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October 2, 2020

What to expect in Washington (October 2)

The House October 1 approved by a largely party-line 214-207 vote (18 Democrats voted 'no,' no Republicans voted in favor) an updated version of the HEROES Act coronavirus relief bill, trimmed to a net cost of $2.2 trillion, while Speaker Nancy Pelosi (D-CA) continued to negotiate with Treasury Secretary Steven Mnuchin on a bipartisan agreement. The Speaker told reporters she was reviewing materials from the White House and didn't expect any breakthroughs overnight. "We'll see where we go from there tonight, but I've spoken to him a number of times already," the Speaker said, as reported by Politico. The Administration has thus far committed to $1.62 trillion in relief, including significant funds for Democratic priorities. Holding a vote was seen as formalizing the Democratic position and appeasing House members who wanted to go on record in support of additional relief before the election, but others weren't happy that the vote was being held instead of focusing on a deal.

In addition to longtime sticking points over state and local funding and liability protection, as well as how to apply new health care funding, tax provisions have emerged as a sticking point in recent days. At several points October 1, Speaker Pelosi criticized the unwillingness of the Administration to agree to expansions of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) and juxtaposed that relief with the CARES Act net operating loss (NOL) and excess business loss provisions, which Democrats propose to roll back.

The Speaker said she was waiting to see whether the Administration would "come back with a proposal" for CTC and EITC expansions. HEROES Act changes include making the CTC fully refundable for 2020 and expanding the eligibility and amount of the EITC for those with no qualifying children. The Speaker suggested on Bloomberg TV that "the debate on the other tax" — presumably referring to the NOL and excess business loss relief — "is our leverage."

So-called "refundables," CTC and EITC provisions were sought by Democrats in 2019 but could not be agreed to in a year-end bill that addressed the tax extenders and repeal of Affordable Care Act (ACA) taxes.

A big question is how the Republican-controlled Senate would react to a potential deal, given that some Republican members have been resistant to an additional large relief bill. Majority Leader Mitch McConnell (R-KY) was reported yesterday as saying only that he wished negotiators well. Politico reported that some GOP Senators in competitive races are more adamant that relief be enacted:

  • "There's no reason we shouldn't all be here until the election if that's what it takes to pass a follow up to the CARES Act," said Senator Thom Tillis (R-NC)
  • "I do not think we should recess without a coronavirus package," said Sen. Susan Collins (R-ME)

Still an issue: wide-scale airline furloughs that are being blamed on a lack of federal relief. And, of course, the news of President Trump testing positive for COVID-19 has created even more uncertainty on activities in Washington and the election.


The Senate procedural vote was held October 1 on Democratic Leader Chuck Schumer's (D-NY) motion to proceed to S. 4653, "legislation to protect the healthcare of millions of people in the US and prevent efforts of the Department of Justice (DOJ) to advocate courts to strike down the ACA." Senator Schumer made the motion to proceed, which is generally viewed as a Majority Leader's prerogative, and filed cloture on his own motion likely as an effort to force Republicans to vote before the election on the issue of health care, which has become an even greater focus in light of plans by the President and Senate majority to fill the Supreme Court vacancy as the Court is set to consider an ACA case November 10. As expected, the motion failed 51-43 (60 votes were needed) but did attract the support of some Republican senators up for reelection: Susan Collins (R-ME), Joni Ernst (R-IA), Cory Gardner (R-CO), and Dan Sullivan (R-AK). The motion was also supported by Senator Lisa Murkowski (R-AK), who is not up for reelection.

The New York Times reported: "Senate Democrats have begun a concerted push to make the fight over Judge Amy Coney Barrett's confirmation to the Supreme Court a referendum on the Affordable Care Act, working to turn a short-term victory for President Trump and Republicans into a liability that could cost them control of the Senate."

House Committee on Oversight and Reform hearings on drug price increases continued for a second day. Chairwoman Carolyn Maloney (D-NY) said, based on documents reviewed by the Committee, companies' price increases served "to meet internal revenue targets or to increase their own bonuses," with R&D expenditures "nowhere near the windfall profits they are bringing in as a result of their massive price increases." Some of the witnesses said their companies were committed to responsible pricing, that innovations for additional uses and ease of use were costly, and that price increases can be driven by market competition. They also cited investments in R&D.


A Washington Post analysis considered the potential for the House to decide the next president if neither candidate secures the requisite 270 electoral votes. "Republicans have the delegation majority in 26 states, Democrats have 22 states, while Pennsylvania and Michigan are essentially tied. But, as Pelosi (D-Calif.) noted in a memo to her caucus Sunday, the new Congress sworn in the first week of January would cast those votes early next year ahead of the scheduled Jan. 20 inauguration."


Treasury and IRS October 1 issued final regulations that provide guidance for employers concerning income tax withholding from employees' wages: "These final regulations concern the amount of Federal income tax employers withhold from employees' wages, implement changes in the Internal Revenue Code made by the Tax Cuts and Jobs Act, and reflect the redesigned withholding allowance certificate (Form W-4) and related IRS publications."

Tax Notes reported: Negotiations on a part of a proposed global tax overhaul are taking longer than expected, so it's unlikely countries will find consensus by the end of 2020 as originally planned, Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said October 1 during a virtual event organized by the Indonesian government and the OECD.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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