February 9, 2021
Ways & Means COVID Bills are roughly half of Biden relief plan
House Ways & Means Chairman Richard Neal (D-MA) February 8 released the Committee's budget reconciliation legislative proposals comprising roughly half of President Biden's $1.9 trillion COVID relief proposal, and addressing issues including tax, unemployment, health, and retirement. The bills detail how a $1,400 refundable tax credit for each family member will be paid out in advance payments, similar to Economic Impact Payments in the CARES Act and year-end 2020 legislation, and a similarly refundable and advanceable Child Tax Credit expansion to $3,000 per child ($3,600 under 6) will take the form of IRS monthly payments, based on 2019/2020 tax return information. The Ways & Means markup will be held Wednesday, February 10 (10:00 a.m.) through Friday, February 12, and other House Committees are marking up this week.
The $1,400 advance payments phase out between $75,000-$100,000/AGI ($112,500-$150,000 for heads of household, $150,000-$200,000 for joint filers). Some have called for the payments to be more narrowly targeted. In addition to the child credit advance payments, the maximum Earned Income Tax Credit for workers without children would be nearly tripled and eligibility extended, and the Child and Dependent Tax Credit (CDCTC) would be expanded to allow families to claim up to half of their childcare expenses.
Another tax provision would repeal the election for US affiliated groups to allocate interest expense on a worldwide basis, maintaining pre-2021 policy regarding the allocation of expenses by eliminating the election that would be available starting in 2021. Repeal of the worldwide interest allocation rules would raise roughly $22 billion/10 years, according to a JCT estimate of the entire Ways & Means package. (The Hiring Incentives to Restore Employment Act from 2010 delayed until December 31, 2020 the application of worldwide interest allocation rules, which were enacted in the American Jobs Creation Act of 2004.)
The Ways & Means bill would extend the employee retention tax credit, as added by the CARES Act and expanded and extended in year-end 2020 legislation, through December 31, 2021 and modify the credit such that, beginning after June 30, 2021, it would be structured as a refundable payroll tax credit against the hospital insurance tax.
The bill deviates from President Biden's plan as announced on January 14 in extending pandemic unemployment programs through August, rather than September. The Pandemic Unemployment Assistance (PUA) program and Federal Pandemic Unemployment Compensation program (FPUC) would be extended past their mid-March expiration through August 29, and the FPUC supplemental amount increased from $300 to $400 for weeks ending after March 14 and before August 29.
COBRA coverage — The bill subsidizes COBRA coverage at 85% through September 31 and provides an extension of the COBRA election period. Also provides a refundable payroll tax credit to reimburse employers and plans who paid the subsidized portion of the premium to COBRA and requires notices to COBRA-eligible individuals.
ACA tax credits — The bill modifies affordability thresholds for premium tax credits for 2021 and 2022 so no one will pay more than 8.5% of their income, including those over 400% of the federal poverty line who are currently ineligible for subsidies. It also provides advanced premium tax credits to individual's receiving unemployment insurance for 2021 as if the taxpayer's income was no higher than 133% of the federal poverty line.
SNF infection control — The bill appropriates $200 million to the Department of Health and Human Services for COVID-19 infection control support in skilled nursing facilities through quality improvement organizations and $250 million for the establishment of strike teams to manage outbreaks when they occur.
Multiemployer pension support — The bill would create a special financial assistance program under which cash payments would be made by the PBGC to troubled multiemployer plans. Assistance to plans would be provided in a lump sum that would be sufficient to pay all benefits due under the plan through 2051. Plans would have to apply for assistance by December 31, 2025. Eligible plans would be those in critical and declining status, plans with significant underfunding and more retirees than active employees, and plans that suspended benefits and certain insolvent plans.
Single employer defined benefit plan funding relief — The bill would extend the current seven-year amortization period for funding shortfalls to fifteen years for all plan years beginning after 2019. It would also provide further interest rate stabilization — the current 10% corridor would be narrowed to 5% for 2020 and remain at 5% until 2026. The bill would also establish a 5% floor under the 25-year average used to calculate the interest rate.
Community Newspaper Funding relief — The SECURE Act enacted into law in December 2019 provided relief to certain community newspapers by increasing the interest rate used to calculate their funding obligations and extending their amortization period. The bill would extend the relief provided by SECURE to additional newspapers.
Cost of Living Adjustment Freeze — To offset out-year revenue losses generated by the single-employer pension funding relief, the bill would freeze certain pension-related limits that normally are inflation-adjusted. The three limits affected are the compensation limit, the defined contribution limit, and the defined benefit limit. All would be frozen for calendar years beginning in 2030.
Text and summaries of the bills are available here. The JCT revenue estimate is available here.