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March 1, 2021
2021-0451

House approves COVID relief reconciliation bill

The House on February 27 approved 219-212 a budget reconciliation bill (H.R. 1319) reflecting President Biden’s $1.9 trillion COVID relief plan, sending the bill to the Senate for consideration. The American Rescue Plan Act would provide direct payments, a child tax credit expansion in the form of direct payments, an international tax change, extended unemployment benefits, COBRA subsidies and ACA tax credit enhancements, relief for pension plans, state & local funding, and other provisions. Two Democrats voted against the bill (Reps. Golden D-ME and Schrader D-OR) and no Republicans voted in favor.

The House bill includes a minimum wage increase to $15/hour, but the Senate Parliamentarian’s ruling that the provision violates budget reconciliation rules means it is likely to be stripped out by the Senate, where Democratic leaders are considering alternatives like imposing a tax penalty for corporations that don’t pay $15/hour or another amount. Other provisions being evaluated for compliance with budget reconciliation rules include COBRA subsidies and multiemployer pension provisions, and language on child tax credit payments to be sent out by the IRS was changed to comply with the rules.

If the House bill is changed by the Senate, a conference process to resolve differences may be necessary or, at the very least, another House vote on the final version will be required before the President’s signature. Other potential changes include steering more of the House bill’s $350 billion in state and local government funding toward broadband investment, as some Senate Democrats want. Democrats want the bill enacted before pandemic UI programs expire March 14, after which President Biden is set to outline his next major bill with infrastructure as the focus.

The Congressional Budget Office has confirmed in a letter to House Minority Leader Kevin McCarthy (R-CA) that the relief package would trigger mandatory cuts to Medicare of $36 billion and as much as $90 billion in other programs due to statutory Pay-As-You-Go (PAYGO) requirements. The cuts would take effect within 15 days of the end of the Congressional session barring the enactment of subsequent legislation that would offset the deficit increase, waive the bill’s effect on the PAYGO scorecard, or otherwise mitigate or eliminate the PAYGO requirements.

Some provisions of the House bill are described in brief below.

TAX

  • extension of the employee retention tax credit through December 31, 2021 and, beginning after June 30, 2021, structuring it as a refundable payroll tax credit against the hospital insurance tax
  • repeal of the Section 864(f) worldwide interest expense allocation election
  • $1,400 advance payments that phase out between $75,000-$100,000/AGI ($112,500-$150,000 for heads of household, $150,000-$200,000 for joint filers)
  • a refundable and advanceable child tax credit expansion to $3,000 per child ($3,600 under 6) that will take the form of IRS payments
  • an increase in the amount of child and dependent care expenses that are eligible for the credit to $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals (such that the maximum credits are $4,000 and $8,000)
  • extension of the Pandemic Unemployment Assistance (PUA) program and Federal Pandemic Unemployment Compensation program (FPUC) past mid-March through August 29, with the FPUC supplemental amount increased from $300 to $400 between March 14 and August 29

HEALTH

HHS pandemic-related funding:

  • $47.8 billion for testing and tracing activities.
  • $8.5 billion for vaccine activities at the Centers for Disease Control and Prevention (CDC).
  • $7.66 billion to expand the public health workforce, including grants to state, local, and territorial health departments.
  • $7.6 billion for community health centers.
  • $6.09 billion for tribal health programs.
  • $6.05 billion to support manufacturing and purchasing vaccines.
  • $3.5 billion for block grant programs under the Substance Abuse and Mental Health Services Administration (SAMHSA).
  • $1.75 billion for genomic sequencing and surveillance.
  • $250 million for “strike teams” to assist skilled nursing facilities (SNFs) and $200 million for infection control support at SNFs.
  • $10 billion to use the Defense Production Act to purchase, produce, and distribute medical supplies and equipment related to Covid-19.

Medicaid

  • Free vaccines and treatments for a year after the pandemic ends for Medicaid and CHIP beneficiaries, as well as the uninsured. FMAP increased to 100% for vaccines during that time.
  • Increased FMAP by 5% for two years for states that expand Medicaid.
  • Postpartum Medicaid coverage for a year after giving birth, instead of 60 days, for seven years.
  • 85% FMAP for first three years of covering mobile crisis intervention services for five years
  • 100% FMAP for two years for services received through an Urban Indian Organization or Native Hawaiian Health Center.
  • Increased FMAP by 7.35% for home and community-based services for one year.
  • End a cap on the rebate that drug companies provide to Medicaid, in 2023, currently limited to 100%.
  • Modified disproportionate share hospital (DSH) funding to account for the 6.2% increase in prior law.

ACA tax credits and COBRA coverage

  • Expands the affordable Care Act’s premium tax credits for health insurance purchased through an exchange for 2021 and 2022:
    • Eliminates premiums for individuals at 150% of the federal poverty level (FPL) or less and reduces premiums for all other households.
    • Make households above 400% of the FPL newly eligible for premium tax credits, with a premium cap of 8.5% of income.
    • Allow taxpayers who receive unemployment compensation in 2021 to be eligible for the credit without any premiums.
  • Subsidize 85% of premiums for individuals eligible for COBRA continuation coverage, available through Sept. 30.
    • Would not be available once an individual becomes eligible for coverage under another group health plan or Medicare.
    • The employee would pay 15% of the premium and the employer or health plan could claim a refundable tax credit against its Medicare payroll tax liability for paying the remaining amount.

Other provisions: TANF, Childcare, other HHS programs

  • $1 billion for the Temporary Assistance for Needy Families (TANF) program.
  • Around $24 billion for grants to childcare providers.
  • $15 billion for the Child Care and Development Block Grant,
  • Increase in funding for the Child Care Entitlement to States to $3.55 billion per year from $2.92 billion.
  • Additional $1 billion for Head Start
  • $4.5 billion for the Low Income Home Energy Assistance Program
  • $1.44 billion for programs under the Older Americans Act, including $750 million for nutrition programs
  • $852 million for the Corporation for National and Community Service, including $620 million for AmeriCorps.
  • $450 million for programs under the Family Violence Prevention and Services Act, including $198 million for grants to support survivors of sexual assault.
  • $350 million for programs under the Child Abuse Prevention and Treatment Act
  • $50 million for the Title X Family Planning program.

FINANCIAL SERVICES

Paycheck Protection Program: The bill increases the PPP’s lending authority by $7.25 billion, to $813.7 billion, and appropriates the same amount for the Small Business Administration (SBA) to guarantee additional loans.

  • Nonprofits: The bill would expand the PPP’s eligibility rules to cover most other types of tax-exempt groups, including 501(c)(5) labor organizations, 501(c)(7) social and recreation clubs, and 501(c)(8) fraternal benefit societies. Religious educational groups would be permitted. 501(c)(4) social welfare groups would still be prohibited. 501(c)(3) charitable organizations, 501(c)(6) business associations and 501(c)(19) veterans' organizations already qualify for PPP loans. The bill changes the PPP’s rules to allow participation by 501(c)(3) groups with as many as 500 employees per location.
  • News Publishers:  Internet-only news outlets that were previously ineligible could receive PPP loans if they have 500 or fewer employees (or a size set by the SBA per location). They would have to certify that the funds will be used to support local news.
  • Loan forgiveness: The bill would expand PPP loan forgiveness to include payments made for premiums on behalf of individuals who qualify for COBRA continuation coverage.

Restaurant Assistance:  $25 billion for a Restaurant Revitalization Fund administered by the SBA. Eligible recipients would include restaurants, bars, food trucks and caterers. For 60 days after enactment, $5 billion would be set aside for eligible entities that had gross revenue of $500,000 or less in 2019.

Disaster Loans:  $15 billion for additional Economic Injury Disaster Loan (EIDL) advance payments, with applications processed by the SBA on a staggered schedule: 1) Within 14 days of enactment, businesses with 300 or fewer employees and losses of at least 30% over eight weeks compared with a similar period before the pandemic. 2) 28 days from enactment, businesses with 10 or fewer employees that had losses of more than 50% during the covered period. 3) 42 days from enactment, businesses with 10 or fewer employees that did not previously qualify.

$10 billion in Defense Production Act spending, allowing the president to increase production of essential materials, including helping private-sector entities expand production lines to fulfill U.S. national security needs.

$25 billion in emergency rental assistance, including assistance targeted to specific populations:

  • $19.05 billion to the Department of Treasury for emergency rental and utility assistance to be allocated to states and other jurisdictions, to help stabilize renters and help rental property owners cover costs
  • $5 billion for emergency Housing Choice Vouchers to house people experiencing or at risk of homelessness, domestic violence survivors, and victims of human trafficking (section 4202)
  • $100 million to support unassisted households, living in USDA-subsidized properties, who are struggling to pay rent during the pandemic
  • $750 million to support the Indian Housing Block Grant program and the Indian Community Development Block Grant program
  • $100 million in funding for NeighborWorks to support housing counseling services that help renters, people experiencing or at risk of homelessness, and homeowners

$5 billion for homelessness funding, to allow state and local governments to finance supportive services, affordable housing, and the acquisition of non-congregate shelter (such as hotels) for people currently experiencing homelessness.

More than $10 billion in homeowner assistance funding, including $9.96 billion to states, territories and tribes to provide direct assistance with mortgage payments, property taxes, property insurance, utilities and other costs for homeowners struggling due, directly or indirectly, to the impacts of the pandemic (section 4207) and $39 million for the Department of Agriculture (USDA) to continue providing Section 502 and 504 home loans to low-income borrowers in rural areas as well as existing USDA borrowers.

$10 billion for the State Small Business Credit Initiative, supporting up to $100 billion in small-business financing through state government programs, including up to $2.5 billion to support businesses owned by socially and economically disadvantaged individuals, including minorities.

$15 billion in airline industry assistance, extending the Payroll Support Program (PSP3) for airline workers and related contract workers through September 30, 2021. PSP3 would provide $14 billion to support eligible air carrier workers and $1 billion for workers of eligible contractors.

RETIREMENT

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.

JCT’s “Estimated Revenue Effects Of H.R. 1319” is available here.

All other materials are available here.

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