July 30, 2020
What to Expect in Washington (July 30)
The Administration continues to promote a narrow coronavirus bill to extend expanded unemployment benefits and prevent evictions given the slow progress in reconciling the $1 trillion in relief outlined by Senate Republicans this week with the $3 trillion Democratic bill passed by the House in May. "As of now, we're very far apart. And because of that, the President and we have discussed a short-term extension to UI and the evictions so that we have some period to negotiate before this runs out," Treasury Secretary Steven Mnuchin said in remarks with the President before his departure to Texas. President Trump said, "We want to work on the evictions so that people don't get evicted. We'll work on the payments for the people. And the rest of it, we're so far apart, we don't care."
White House Chief of Staff Mark Meadows, who with Secretary Mnuchin is negotiating with Democrats, said yesterday, "We're nowhere close to a deal," and predicted the expanded unemployment benefits expiring July 31 would lapse. The New York Times cited senior Republican Senator John Cornyn (R-TX), who is up for re-election this year, as saying, "There's no agreement on anything — I'd call it an exchanging of views, part of the catharsis you've got to go through before we actually get to a position." He said the challenges of the pandemic and impending election make negotiating difficult, but suggested the current situation is consistent with how Congress sometimes operates. "We're going to try everything else that doesn't work until we finally get to what does work. It's a process." Talks continue today.
Senate Majority Leader Mitch McConnell (R-KY) also struck a tone of 'this is how Congress operates,' saying on PBS NewsHour "many things around here happen at the last minute … so hope springs eternal that we will reach some kind of agreement, either on a broad basis or a more narrow basis, to avoid having an adverse impact on unemployment." He elsewhere said Democrats supporting the continuation of the $600 unemployment benefit add-on is an "unhinged position," and suggested House Speaker Nancy Pelosi (D-CA) could potentially refuse to negotiate until the election.
The President criticized Democratic efforts to provide additional funding for state and local governments that is not in the GOP plan, but Speaker Pelosi said during a news conference yesterday it is necessary "if we want to send our children to school and want to open up our economy." Senate Democratic leader Chuck Schumer (D-NY) said Republicans don't have a comprehensive plan and now, "They try to come up with a skinny little bill that doesn't rise up to the moment and they can't even pass that in their own Senate."
Tax — There are some areas of common ground like Employee Retention Tax Credit (ERTC), a refundable payroll tax credit created in the CARES Act. Both the HEROES Act passed by the House 10 weeks ago and this week's Senate HEALS Act relax the eligibility requirement that businesses lose 50% of gross receipts compared to the same quarter in 2019. Under the House bill, the credit would equal 80% of wages per employee up to $15,000/quarter ($45,000/year); under the Senate bill, the credit would be 65% of per-employee wages up to $10,000/quarter ($30,000/year). "The short answer is that that should be an easier provision to reach common ground on," House Ways & Means Committee Ranking Member Kevin Brady (R-TX) said in Politico.
A Wall Street Journal article focused on the bipartisan 'mobile workforce' proposal in the Senate package to create uniform rules for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders due to the pandemic. "Supporters of the Republican proposal say that under current law, many remote workers affected by the pandemic will have to file income-tax returns in more than one state for 2020, and some will face higher taxes," the article said.
The House yesterday approved 250-161 as a standalone bill (H.R. 7327) some childcare provisions included in the HEROES Act, including making the child and dependent care tax credit (CDCTC) fully refundable, increasing the maximum credit rate to 50%, making the phaseout threshold begin at $120,000, and doubling eligible expenses; and increasing the exclusion for employer-provided dependent care assistance from $5,000 to $10,500. The bill also includes payroll tax credits for expenses of childcare facilities subject to closure by reason of COVID-19 and for certain employee dependent care expenses paid by employers. The Senate is not expected to take up this bill.
The Internal Revenue Service today issued Notice 2020-58 that provides additional relief to taxpayers in satisfying the substantial rehabilitation test for purposes of the rehabilitation credit.
IRS today also issued proposed regulations updating various tax accounting regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA).
Yesterday, IRS issued proposed regulations relating to the excise taxes imposed on certain amounts paid for transportation of persons and property by air.
Election — In a tweet today, President Trump raised the prospect of delaying the election.
The Committee for a Responsible Federal Budget has posted "Understanding Joe Biden's 2020 Tax Plan," showing it would raise between $3.35 trillion and $3.67 trillion over a decade if enacted in full starting in 2021 and "the ultimate fiscal, economic, and distributional impact of Vice President Biden's tax policies will depend on how newly raised revenue is spent or allocated."
The global EY Tax COVID-19 Response Tracker is updated through July 28.