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October 2, 2020

House approves updated HEROES Act as bipartisan talks continue

The House October 1 approved by a largely party-line 214-207 vote 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 is reviewing materials from the White House.

House Majority Leader Steny Hoyer (D-MD) said if a bipartisan agreement had been reached, "we wouldn't have this bill on the floor, because we know we want a bill signed. But we also know we want to let the American people [know] where we stand." Leaders have been pressured by some members to put a bill on the floor before the election. Other Democrats weren't happy that the vote was being held instead of focusing on a deal.

Speaker Pelosi said earlier October 1 on Bloomberg TV that "I'm hopeful, actually. Doesn't mean I'm positive but I am hopeful. We do have some areas of disagreement that are broad." Tax provisions have emerged as a sticking point in recent days. Speaker Pelosi criticized the unwillingness of the Administration to agree to expansions of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), especially given the significant net operating loss (NOL) and excess business loss provisions in the CARES Act, which Democrats propose to roll back. "In the CARES Act, the Republicans — stealthily, I might add — put in $150 billion to the net operating loss benefit, benefiting a small percentage of the American people, the wealthiest in our country."

The Speaker said she hopes the Administration will come around on CTC and EITC improvements, and, on the NOL and excess business loss piece, "we have great opposition in our caucus to that tax cut that is retroactive having nothing to do with the coronavirus." She said, "I would hope that they would … definitely come back with a proposal for the tax cuts, the child tax credit, the earned income tax credit refundability. I would hope that they would come back with that. The debate on the other tax is our leverage."

There are also said to be remaining differences between the Administration and House Democratic leaders on state and local government funding and liability protections. Roll Call reported today, "The overall funding levels for health care are in good shape but there's still significant divisions on policy prescriptions that go with the funding."

Tax provisions in the updated HEROES Act include:

  • making the CTC fully refundable for 2020
  • expanding the eligibility and the amount of the EITC for taxpayers with no qualifying children
  • making the child and dependent care tax credit (CDCTC) fully refundable for 2020 and increasing the maximum credit rate to 50%
  • reversal of the CARES Act excess business loss relief
  • limiting net operating loss (NOL) carrybacks permitted by the CARES Act so that losses arising in 2018, 2019 and 2020 cannot be carried back prior to 2018 plus disallowance for companies that do not meet requirements for executive compensation, dividends, and stock buybacks
  • an increase in wages reimbursed through the Employee Retention Tax Credit from 50% to 80%, and in the limit on wages taken into account per employee from $10,000 for the year to $15,000 per quarter (limited to $45,000 for the calendar year
  • $1,200 ($2,400 for joint filers) Economic Impact Payments
  • elimination of the limitation on the deduction for state and local taxes for the 2020 tax year

Health provisions in the updated version of the bill include:

  • $249 billion to the Department of Health and Human Services to support public health; research, development, manufacturing, procurement and distribution of vaccines and therapeutics; and other activities related to the coronavirus
  • $13.7 billion to the Centers for Disease Control and Prevention to support federal, state and local public health agencies to prevent, prepare for and respond to the coronavirus
  • $4.7 billion to the National Institutes of Health expand COVID-19-related research Public Health and Social Services Emergency Fund
  • $125 billion to reimburse for health care related expenses or lost revenue attributable to the coronavirus, as well as to support testing and contact tracing to effectively monitor and suppress COVID-19
  • an increase in Federal Medical Assistance Percentage (FMAP) payments to state Medicaid programs by a total of 14 percentage points starting October 1, 2020 through September 30, 2021

A summary of the bill is attached.


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Any member of the group, at (202) 293-7474.


Updated Heroes Act Summary