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House Approves Fourth Relief Package; Talks With GOP Continue

Posted on May 18, 2020

Talks with Republicans are ongoing after the House narrowly passed a $3 trillion coronavirus relief package destined for failure in the Senate.

The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) passed the House May 15 by a vote of 208 to 199. One Republican, Rep. Peter T. King of New York, supported the bill, and 14 Democrats voted against the measure.

Senate Republicans said the relief package would be dead on arrival in that chamber, and the White House has said it would reject the bill if it landed on President Trump’s desk.

But that won’t stop Democrats from trying to force through some parts of the bill as negotiations with Republicans continue. The 1,800-plus-page bill includes rule changes for net operating losses, new tax credits to help businesses cover rent and utility payments, and a repeal of the $10,000 state and local tax deduction cap.

It would also send taxpayers a second round of $1,200 relief payments, this time including dependents over age 17 and those with an individual taxpayer identification number but no Social Security number.

Some Consensus on Tax

Despite Republicans’ overwhelming rejection of the bill, they share some priorities with Democrats, including support for expanding the employee retention tax credit. The provision would increase the credit from 50 percent to 80 percent of qualified wages and increase the per-employee limit to $15,000, as well as redefine a large employer as a business with more than 1,500 employees, instead of more than 100 employees, allowing more wages to qualify.

House Ways and Means Committee Chair Richard E. Neal, D-Mass., told Tax Notes there is also room for consensus on a credit for the domestic production of personal protective equipment and other healthcare necessities that have been in short supply.

“My mind is open on those things,” Neal said. This has been a priority for Republicans, who have shared their views on such a credit with the White House.

Neal was also confident that House Republicans would support tax deductions for business expenses associated with the Paycheck Protection Program, despite statements by House Ways and Means Committee ranking member Kevin Brady, R-Texas, that there was no unified congressional intent. Brady appeared to side with the administration to prevent companies from deducting expenses associated with the small business loan.

Neal was adamant that negotiations must continue and that Democrats are intent on passing some form of the bill.

“The rhetoric on the outset of all these pieces of legislation has been pretty charged, but the vote totals have been near unanimous,” Neal said. “Given the pandemic, there is ample opportunity to find some agreement on those issues.”

Democrats Also Critical

While most Republicans voted against the bill, they were joined by several Democrats saying the measure didn’t go far enough.

Rep. Cynthia Axne, D-Iowa, said the bill was helping parts of the economy currently unaffected by the pandemic as the rate of coronavirus infections in Iowa is increasing. Progressives like Reps. Ro Khanna, D-Calif., and Pramila Jayapal, D-Wash., said the bill wouldn’t do enough to help Medicare and Medicaid recipients.

Some members of the Congressional Progressive Caucus wanted to move the vote to the week of May 18 to include more provisions preventing further unemployment and businesses from shuttering. “My deep belief is that we need to invest in the economy,” Jayapal said.

Too Much Money

Republicans objected to the amount of spending in the bill. The Joint Committee on Taxation estimated May 15 that changes to the tax provisions in the bill would cost the federal government about $883 billion over 10 years.

That includes another round of relief payments to taxpayers to the tune of $412 billion, while also retroactively expanding checks to those with individual ITINs at a cost of $22.7 billion. Republicans said expanding the pool of rebate recipients would invite fraud and payments to illegal immigrants.

Another provision of the bill that offended Republicans was limiting carrybacks to years after 2017. Brady said it would hurt businesses in their time of need. The provision, however, would add $254 billion to federal coffers.

Republicans have offered no alternative timeline for passing a relief package despite acknowledging the necessity to do so. Asked when he wants to see another relief package, House Minority Leader Kevin McCarthy, R-Calif., said only that he wants to see how the effects of the Coronavirus, Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) play out.

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