On The Hill

Congress Update

GOP Skinny Bill

This week, Senate Republicans began circulating a “skinny” COVID-19 relief bill. The legislation would include $300 a week unemployment benefits, a second round of Paycheck Protection Program (PPP) loans, funding for schools, funds for the postal service, and liability protections for businesses and schools. The plan does not include stimulus checks or aid to state and local governments.

The bill could be used as a counteroffer to Democrats postal service bill.^[1] 

Postal Service

On Saturday (Aug. 22), the House will come back from August recess to vote on H.R. 8015, which would provide additional funds to the U.S. Postal Service (USPS) and prevent the USPS from implementing changes to services or operations during the COVID-19 pandemic. Democrats have criticized recent USPS changes, and said they could result in vote by mail ballots not being delivered in time.

Postmaster General Louis DeJoy said on Tuesday (Aug. 18) he would suspend changes to the USPS until after the election.^[2] 

Additionally, some Democrats have called for votes on COVID-19 legislation while they are back from recess to vote on the USPS bill. It remains unclear if Democrats will vote on additional COVID-19 legislation.^[3] 

 

Payroll Tax Deferral

On Tuesday (Aug. 18), numerous business groups sent a letter to Treasury Secretary Steve Mnuchin, House Speaker Nancy Pelosi (D-CA), and Senate Majority Leader Mitch McConnell (R-KY) and said they would not participate in the payroll tax deferral program. The letter stated that the payroll tax deferral Executive Order (EO) would create a substantial tax liability for employees at the end of the deferral period. Additionally, it said that without Congressional action to forgive the liability a serious hardship could be imposed on employees. The letter also urged Congress and the White House to work together on another COVID-19 relief package.

“We hope Congress and the administration come together on a path that supports workers instead of burdening hardworking Americans with a large tax bill next year,” the letter said.^[4] 

On Wednesday (Aug. 19), White House Economic Advisor Larry Kudlow indicated the administration is looking into giving people years to pay back payroll taxes that were deferred under President Trump’s Executive Order (EO). Kudlow said the period could be as long as eight years.

“As far as the payback is concerned, you know you could stretch that out over a long period of time, so the payback won’t be immediate and no one will be burdened,” Kudlow said. “You’ve got a lot of elbow room to get around that issue,” he added.

Kudlow noted businesses did not complain when Congress allowed them to defer their half of the Social Security tax. He said that “businesses got their own tax holiday,” and does not know why they do not want to give their workforce a tax holiday.^[5] 

 

Biden

On Thursday (Aug. 20), Jared Bernstein, a Biden campaign advisor, said tax increases early in Biden’s administration are “going to be very dependent on economic conditions.”

“Biden is extremely committed to pay-fors for his permanent initiatives,” he noted.

Some of the tax proposals Biden has released so far include increasing the corporate rate to 28 percent, raising the top individual income tax rate to 39.6 percent for people earning more than $400,000, and tax capital-gains as ordinary income for those who earn over $1 million annually.^[6] 

 

IRS

This week, the Internal Revenue Service (IRS) will start issuing interest payments averaging $18 to around 14 million taxpayers. The payments are a result of the tax filing date shifting from April 15 to July 15 due to the COVID-19 pandemic. No interest will be added to refunds issued before the original April 15 deadline, and businesses are not eligible for interest. The payments are considered taxable income and recipients will need to report it on their 2020 federal tax return.^[7] 

On Wednesday (Aug. 19), House Ways and Means Chairman Richard Neal (D-MA) said the IRS should stop sending taxpayers notices of unpaid taxes until the IRS clears its mail backlog. Cases of unpaid taxes have been addressed by taxpayers for the most part, but due to the mail backlog, it is reportedly unknown to IRS personnel.

“The IRS should not make its backlog problem a taxpayer problem,” Neal said in a letter to IRS Commissioner Chuck Rettig on Wednesday (Aug. 19).^[8] 

 

China

On Monday (Aug. 17), President Trump said that he will lure manufacturing back from China using tax incentives and tariffs.

“We will create tax credits for companies that bring jobs from China back to America, and we’ll impose tariffs on companies that leave America to produce jobs overseas,” Trump stated.

Trump did not provide details but said the policy would continue his administration’s “America First” focus.

Democratic presidential nominee Joe Biden has also vowed to discourage jobs from leaving the U.S. His campaign said the Tax Cuts and Jobs Act (TCJA) has encouraged investment overseas.

“The Trump tax cut encouraged offshoring and investment overseas — not in the United States,” Biden’s website said.^[9] 

 

OECD

A recent draft from the Organization for Economic Cooperation and Development (OECD) raised concerns about multinationals facing complicated calculations to ensure they are paying a minimum tax rate around the world. The OECD Pillar Two plan would create a global minimum corporate tax.

“The Pillar Two details show just how complicated it will be to administer these rules globally for both companies and countries, and it may take some time to iron out all the kinks,” said Sandy Bhogal, a partner at Gibson Dunn & Crutcher in London.^[10] 

The OECD plans to incorporate feedback and release another draft at the end of August. That draft is reportedly going to address how Pillar Two would interact with the U.S. global intangible low-taxed income (GILTI). ^[11] 

 

References

^[1] Wilkins, Emily & Wasson, Erik. “Senate GOP ‘Skinny’ Virus Plan Funds Education, Unemployment Aid.” Bloomberg Government, 18 Aug. 2020. https://link.edgepilot.com/s/6f60de88/Vv1yXDNEFUeuxEcLObQl1w?u=https://about.bgov.com/news/senate-gop-skinny-virus-plan-funds-education-unemployment-aid/

^[2] Montellaro, Zach & Lippman, Daniel “DeJoy suspends Postal Service changes amid election fears.” Politico, 18 Aug. 2020. https://link.edgepilot.com/s/d5cc00f6/7B2tSWML0EO10QOk6bzqxA?u=https://www.politico.com/news/2020/08/18/dejoy-suspends-usps-changes-under-pressure-397765

^[3] Ferris, Sarah & Bresnahan, John. “Rank-and-file Democrats press Pelosi for more votes on coronavirus aid.” Politico Pro, 18 Aug. 2020. https://link.edgepilot.com/s/f5675ef1/bi7Vd6NO6kWz2HcAWzbELg?u=https://subscriber.politicopro.com/article/2020/08/rank-and-file-dems-press-pelosi-for-more-votes-on-coronavirus-aid-1981111

^[4] Faler, Brian. “Businesses warn they won’t participate in Trump’s payroll tax plan.” Politico Pro, 18 Aug. 2020. https://link.edgepilot.com/s/f812da85/2xTMomfHt0_PiHK5mMT1Aw?u=https://subscriber.politicopro.com/article/2020/08/businesses-warn-they-wont-participate-in-trumps-payroll-tax-plan-1980785

^[5] Faler, Brian. “Kudlow: Workers could potentially get years to pay deferred payroll taxes.” Politico Pro, 19 Aug. 2020. https://link.edgepilot.com/s/16cba1e6/2R1Laxdli0u-EzHCq_ZX1g?u=https://subscriber.politicopro.com/article/2020/08/kudlow-workers-could-potentially-get-years-to-pay-deferred-payroll-taxes-1982131

^[6] Eckert, Toby. “Biden adviser says tax hikes would depend on state of economy.” Politico Pro, 20 Aug. 2020. https://link.edgepilot.com/s/d71b2c1e/fOJMm3XglUqciIpBLmGUmA?u=https://subscriber.politicopro.com/article/2020/08/biden-adviser-says-tax-hikes-would-depend-on-state-of-economy-3983453

^[7] Lorenzo, Aaron. “IRS starting to send interest payments to some tax refund recipients.” Politico Pro, 18 Aug. 2020. https://link.edgepilot.com/s/fb961a71/l0LGOuVu0E26OFn6U6Xalw?u=https://subscriber.politicopro.com/article/2020/08/irs-starting-to-send-interest-payments-to-some-tax-refund-recipients-1980763

^[8] Lorenzo, Aaron. “Neal tells IRS to temporarily halt tax bills.” Politico Pro, 19 Aug. 2020. https://link.edgepilot.com/s/b2c34137/xFFjwMuZRkuWzze1RD4jYA?u=https://subscriber.politicopro.com/article/2020/08/neal-tells-irs-to-temporarily-halt-tax-bills-3983443

^[9] Parker, Alex. “Trump Vows To Tax Companies Moving To China.” Law 360 Tax Authority, 18 Aug. 2020. https://link.edgepilot.com/s/60d1e0ba/RoO5jVQxeE6UkcMOMxw58w?u=https://www.law360.com/tax-authority/federal/articles/1302159/trump-vows-to-tax-companies-moving-to-china?nl_pk=19f12e87-7ef0-48bc-8cfd-cd480139d3bb%26utm_source=newsletter%26utm_medium=email%26utm_campaign=tax-authority/federal

^[10] Gottlieb, Isabel & Ali, Hamza. “OECD’s Minimum Tax Plan Raises Concerns About Complexity.” Bloomberg Tax, 19 Aug. 2020. https://link.edgepilot.com/s/cd61b856/Tk60tm–iEq75D6l7yNPIg?u=https://news.bloombergtax.com/daily-tax-report-international/oecds-minimum-tax-plan-raises-concerns-about-complexity

^[11] Gottlieb, Isabel & Ali, Hamza. “OECD Pillar Two Draft Skips Decision on How to Treat GILTI.” Bloomberg Tax, 17 Aug. 2020. https://link.edgepilot.com/s/6dda6058/x_yNUL44y0ijBiul0nBemw?u=https://news.bloombergtax.com/daily-tax-report-international/oecd-pillar-two-draft-skips-decision-on-how-to-treat-gilti-rules