Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Nancy Pelosi (D-CA) discussed additional coronavirus spending December 3 for the first time since the election and lawmakers expressed fresh optimism that a deal could come together in time to be attached to a year-end omnibus appropriations measure. That government funding bill presents a deadline — currently December 11, though a stopgap could allow negotiations to go longer — that, combined with the severity of the pandemic and concern that adequate funding be provided for vaccine distribution, puts pressure on lawmakers to reach agreement. "I think we're both interested in getting an outcome, both on the [spending bill] and on a coronavirus package," Senator McConnell said in the Washington Post.

There is still some dispute over the starting point for the negotiations, either:

• a $908 billion package assembled by a group of moderate senators in the weeks since the election — basically the same group who are a focus for deal-making in a closely divided Senate next year — that would fund key programs through March and provide $160 billion in state and local funding and Paycheck Protection Program (PPP) deductibility, among other things; or
• a "targeted" proposal from Senator McConnell to extend pandemic unemployment programs for a month (but not provide an Unemployment Insurance (UI) add-on), and provide a second round of the Paycheck Protection Program (PPP), additional emergency health appropriations, and tax provisions seen as appealing to the President, including a 100% deduction for business meals

The proposal by the bipartisan group led by Senator Joe Manchin (D-WV) and several moderate Republicans — crafted over several post-election dinner meetings, as the New York Times described today (Friday) — was quickly dismissed by Leader McConnell upon its rollout December 1. However, it quickly came back into focus as Speaker Pelosi and Senate Democratic leader Chuck Schumer (D-NY), who have long pushed for a much larger deal, declared "the bipartisan framework introduced by Senators yesterday should be used as the basis for immediate bipartisan, bicameral negotiations." The plan — which would also provide a $300 UI add-on for 18 weeks and another $288 billion in support for small businesses including the PPP and provisions for restaurants and performing arts venues — has also been advocated by President-elect Joe Biden and welcomed by an increasing number of Senate Republicans, including John Cornyn (R-TX), Joni Ernst (R-IA) and Finance Committee Chairman Chuck Grassley (R-IA).

The appropriations aspect of the omnibus bill — which would fund the government through the remainder of the fiscal year by rolling the dozen annual appropriations bills into one — hasn't been controversial, but Senate Appropriations Committee Chairman Richard Shelby (R-AL) said a short-term continuing resolution to allow talks to continue beyond December 11 is likely and lawmakers may remain in session for weeks.

Tax

Tax items being included in the targeted bill, as well as signals this week that bipartisan tax proposals were being discussed among congressional tax-writing committee members for possible inclusion in a deal, present the possibility that a year-end bill could include a tax package. The still-fluid bipartisan Senate plan doesn't yet identify tax provisions (aside from PPP deductibility) and it's unclear whether the provisions in McConnell's targeted bill, which also include a further expanded charitable deduction, will be agreed to. Other provisions discussed for a coronavirus bill include expansions of the Employee Retention Tax Credit and the Work Opportunity Tax Credit, and certainty for state and local taxes for the "mobile workforce."

Politico December 4 reported Senator Schumer is a "wild card" on the mobile workforce issue, as New York "is notoriously aggressive about taxing people coming to the Empire State even temporarily — and wary of what would be a rare bid by the federal government to dictate to states how their tax systems will work."

Both parties in the House chose committee chairmen and ranking members, with no change at the top on the Ways & Means Committee — Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX).

Health

Politico reported "former Obama administration official Jeff Zients is set to serve as the White House's Covid-19 coordinator and Vivek Murthy, the former U.S. surgeon general under Obama, will return to that role."

Retirement

The Senate Finance Subcommittee on Social Security, Pensions, and Family Policy of the Committee will hold a hearing on Wednesday, December 9, at 10:00 a.m. on "Investigating Challenges to American Retirement Security."

Today (Friday) 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.

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