December 2, 2020
What to expect in Washington (December 2)
Coronavirus spending talks are back on in the home stretch of legislating for the year, and if agreement can be reached, the provisions will likely be attached to an omnibus appropriations bill to extend government funding beyond December 11, Senate Majority Leader Mitch McConnell (R-KY) said on Tuesday. A new "targeted" bill being circulated by Senate Republicans in consultation with the White House would provide: a one-month extension of the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs, but not an Unemployment Insurance (UI) add-on; a second round of the Paycheck Protection Program (PPP); and additional emergency appropriations for the coronavirus health response.
As the Wall Street Journal observed, the proposal, in leaving out top Democratic priorities like state and local government funding, signaled that Republican leaders may not be ready to make major concessions.
Tax items in the Republican plan include: two years of tax credits for contributions to scholarship-granting organizations; increasing the above-the-line deduction for 2020 charitable contributions to $1,200 for those filing a joint return; and, addressing an issue talked about by the President, a 100 percent deduction for business meals. It is unclear whether these or other tax provisions can ultimately be agreed to.
While not releasing details, House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY) presented Republicans with a new coronavirus offer November 30. Pelosi spoke with Treasury Secretary Mnuchin Tuesday about issues including that "any COVID proposal must ensure that the vaccine is free and accessible to everyone," a point of emphasis from Democrats lately.
A bipartisan group led by Senator Joe Manchin (D-WV) and several moderate Republicans also proposed a coronavirus relief framework December 1. This bipartisan proposal includes $160 billion in state and local funding and PPP deductibility, among other things, but was quickly panned by Leader McConnell.
President-elect Joe Biden called for a robust coronavirus proposal this year that would likely be "just a start" on the issue.
Whether an agreement can be reached and what it will include is uncertain, but the end of the year and movement on an omnibus appropriations bill is presenting lawmakers with a deadline. "We just don't have time to waste time. We have a couple of weeks left here," McConnell said in a Washington Post story. "Obviously, it does require bipartisan support to get out of Congress, but it requires a presidential signature."
A Law360 article reported on Democrats being open to supporting Tax Cuts and Jobs Act (TCJA) technical corrections in a package that includes green-energy related tax extenders as "part of a final drive to try to attach extensions of expiring tax incentives" to a year-end spending bill. "House Ways and Means Chairman Richard Neal, D-Mass., said he would be open to combining GOP-backed proposals for technical corrections with extensions of incentives for renewable energy and other items in a possible post-election tax deal. 'One of the challenges of a lame-duck session is there has to be a lot of give and take. I'm open-minded about it. There's an opportunity there. We don't want to let that get away,' Neal told Law360."
Further efforts at coronavirus relief can be expected in 2021, with the scope of any such relief influenced by control of the Senate. Control of the chamber won't be known until two January 5 Georgia Senate runoffs are decided. If Democrats win both Senate seats and control the Senate, a larger relief package could be pursued. However, if Republicans win at least one on the Georgia Senate seats, any relief package would be expected to be more modest.
Moderate senators of both parties are a focus for 2021 given what will certainly be a narrowly divided Senate. A New York Times (NYT) story noted that if Democrats can win the two Georgia runoffs and control the Senate, progressive proposals would have to go through moderates like Manchin. Alternatively, "If Republicans win at least one of the Georgia races, allowing them to maintain Senate control, they will need centrists in both parties to help block progressive items or pass compromise legislation. That is the situation that Mr. Manchin said he considered more likely. He is already preparing for a power dynamic that he asserted would give him and three moderate Republicans — Susan Collins of Maine, Lisa Murkowski of Alaska and Mitt Romney of Utah — a big role in determining what happens at the dawn of Mr. Biden's presidency."
Senator Mark Kelly (D-AZ) will be sworn in today (Wednesday), earlier than the other new senators because his predecessor was appointed, not elected, to replace the late Senator McCain until a special election was held. Kelly will serve the remainder of McCain's term, which ends in 2022. This will reduce the margin of Republican control of the Senate to 52-48.
Speaking to the NYT in an interview reported today, President-elect Biden repeated his call for tax increases, saying enacting stimulus legislation now will generate economic growth without long-term fiscal harm if, in the future, "everybody pays their fair share. … And by that fair share, I mean there's no reason why the top tax rate shouldn't be 39.6 percent, which it was in the beginning of the Bush administration. There's no reason why 91 Fortune 500 companies should be paying zero in taxes." He expressed confidence in negotiating with Senate Republicans, even if they retain control and reinvigorate deficit concerns. "There are a number of things that when McConnell controlled the Senate that people said couldn't get done, and I was able to get them done with [him]. I was able to get them to, you know, raise taxes on the wealthy." (Biden and McConnell negotiated a resolution to the 2012 "fiscal cliff" slate of tax increases.)
On Friday, December 4, is the EY Webcast, "Tax in the time of COVID-19," at 12:00 p.m. ET. The coronavirus (COVID-19) and the resulting economic crisis — all occurring in an election year — have made reacting to tax and trade developments more complicated and more difficult. To determine what information your company needs to know now, join our panelists for the next in our series of conversations about operating the tax function in this time of COVID-19. Panelists will provide updates on: (i) Elections, US economy and tax policy; (ii) What's happening at the IRS; and (iii) Breaking developments. Register.