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March 4, 2021

Senate COVID bill includes changes from House version

The Senate March 4 voted 51-50, with Vice President Kamala Harris voting in the affirmative in the tied Senate, to proceed to consideration of the budget reconciliation bill (H.R. 1319) reflecting President Biden's $1.9 trillion "American Rescue Plan" COVID-19 relief package. Following the vote, Senate Majority Leader Chuck Schumer (D-NY) offered a substitute amendment with an expansion of 162(m) compensation deduction limits and changes to health and government funding provisions.

Changes in the substitute bill include:

  • an expansion of IRC Section 162(m) limits on the deduction companies can take for compensation paid to the CEO, CFO, and the three next highest paid employees, to the additional next five highest paid individuals beginning in 2027;
  • a tightening of the income limitations for $1,400 recovery rebate direct payments to cut them off above $80,000 of income for individuals and $160,000 for couples;
  • $8.5 billion in emergency funding for rural health care providers for health care related expenses and lost revenues attributable to COVID-19;
  • increasing to 100% the proposed subsidies of insurance premiums for workers eligible for COBRA after they lost their jobs or had their hours reduced, through September 30 (subsidies were 85% under the House-passed bill);
  • delay of a provision to end the cap on Medicaid's drug rebate program, now slated to start in 2024 (Medicaid drug rebate caps are currently set at 100% of a drug's average manufacturer price);
  • expanding the employee retention tax credit (ERTC) to "recovery startup businesses" (average annual gross receipts under $1 million); and
  • changing the language for state and local government funding including to permit its use for water, sewer, or broadband infrastructure, prohibit offsetting a reduction in the net tax revenue of a state territory resulting from a change in law, and prohibit deposits into any pension funds.

The bill continues to include tax provisions like extension of the ERTC through December 31, 2021 and, after June 30, 2021, structuring it as a refundable payroll tax credit against the hospital insurance tax; and repeal of the IRC Section 864(f) worldwide interest expense allocation election.

There are up to 20 hours of debate during which amendments will be considered, then a "vote-a-rama" on amendments offered after debate time ends, which could begin sometime on Friday. Consideration could take longer than previously anticipated because Senator Ron Johnson (R-WI) plans to use procedural privileges like requiring the text of amendments to be read out loud to extend the process and express his opposition to the bill.

After Senator Schumer offered the substitute amendment, Senator Johnson objected to waiving the reading of the amendment, which, if it continues, could take hours, preventing debate from commencing until then.

Text of the substitute amendment and a summary are attached below.


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


American Rescue Plan Act – Summary

American Rescue Plan Act – Substitute Amendment