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July 27, 2020

What to Expect in Washington (July 27)

Senate Majority Leader Mitch McConnell's (R-KY) coronavirus proposal is expected to be released today as a series of bills, while Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows continued to suggest that Congress may have to approve a stopgap measure to mainly extend expanded unemployment benefits past July 31 as broader relief is negotiated. House Speaker Nancy Pelosi (D-CA) last week rejected that approach, saying, "We cannot piecemeal this." How the week's events unfold is unclear.

On ABC's This Week, Chief of Staff Meadows said, "Honestly, I see us being able to provide unemployment insurance, maybe a retention credit to keep people from being displaced or brought back into the workplace; helping with our schools … If we can do that, along with liability protection, perhaps we put that forward, get that passed and we can negotiate on the rest of the bill in the weeks to come."

On CBS's Face the Nation, Speaker Pelosi noted that the House approved its HEROES Act over 2 months ago, and that the chamber won't break for the August recess until further relief is enacted. "We can't go home without it," she said. The August 3 scheduled start of the House recess is increasingly in doubt. She highlighted the need for additional state and local funding and the simplicity of the $600 unemployment insurance add-on in the CARES Act, as opposed to a %-of-wages formula Republicans are discussing.

A Washington Post story over the weekend cited an unnamed Senate Republican aide as predicting that lawmakers would opt for a flat $200 unemployment add-on as opposed to the more complicated formula approach. The story also cited Senator McConnell as suggesting a bipartisan deal would take longer than the July 31 unemployment expiration, saying at a Kentucky event, "Hopefully we can come together behind some package we can agree on in the next few weeks."

Mnuchin and Meadows were at the Capitol meeting with staff over the weekend working on the package. Secretary Mnuchin said on Fox News, "the administration and the Senate Republicans are completely on the same page. Mark Meadows and I were up yesterday just working on technical issues in the drafts."

Within the Republican party, there are a significant number of members who don't support any additional relief. Senator Lindsey Graham (R-SC) predicted on Fox News that half of Senate Republicans will vote against any type of relief but expressed optimism that a next bill would be finalized by August 5. Senator Ted Cruz (R-TX), a leading voice against more relief and in favor of reopening the economy, said on CBS of Speaker Pelosi, "Her objectives are shoveling cash at the problem and shutting America down. And, in particular, you look at the $3 trillion bill she's trying to push, it's just shoveling money to her friends, and not actually solving the problem."

Speaker Pelosi continues to make the point that Republicans were not concerned about the cost of the Tax Cuts & Jobs Act (TCJA), and so should not balk at pandemic spending. She said on Face the Nation yesterday that the TCJA tilted benefits toward the wealthy at a "cost of $2 trillion to the national debt," and questioned how Republicans are now "resenting $600 for single moms to be able to put food on the table, for dads to maintain the dignity of keeping their families intact, and with unemployment insurance … "

This week, the Senate Finance Committee holds two hearings on the medical supply chain and a hearing on WTO reform.

Health — On Friday, July 24, President Trump signed four executive orders targeting high prescription drug costs. The orders would: 1) Require Federally Qualified Health Centers to pass through savings on insulin and injectable epinephrine from the 340B program directly to certain low-income patients, allowing them to acquire the drugs at cost; 2) Expand on the administration's earlier drug importation efforts, broadening them to include insulin and epinephrine products; 3) Eliminate regulations permitting manufacturer rebates to pharmacy benefit managers (PBMs), unless the rebates are provided directly to the patient at the pharmacy counter; and 4) Create a "Most Favored Nation" (MFN) policy basing the price of certain Medicare Part B drugs on prices in economically comparable countries.

Election — The AP reported over the weekend on one factor that makes former national security adviser Susan Rice a top contender for presumptive Democratic presidential candidate Joe Biden's running mate pick: familiarity. The story noted that, while Rice has never run for office, she provided daily briefings to Biden during the Obama era and said, "it's the close working relationship Rice forged with Biden during the Obama administration that is seen as a key intangible that other contenders simply don't have."

The Wall Street Journal this morning reported on Biden's proposed 15% surtax on companies' book income over $100 million, saying while it "targets profitable companies that pay almost nothing" and that increasing corporate taxes resonates with voters, "critics say Mr. Biden's proposal could be counterproductive, partly because it would discourage companies from using tax breaks Congress created to promote investment in some of the very things the former vice president is trying to promote, such as renewable energy, low-income housing and manufacturing."

The global EY Tax COVID-19 Response Tracker is updated through July 26.

EY Webcasts this week include, on Tuesday, July 28 (at 4:00 p.m. ET), Teleworker tax implications for COVID-19 and beyond. In their response to the COVID-19 pandemic, states and localities issued stay-at-home orders and guidelines for social distancing that dramatically increased the number of employees working from home. During this crisis, telework arrangements provide an essential job safety net to workers while COVID-19 containment efforts are underway. To help you identify the tax implications of telework arrangements, we have brought together our EY employment and business tax professionals to discuss these issues. Register for this Thought Center Webcast.


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