On The Hill

 

On Monday (Jul. 27), Senate Republicans released their $1 trillion COVID-19 relief package. The package includes a reduction of federal unemployment insurance (UI) benefits, a second round of stimulus checks, expansion of the employee retention tax credit, new tax credits for employers that purchase personal protective equipment (PPE), and allows businesses a second (more targeted) Paycheck Protection Program (PPP) loan. The extension of UI benefits, state and local aid, and COVID-19 liability protections for businesses have caused a major contention between lawmakers. Lawmakers have signaled that they could move quicker on provisions to help businesses once the major points of disagreements are resolved.

 

The Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act would expand the employee retention tax credit to 65 percent of employees’ wages and raise the annual amount of qualified wages a company can claim to $30,000 per employee.^[1] The legislation would create a five-year liability shield that aims to prevent businesses, universities, schools, and hospitals from being sued over COVID-19 related damages. Senate Majority Leader Mitch McConnell (R-KY) has said he will not sign a package without these protections.^[2]

 

On Wednesday (Jul. 29), House Ways and Means Ranking Member Kevin Brady (R-TX) said he was open to allowing companies to make PPP-related expenses deductible in the next package. Notably, in May Brady did not sign onto a letter to Treasury Secretary Steven Mnuchin about making PPP loans deductible from Senate Finance Chairman Chuck Grassley (R-IA), Ranking Member Ron Wyden (D-OR), and House Ways and Means Chairman Richard Neal (D-MA). The Internal Revenue Service (IRS) and Treasury Department have said they will not allow PPP loans to be deductible because it would be improper double-dipping.^[3] 

 

On Thursday (Jul. 30), the Senate attempted to pass a standalone measure to extend UI benefits before the expiration deadline, however, the measure failed. Negotiations are ongoing between Treasury Secretary Mnuchin, White House Chief of Staff Mark Meadows, House Speaker Nancy Pelosi (D-CA), and Senate Minority Leader Chuck Schumer (D-NY) for an extension of UI benefits, but there is no sign of a deal.

 

 

 

On Friday (Jul. 31), the Treasury Department issued proposed regulations designed to prevent individuals from evading new limits on a tax break for so-called carried interest. The regulations are designed to clear up a glitch in the 2017 Tax Cuts and Jobs Act (TCJA). In March 2018, Treasury served notice that it was aware of the issue.^[4]

 

On Monday (Jul. 27), IRS released a temporary regulation on the recapture of excess employment tax credits under the Families First Act and the CARES Act. Businesses will have to repay the IRS for overpaid employment tax credits. The overpaid credit will be treated as an erroneous refund that the IRS must seek to be repaid.^[5]

 

On Tuesday (Jul. 28), the IRS released final regulations on the provision in the TCJA that limits the deduction of business interest expense along with amendments in the CARES Act. Additionally, proposed regulations were released on issues not addressed in the final regulations as well as complex issues with CARES Act amendments.^[6]

 

 

 

On Tuesday (Jul. 28), presumptive Democratic presidential candidate Joe Biden outlined the fourth pillar of his “Build Back Better” agenda for economic recovery which focused on racial disparities. The plan calls for changes to the Opportunity Zone (OZ) program, including: a requirement that OZ benefits be reviewed by the Treasury Department; a requirement that OZ tax break recipients provide reporting and public disclosure on investments and impacts; and a provision incentivizing partnerships with nonprofits or community-based programs.

 

Last week, Representatives Alexandria Ocasio-Cortez (D-NY) and Rashida Tlaib (D-MI) proposed an amendment to an appropriations bill that would prevent the IRS from using funds to administer or enforce the OZ program. The amendment was not included in the appropriations bill.^[7]

 

 

 

^[1] Wilhelm, Colin. “Business Tax Breaks Could Move Fast if Big Ticket Items Resolved.” Bloomberg Tax, 31 Jul. 2020.

 

^[2] Stein, Jeff, Meckler, Laura & Romm, Tony. “Here is what’s in the Senate GOP’s $1 trillion ‘Heals Act’ package.” Washington Post, 27 Jul. 2020.

 

^[3] Lorenzo, Aaron. “Brady opens door to allowing expense deductions along with PPP loans.” Politico Pro, 29 Jul. 2020.

 

^[4] Faler, Brian. “Treasury issues regulations targeting ‘carried interest’ glitch.” Politico Pro, 31 Jul. 2020.

 

^[5] Lorenzo, Aaron. “IRS tells businesses to repay excess employer tax credits.” Politico Pro, 27 Jul. 2020.

 

^[6] IRS “IRS issues final regulations and other guidance on business interest expense deduction limitation.” 28 Jul. 2020.

 

^[7] Becker, Bernie. “Morning Tax.” Politico Pro, 29 Jul. 2020. https://link.edgepilot.com/s/d36dec20/SV9AdMm8mEqqmjmeHOhI7w?u=https://subscriber.politicopro.com/newsletter/2020/07/biden-and-ozs-789517