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July 24, 2020

What to expect in Washington (July 24)

Senate Majority Leader Mitch McConnell's (R-KY) proposal for the next coronavirus bill now won't be released until at least Monday. "The Administration has requested additional time to review the fine details," he said yesterday, "but we will be laying down this proposal early next week. We have an agreement in principle on the shape of this package." The comments followed Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows going into a morning meeting with McConnell that Meadows said was over final details and "hopefully we'll be able to resolve this." The form of the rollout is unclear, but the GOP plan could begin as a series of bills rather than a single package.

The Washington Post reported it was Secretary Mnuchin that suggested a stopgap measure to only extend expanded unemployment benefits past July 31 as other aspects of relief are negotiated, though the idea was dismissed on Capitol Hill given the enormity of the crisis. "This terrible virus is still with us. It kills more Americans every day," Senator McConnell said. House Speaker Nancy Pelosi (D-CA) said, "We cannot piecemeal this," and both she and Senate Democratic leader Chuck Schumer (D-NY) repeated that Republicans need to have something down on paper before negotiations can begin in earnest.

"[H]ere we are, still waiting for the Republicans to put together a partisan bill … " Senator Schumer said during a joint news conference. "And now, we're hearing that the Republicans may only be able to produce a series of disjointed small proposals that don't even add up to a coherent plan to fight COVID." He criticized the likely omission from the GOP plan of food and rental assistance and state and local government funding. Asked whether the bill can be completed by the end of next week as the Administration aims, the Speaker said, "Well, depending on what they come up with."

Additional stimulus checks are likely to be called for in the GOP proposal, and Secretary Mnuchin said they would be proposed at the same amount as under the CARES Act — $1,200 per individual, $2,400 for couples and $500 for each qualifying dependent. The Wall Street Journal reported on positive prospects for tax items like a 'mobile workforce' plan to exempt employers from withholding state income tax and workers from filing returns in another state if they work there for 30 or fewer days a year and provide that rules for determining worker presence won't apply for 2020, and a refundable payroll tax credit for safe business opening/operations through testing, cleaning, PPE, and reconfiguration.

The approach to unemployment benefits was said to be a main sticking point. The Administration has suggested "that the opening Republican bid would be for workers to receive 70% of their previous salary in combined state and federal benefits — which works out to an average of about $200 per week in federal benefits for a typical worker," the New York Times reported. Secretary Mnuchin also said there would be a "turbocharged tax incentive" for hiring, though the details are unclear, Politico. reported.

In the background of the negotiations is the sentiment by some Republicans, including a significant number of senators, that another costly bill should not be pursued. A Wall Street Journal editorial said aside from liability protection and testing money, "The rest of the GOP proposal is a $1 trillion spending bonanza on all and sundry;" another round of direct payments "does nothing for growth;" and "the worst idea is to extend the federal unemployment bonus for several more months." An op-ed by Senator Ron Johnson (R-WI) said Congress has authorized $2.9 trillion of relief, equal to 13.5% of 2019's US GDP, and more than $1 trillion of it hasn't yet been spent or obligated. "So why is Congress rushing to pass at least $1 trillion more?"

A New York Times analysis noted the challenge of Republicans producing a recovery plan before the unemployment benefits add-on expires July 31 and said one complicating factor is the wide range of opinions on how to proceed and fears among senators that they will be shut out of leadership-driven talks. It said senators protesting further aid are outnumbered by those who recognize that members, especially the ones in tough races, "can hardly return home to campaign through August and tell tens of thousands of anxious jobless voters that, sorry, the expanded unemployment benefits have run out."

Although unclear as to whether they would make it into the next COVID response bill, House Ways & Means Committee Republican members yesterday unveiled bills to:

  • repeal the requirement to amortize R&D costs beginning in 2022;
  • make permanent TCJA's full expensing provisions;
  • double the R&D credit;
  • lower the tax rate on the income from the domestic manufacturing and sales of active pharmaceutical ingredients (API) and medical countermeasures; and
  • allow US companies to bring back their IP developed offshore without any immediate U.S. tax cost.

The White House issued a fact sheet last night saying, "President Donald J. Trump is taking action to ensure schools safely reopen in the fall and empower parents to make decisions about their children's education."

Election — The Cook Political Report issued a report yesterday, "Almost 100 Days Out, Democrats Are Favored to Take Back the Senate," and updated ratings of specific races:

  • Senator Martha McSally's (R-AZ) race moved from toss up to lean D;
  • Senator Joni Ernst (R-IA) moved from lean R to toss up;
  • Senator David Perdue (R-GA) moved from lean R to toss up; and
  • races in Minnesota (Smith) and New Mexico (open/Udall retiring) moved in favor of Democrats.

Rep. Lewis — Speaker Pelosi announced that "late Civil Rights icon Congressman John Robert Lewis will lie in state in the United States Capitol Rotunda," on Monday, July 27 and Tuesday, July 28.

The global EY Tax COVID-19 Response Tracker is updated through July 21.

Today, July 24 from 12:00-1:00 p.m. EDT is the next webcast in the EY series discussing Tax in the time of COVID-19. This week's panelists will provide updates on: (i) The US legislative and economic landscape; (ii) Global tax policy developments; (iii) Treasury and IRS regulatory projects; and (iv) any IRS and breaking developments. Click here to register.


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