Tax Relief to Support Workers and Families during the COVID-19 Recession" on Thursday, June 18 at noon. Politico cited a Committee spokesperson as saying the discussion may include refundable tax credits and other "safety net"-type tools.

Last week (June 8-12)

Coronavirus (COVID-19): The Trump administration has been trying to soothe concerns over another wave of coronavirus infections amid spikes in some states and a stock sell-off this week, and to keep the focus on reopening the economy. Treasury Secretary Steven Mnuchin suggested on CNBC June 11 that reopening efforts shouldn't be retracted, saying, "We can't shut down the economy again. I think we've learned that if you shut down the economy, you're going to create more damage." It's unclear whether troublesome signs in the market and the nation will affect the timing and substance of a next coronavirus bill, about which Secretary Mnuchin said, "We're prepared to go back to Congress for more money to support the American worker." There have been multiple signals that a next coronavirus response bill that could include tax proposals won't get off the ground until the second half of July, with CNBC the latest to report that White House and Republican negotiators don't plan to begin talks until Congress returns the week of July 20 from the Independence Day recess. Previously, Politico reported fourth-ranking Senate Republican Roy Blunt (R-MO) as saying, "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." Republican leaders have yet to craft a united position on what proposals should be included and Senate Majority Leader Mitch McConnell (R-KY) is pushing for a next bill to stay within about $1 trillion, compared to the $3 trillion House-passed HEROES Act that Democratic leaders continue to advocate.

Tax proposals: The Washington Post June 12 reported that Senate Finance Committee members are "studying a proposal that would allow corporations to claim a bevy of federal tax credits in 2020 that they would otherwise be ineligible to receive until future years." The proposal would void the limitation on claiming federal tax credits that exceed a corporation's overall tax liability, which currently requires them to roll credits into future years, allowing corporations to "cash out" on all their credits this year, the report said. Secretary Mnuchin was on Capitol Hill June 10 and expressed support for another legislative stimulus package to offer pandemic relief, saying, "We're open-minded, but we absolutely believe small businesses — and by the way, many big businesses in certain industries — are absolutely going to need more help," and "there is still significant damage in parts of the economy … We will have a significant amount of unemployment, and we're going to need to look at doing something there." During a Senate Small Business & Entrepreneurship hearing on the Paycheck Protection Program (PPP), Secretary Mnuchin said "I definitely think we are going to need" more bipartisan legislation to put more money into the economy, and that any bill should include help for travel, retail and leisure businesses, and possibly more cash for American families. "Whatever we do going forward needs to be much more targeted particularly to the industries and small businesses that are having the most difficulty in reopening as a result of Covid-19," he said, specifying restaurants and hotels as in need of further support. Secretary Mnuchin further said he did not support the idea of including capital gains tax cuts in a next stimulus bill. "It's something we've discussed," he said. "My opinion right now is that the Fed facilities have unlocked the capital markets. There's a lot of liquidity for investment … That's something we'll look at, but I think we're much more targeted at getting back to work."

PPP deductibility: Tax Notes reported June 10 that high-ranking GOP Senator John Cornyn (R-TX) is trying to win quick Senate approval of the Small Business Expense Protection Act of 2020 (S. 3612) to allow businesses to claim a deduction on expenses incurred while using PPP loan money, and is "chipping away at these holds" from lawmakers with objections.

SFC unemployment hearing: There weren't many new developments during a Senate Finance Committee hearing on unemployment benefits June 9. Republicans argued the $600 per-week unemployment benefits expansion provides an incentive for people to stay out of work and should end and discussed Senator Rob Portman's (R-OH) proposal for a temporary $450 per week return-to-work bonus as an alternative going forward. Democrats said they didn't understand how Republicans can both celebrate last Friday's employment numbers while also arguing that there is a UI disincentive for people returning to work and argued that worker benefits are necessary given the money spent to support businesses and uncertainty about the economic recovery.

Election: Amid improved prospects for Democrats to take control of Washington in 2021, a CNN article discussed presumptive Democratic presidential nominee Joe Biden's call for increasing the corporate tax rate to 28% and other proposals, and how other areas, like trade, could be more business-friendly than under the current Administration. Biden hasn't said much new on tax policy and, unlike previous campaigns and candidates, doesn't yet have high-profile surrogates laying the groundwork for his economic agenda. A New York Times story yesterday said Biden "relies on veteran advisers with Washington roots and has begun sounding out other economists on the ideological left, but his campaign will not say who really has his ear." The article said, "As the pandemic worsened and businesses shut down in response, [Biden] has become more fixated on questions of how to preserve business dynamism and to accelerate job creation in recovery." Biden released a plan for reopening that includes a federal testing approach.

Like-kind regulations: On June 11, IRS released proposed regulations reflecting statutory changes limiting section 1031 to exchanges of real property. The TCJA amended section 1031 to limit its application to exchanges of real property for exchanges completed after December 31, 2017.

IRS PGP: The IRS third quarter update to the 2019–2020 Priority Guidance Plan was released June 11. Listed under "additional projects" under the international heading are "Regulations related to the foreign tax credit, including on the allocation and apportionment of interest expense, the definition of a foreign income tax, and the timing of when foreign taxes accrue and may be claimed as a credit." IRS June 10 published (Notice 2020-47) its annual request for the public to submit recommendations for items to be included in the next Priority Guidance Plan, which covers the period from July 1, 2020 through June 30, 2021, with a July 22 deadline for consideration.

Leave-based donation: In Notice 2020-46 June 11, IRS provided guidance on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the COVID-19 pandemic. It provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation, or personal leave which their employees forgo will not be treated as wages (or compensation).

Medical care regulations: IRS June 8 released proposed regulations addressing the treatment of medical care arrangements under 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% AGI.

NMTC: On June 12, Treasury/IRS provided tax relief for certain taxpayers affected by the COVID-19 pandemic involved in new markets tax credit transactions. The taxpayers receiving relief are community development entities (CDEs) and qualified active low-income community businesses (QALICBs) investing and conducting businesses in low-income communities. Notice 2020-49 provides a CDE or QALICB with relief for certain specified time-sensitive acts that are due to be performed between April 1, 2020, and Dec. 31, 2020, in order to meet requirements under section 45D of the tax code and its regulations.

OIRA 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 NOL rules was completed by OIRA in March. Still listed as under review are: final regulations under IRC Section 250, relating to the foreign-derived intangible income (FDII) provision and the global intangible low-taxed income (GILTI) provision; a final rule on Domestic Production Activities Deduction for Specified Agricultural or Horticultural Cooperatives [TCJA]; and carried interest regulations under IRC Section 1061 that have been resubmitted for review.

Regulations watch: Below is a timeline for guidance projects released by the IRS related to the TCJA.

Quotable

"I think it's important again to note what's going on all around us, and that is the acknowledgement of racial injustice that has gone on for far too long in this country. I certainly support those who are speaking out and making their voices heard in a peaceful manner to bring about change. While change does not always come easily, I want to remind those watching this hearing today that change is possible. In December of 2018, the First Step Act — which I introduced — became law. This law is the most significant criminal justice reform law in a generation. A lot of people didn't think it was possible. But we did it by working together — it was a bipartisan effort." — Senate Finance Committee Chairman Chuck Grassley (R-IA), June 9 hearing on unemployment benefits

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