July 9, 2020
What to expect in Washington (July 9)
Presumptive Democratic presidential nominee Joe Biden is set to give a speech today (July 9) calling for reviving the US economy by spurring manufacturing and encouraging innovation, including through a push to buy American and incentivize American jobs, as well as facilitating clean energy and the "caring" economy such as child and elder-care workers and domestic workers, Bloomberg reported.
The Wall Street Journal posted a story this morning saying the "'Buy American' initiative would require that some portion of federal funds be set aside for domestic producers," and the speech, an adviser said, "will serve notice to American trading partners that, even if Mr. Trump loses in November, allies shouldn't expect Washington to return to the embrace of economic globalization that had defined the policies of the Obama-Biden administration and two decades of Republican and Democratic presidents who preceded it."
The New York Times said Biden will propose "a $300 billion increase in government spending on research and development of technologies like electric vehicles and 5G cellular networks, as part of an effort to more aggressively challenge President Trump on economic policy," and that the plan will be offset through proposed tax increases that may roll back parts of the Tax Cuts & Jobs Act and otherwise target wealthy individuals and corporations.
Separately, the Biden-Sanders Unity Task Force released recommendations on a range of issues including the climate crisis, criminal justice, the economy, trade, and health care, in an effort to unite the presumptive nominee's campaign with the progressive wing represented by Senator Bernie Sanders (I-VT) and influence the party's platform. The economic chapter of the document said, "We will work to reform the tax code to be more progressive and equitable … the wealthiest Americans can shoulder more of the tax burden, including in particular by making investors pay the same tax rates as workers and bringing an end to expensive and unproductive tax loopholes. Corporate tax rates, which were cut sharply by the 2017 Republican tax cut, must be raised … Estate taxes should also be raised back to the historical norm."
The Wall Street Journal reported on state and local government budget shortfalls amid lower tax revenue, and associated cuts in services, saying it is unclear how much revenue will come in following the July 15 tax filing deadline many states adopted to match the federal deadline, and "It is also unclear whether states will get more help from Congress," with talks on a next bill paused until mid-July.
House Speaker Nancy Pelosi (D-CA) spoke to the issue on MSNBC yesterday, saying "on June 30th, state and local governments across the country had to balance their budgets," many public employees have lost their jobs because of the coronavirus, and the House-passed HEROES Act awaiting negotiation with Senate Republicans provides funding to state and local governments to "offset any expenses they had from the coronavirus and … make up for lost revenue because of all the shutdowns from the coronavirus."
On Fox News this morning, House Republican leader Kevin McCarthy (R-CA) spoke to the issue of school re-opening that is a priority for the White House, saying, "What I want to do is actually pass a bill that provides and focuses on child care and the schools to open safely. We want to prioritize them with funding and safe to be able to do it. We want to protect them from frivolous lawsuits. We want to give parents flexibility to use their savings accounts to actually, tax-free, be able to pay for childcare."
Reps. Pelosi and McCarthy both hold their regular news conferences today.
An editorial in today's Washington Post said given new data on beneficiaries of the SBA Paycheck Protection Program established under the CARES Act, in its next virus response package "Congress should target a narrower range of small businesses — while allowing those firms to spend the money for a wider range of purposes, beyond maintaining payroll. Realistically, the huge and hasty PPP was bound to make a lot of questionable loans. Now, however, Congress has enough time and data — as well as a duty — to fix it."
Politico reported on members of Congress proposing tax "credits for businesses to procure items that can help them more safely reopen, like personal protective equipment or contactless payment systems," and a new bill from Senators Kevin Cramer (R-ND) and Kyrsten Sinema (D-AZ) would provide "a two-year credit against payroll taxes — an approach that would also allow nonprofits and other entities that don't pay income taxes to take part."
The Congressional Budget Office (CBO) yesterday said the federal budget deficit in June was $863 billion because of "the economic disruption caused by the 2020 coronavirus pandemic and from the federal government's response to it." By comparison, the entire fiscal year 2019 budget deficit was $984 billion.
The Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) has completed its review of Final Rules Regarding the Global Intangible Low-Taxed Income High Tax Exclusion [TCJA] and a related Proposed Rule Under Section 954(b)(4) (Rules for High-Taxed Subpart F Income) and Section 964 (Rules for Determining the Earnings and Profits of a Foreign Corporation) [TCJA] (received June 16 and completed July 6).
The IRS has issued guidance (Notice 2020-54) addressing the requirement for employers to report the amount of qualified sick leave wages and qualified family leave wages paid to employees under the Family First Act. Form W-2, Box 14, or a separate statement must be used to report these amounts. This reporting requirement will provide self-employed workers who are also employees with the information they need to determine the amount of any sick and family leave equivalent credits that they may claim as self-employed individuals.
The EU said it is committed to working with the OECD to address the issue of digital taxation in draft terms of reference for the July 18 G-20 meeting. "We need to give the highest priority to finding global solutions to address the taxation of the digital economy and the remaining BEPS issues," said the text obtained and reported by Tax Notes. "We look forward to ambitious, fair, effective, nondiscriminatory and workable global solutions, and all should redouble efforts towards a consensus-based solution to deliver this goal in 2020."
The global EY Tax COVID-19 Response Tracker has been updated through July 6.
On Friday, July 10 at 12:00 p.m. ET, is the EY Webcast, Tax in the time of COVID-19: Update on the Employee Retention Credit, net operating losses and IRS developments. This week's panelists will provide updates on: (i) the legislative and economic landscape; (ii) the Employee Retention Credit (including a review of the second set of FAQs released by the government); (iii) Net operating losses — what are companies doing and has the recent guidance helped?; and ((iv) any IRS and breaking developments. Register.