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Senate Relief Package Expands PPP, Extends Tax Credits

Posted on July 28, 2020

A long-awaited pandemic relief package pitched by Senate Republicans would expand the employee retention tax credit and the Paycheck Protection Program (PPP), streamline tax obligations for traveling workers, and provide credits for domestic production of vital products. 

The collection of bills, dubbed the HEALS (Health, Economic Assistance, Liability Protection, and Schools) Act, almost immediately faced a backlash from Democrats, who said the package would not go far enough to help the economy and chided Republicans for the paltry support given to the unemployed.

“We don’t even know if Senate Republicans support the bill,” Senate Minority Leader Charles E. Schumer, D-N.Y., said after several Republicans lamented the bill’s cost. 

The HEALS Act didn’t veer far from what Republicans have been discussing in recent days. The bill includes a second round of economic impact payments structured largely the same as in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136): $1,200 for individuals and $2,400 for couples, which starts phasing out at incomes of $75,000 and $150,000, respectively.

Like under the CARES Act, taxpayers would receive $500 for each dependent. But the second round, unlike the first, wouldn’t be limited to dependents under the age of 17, meaning college students and adult dependents would be included.

The bill adds clarifications to language from the CARES Act, including protection of the payments from bank garnishment and explicitly excluding deceased individuals and prisoners from receiving checks.

An expanded employee retention tax credit in the bill would increase the credit from 50 percent to 65 percent of qualified wages and increase the per-employee limitation to $10,000 per quarter, up from $10,000 per year in the CARES Act.

More employers would qualify for the credit under the updated rules, which now would require businesses to have only a 25 percent decline in gross receipts rather than a 50 percent decline.

The credit would provide more assistance to larger businesses by compensating all wages paid for 500 employees or fewer. Previously, only businesses with 100 employees or fewer could use the credit with all wages paid.  

Businesses would be able to use both the employee retention tax credit and the PPP under the Republican bill, although limitations are included to prevent benefits from overlapping.

Senate Republicans are also looking to temporarily expand the work opportunity tax credit and add those facing unemployment because of the pandemic to one of the 10 targeted groups.

The bill would provide a refundable payroll credit for the use of personal protective equipment and cleaning supplies, and for reconfiguring workplaces to protect employees. That would extend to technology to help with contactless point-of-sale systems and tracking employee interactions with customers. 

In a surprising inclusion, Republicans adopted the bipartisan Remote and Mobile Worker Relief Act of 2020 (S. 3995) to help workers who volunteered in other states during the pandemic avoid hefty tax bills from those states. The bill dictates that the taxing jurisdiction of an employee is that of their employer, regardless of where the employee is located if they are working remotely during the pandemic.

It also clarifies that no nexus or minimum contact is created by an employee working in a state for an out-of-state business during the pandemic. 

The measure has the support of Senate Finance Committee member Sherrod Brown, D-Ohio, but has been opposed by New York lawmakers in past years, including Schumer.

Finance Committee member Tim Scott, R-S.C., introduced a measure that would create a temporary full deduction of business meals to encourage individuals to frequent restaurants. The measure has the backing of the White House and would expire at the end of the year. Scott said it would help the restaurant industry recover.

Finance Committee ranking member Ron Wyden, D-Ore., blasted the proposal as subsidizing lobbyist power lunches.  

PPP Expansion and Credits for Domestic Manufacturing

Republicans are expanding how PPP loans can be used by allowing businesses to use them for technology improvements, restoring property damaged during civil disturbances in 2020, and supplier costs.

The bill, proposed by Sens. Marco Rubio, R-Fla., and Susan M. Collins, R-Maine, would make it easier to apply for most loans without having to supply lender information as required by the CARES Act.

The bill would allow businesses to apply for a second loan if they meet the Small Business Administration’s size requirements, employ fewer than 300 people, and demonstrate at least a 50 percent reduction in gross receipts in the first and second quarter of 2020 compared with 2019.  

However, the bill does not allow for the deductibility of PPP-affiliated expenses, as pushed for by Rubio and Sen. John Cornyn, R-Texas.

The IRS issued Notice 2020-32, 2020-21 IRB 837, in late April, preventing PPP loan recipients from deducting some expenses. Rubio said it was the lawmakers’ intent in the CARES Act for companies to be able to deduct PPP-related business expenses.

In an effort to shift the production of personal protective equipment to the United States, Sen. Lindsey Graham, R-S.C., proposed in his bill to provide for a qualified investment tax credit modeled after the section 48C advanced manufacturing tax credit. The measure would give eligible companies a 30 percent credit against equipment costs associated with personal protective equipment manufacturing.  

Additional IRS Funding 

A Senate emergency appropriation for coronavirus relief envisions $2 billion over four fiscal years for IRS business systems modernization.

The fund, which would be in addition to whatever regular budget Congress appropriates for IT modernization, prioritizes enabling remote work on critical IRS functions during the coronavirus pandemic.

The House Appropriations Committee on July 15 passed a $250 million budget for fiscal 2021 IRS business systems modernization, almost 40 percent more than the $180 million enacted level in fiscal 2020.

The emergency bill stipulates that the money be spent on preparation for or in response to the pandemic’s effects, both domestically and internationally.

William Hoffman contributed to this article.

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