Tax News Update    Email this document    Print this document  

June 18, 2020

Ways & Means subpanel holds hearing on COVID-19 tax relief

The House Ways and Means Select Revenue Measures Subcommittee hearing on "Tax Relief to Support Workers and Families during the COVID-19 Recession" June 18 focused on individual relief like expanded refundable tax credits and direct payments to help families through the pandemic, though members also discussed tax proposals that help businesses retain employees and make workplaces safe.

In an opening statement, Chairman Mike Thompson (D-CA) focused on the House-passed HEROES Act that extends and expands economic impact payments, and broadens tax relief through the Child Tax Credit, the Earned Income Tax Credit, and the Child and Dependent Care Tax Credit. "The Republican Senate must act now," he said. The House approved the bill in mid-May but Republican leaders don't foresee negotiating a next coronavirus response bill until mid-July.

Ranking Member Adrian Smith (R-NE) said the primary focus must be on ensuring future legislation is directed at reopening the economy and incentivizing a safe return to work and said Rep. Tom Rice (R-SC) is working on a bill which will help businesses to reopen safely. To restore worker and customer confidence, it would create a temporary tax incentive through the end of 2020 to help businesses defray costs for testing, PPE, and reconfiguring workplaces, stores, plants and offices, he said.

Witnesses were:

  • Amy Matsui, Senior Counsel, The National Women's Law Center
  • Indivar Dutta-Gupta, Co-Executive Director, Georgetown Center on Poverty and Inequality at the Georgetown University Law Center
  • Allison Bovell-Ammon, Director of Policy Strategy for Children's HealthWatch at Boston Medical Center
  • Martha Rodriguez, Preschool educator, Renton, WA
  • Kyle Pomerleau, Resident fellow, American Enterprise Institute (AEI)

Several witnesses spoke in favor of helping struggling families through the crisis through food and housing relief, as well as tax credit expansions and refundability. Witness Amy Matsui (who is the daughter-in-law of the late former Committee member Bob Matsui) said in her testimony, "Even when the country is not in the midst of a recession, the boost in income provided by refundable federal income tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) helps families make ends meet and reduces the harsh economic effects of gender and racial inequity."

Pomerleau spoke in opposition to White House suggestions for industry-specific tax incentives and House Democrats' proposed repeal of the state and local deduction cap and paring back of net operating loss (NOL) provisions. He said more generally of future legislation, "businesses and individuals will likely need additional support" and if the tax code is used to provide additional assistance, lawmakers "should ensure that tax relief is temporary and well targeted to individuals and businesses affected by the pandemic."

Individual relief

During Q&A, Rodriguez said the uncertainty of what school will look like in the fall, for educators and working parents, makes economic relief even more necessary. Dutta-Gupta also spoke about families struggling with childcare because schools were shuttered, and advocated policies that create good-paying jobs and other means of delivering funds to those in need.

Rep. Smith asserted that business tax policy can benefit workers, which Pomerleau agreed with, saying many of the steps taken thus far have been to help employers maintain payroll and retain employees, such as the deferral of employer-side payroll. He said a main goal of the economic relief was to increase business liquidity and help families maintain budgets and pay bills, and that raising taxes for businesses or individuals will impede that goal.

Rep. Suzan DelBene (D-WA) noted her American Family Act (H.R. 1560) to make the Child Tax Credit fully refundable and increase the amount of the credit and allow an additional credit for children who are under six years of age. She also mentioned the expansion of the credit in the House-passed HEROES Act.

Business issues

Rep. Drew Ferguson (R-GA) said we have to protect American intellectual property (IP) and asked whether it would be beneficial to consider proposals making repatriation of IP possible and more advantageous. Pomerleau noted the Tax Cuts & Jobs Act (TCJA) provisions on amortization of R&D expense beginning in 2022, foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). Lawmakers could address issues that would improve effectiveness of those provisions, he said.

Rep. Lloyd Doggett (D-TX), who has proposed rolling back CARES Act NOL provisions, criticized the bill for directing the majority of its benefits to businesses. He also opposed National Economic Council Larry Kudlow's suggestion in press interviews that the corporate tax rate be halved for companies bringing jobs back to the United States as well as proposals for monetizing tax credits. Matsui said relief to families should be the priority.

Rep. Don Beyer (D-VA) defended Democratic proposals to exclude from NOL provisions corporations that don't meet executive compensation or stock buyback requirements.

Rep. Rice said tourism and hospitality, including Myrtle Beach in his district, have been devastated and businesses have been able to stay afloat through the Payroll Protection Program (PPP). He pushed back against Rep. Doggett's suggestion that the relief has tilted towards big businesses. He asked whether a credit for making workplaces safe would be beneficial. Pomerleau said there is logic to improving workplaces to make employees feel safe, whether provided through a tax credit or other incentives.

Pomerleau said extending the NOL provision may be appropriate, and Congress should also look at TCJA provisions like the phase-down of bonus depreciation after 2022 and amortization of R&D expense requirement beginning in 2022, which will negatively impact cash flow and may need to be paused.

Rep. Darin LaHood (R-IL) promoted his bill with Stephanie Murphy (D-FL), the "Clean Start: Back to Work Tax Credit" bill, to create a temporary tax credit available for businesses to make sure their workplaces are properly cleaned as stay-at-home restrictions are lifted, protecting both workers and customers. Each business entity including but not limited to franchisors or franchisees, and commercial property owners and management companies would be eligible for a 50% tax credit of up to $25,000, per location, up to a maximum of $250,000 per business entity.

Testimony is available here.


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Any member of the group, at (202) 293-7474.