Neal Announces Pandemic Relief Markup

CHAIRMAN NEAL ANNOUNCES MARKUP OF COVID-19 RELIEF MEASURES

The Ways and Means' proposals comprise half of the $1.9 trillion Democratic COVID-19 relief package

Feb 8, 2021

SPRINGFIELD, MA — Today, House Ways and Means Committee Chairman Richard E. Neal (D-MA) announced the Committee will consider nine legislative proposals under the budget reconciliation instructions this week as the next step in delivering COVID-19 relief to the American people. Beginning on Wednesday, February 10, 2021 at 10:00 a.m. through Friday, February 12, 2021, the Committee will markup proposals spanning from extending unemployment insurance to expanding the child tax credit to delivering another round of direct assistance to struggling Americans.

“Our nation is struggling, the virus is still not contained, and the American people are counting on Congress to meet this moment with bold, immediate action,” Chairman Richard E. Neal said. “Later this week, the Ways and Means Committee will take a crucial step to confront this challenge and show the country that help is on the way. From increasing direct assistance to those who need it most to expanding tax credits for low- and middle-income workers, we deliver substantial solutions in this package.

“While it is still our hope that Republicans will join us in doing right by the American people, the urgency of the moment demands that we act without further delay.”

Key Ways & Means Measures:

Additional direct assistance:

• Giving working families an additional direct payment of $1,400 per person — bringing their total relief to $2,000 per person.

Critical supports for unemployed workers:

• Extends temporary federal unemployment and benefits through August 29, 2021.

• Increases the weekly benefit from $300 to $400.

Fairness in the tax code for families and workers:

• Makes historic expansions to tax credits targeted at workers and families:

  • Enhances the Earned Income Tax Credit for workers without children by nearly tripling the maximum credit and extending eligibility.

    • This would be the largest expansion to EITC since 2009.

  • Expands the Child Tax Credit to $3,000 per child ($3,600 for children under 6), and makes it fully refundable and advanceable.

  • Helps families access high-quality child care by expanding the Child and Dependent Tax Credit (CDCTC) to allow families to claim up to half of their child care expenses.

Supporting health coverage and improving health care affordability:

• Reduces health care premiums for low- and middle-income families by increasing the Affordable Care Act's (ACA) premium tax credits for 2021 and 2022.

• Supports the continuation of employer-based health coverage by subsidizing COBRA coverage through the end of the fiscal year.

• Creates health care subsidies for unemployed workers who are ineligible for COBRA.

Protecting the elderly and crushing the virus in nursing homes:

• Provides skilled nursing facilities (SNFs) the tools and on-the-ground support they need to contain COVID-19 outbreaks and gives states funding to deploy strike teams to SNFs to manage outbreaks when they do occur.

• Increases public health and social services to combat abuse, neglect, and exploitation of the elderly that has been exacerbated by the COVID-19 pandemic.

Emergency assistance for vulnerable children, families, and workers:

• Uses existing pathways to get resources to people in need quickly, including those who may not be receiving other assistance provided during the pandemic

  • This aid would help ensure that pregnant women, children, and struggling families can maintain access to the essentials during the emergency, like housing, diapers, internet service, soap, and food.

Strengthened retirement security:

• Stabilizes the pensions for more than 1 million Americans, often frontline workers, who participate in multiemployer plans that are rapidly approaching insolvency.

• Without action, the multiemployer pension system could collapse entirely, leaving retirees in poverty, businesses in bankruptcy and communities in crisis.

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Supporting Continuation of Job-Based Health Coverage
Section-by-Section

Sec. 9500. Short title

This section provides a short title of the “Worker Health Coverage Protection Act”

Sec. 9501. Preserving Health Benefits for Workers

This section provides for premium assistance of 85 percent for COBRA continuation coverage for eligible individuals and families from the first of the month after enactment through September 31, 2021. The section specifies the reduction in premium payments made by individuals and plan enrollment options. This section establishes assistance eligible individuals and excludes individuals from receiving premium assistance if individuals are eligible for other group health plan coverage or Medicare. This section also provides an extension of the COBRA election period and specifies the date for commencement of coverage; provides for an expedited review process relating to denials for premium assistance; and requires notices to individuals including information about extended election periods and the expiration of premium assistance.

This section provides a refundable payroll tax credit to reimburse employers and plans who paid the subsidized portion of the premium to COBRA assistance eligible individuals; specifies penalties associated with failure to notify employees and plans of cessation of eligibility for premium assistance; and excludes premium assistance from income.

Sec. 9502. Implementation Funding

This section provides $10 million for the Department of Labor for implementation funding.

Subtitle G — Promoting Economic Security
Section-by-Section

Part 1 — 2020 Recovery Rebates

Sec. 9601 — 2021 Recovery rebates to individuals.

Provides a $1,400 refundable tax credit for each family member that shall be paid out in advance payments, similar to the Economic Impact Payments in the CARES Act and Consolidated Appropriations Act, 2021. The credit is $1,400 for a single taxpayer ($2,800 for joint filers), in addition to $1,400 per dependent. The credit phases out between $75,000 and $100,00 of adjusted gross income ($112,500 and $150,000 for head of household filers and $150,000 and $200,000 for joint filers) proportional to the taxpayer's income in excess of the phaseout threshold over $25,000 ($37,500 for head of household filers and $50,000 for joint filers). Thus, under this phaseout structure, the credit is reduced to zero for all taxpayers at the $100,000, $150,000 and $200,000 AGI levels (depending on filing status).

For purposes of this credit, a dependent includes both children and non-child dependents. A taxpayer is eligible for a credit with respect to any individual in the household for whom a Social Security number is associated with such individual on the tax return.

Advance payments are generally not subject to administrative offset for past due federal or state debts, including offset for past-due child support.

Treasury is directed to issue this credit as an advance payment based on the information on 2019 or 2020 tax returns. Furthermore, Treasury is given broad authority to make payments to non-filer populations based on return information available to the Secretary. Treasury shall conduct outreach to non-filers to inform them of how to file for their advance payment.

Taxpayers receiving an advance payment that exceeds their maximum eligible credit based on 2021 tax return information will not be required to repay any amount of the payment to the Treasury. If a taxpayer's 2021 tax credit exceeds the amount of the advance payment, taxpayers can claim the difference on their 2021 tax returns.

Part 2 — Child Tax Credit

Sec. 9611 — Child Tax Credit improvements for 2021

Makes the child tax credit (“CTC”) fully refundable for 2021 and increases the amount to $3,000 per child ($3,600 for a child under age 6). The provision also increases the age of qualifying children by one year for 2021, such that 17-year-olds qualify for the credit. For 2021, the excess of the child tax credit (i.e., the additional $1,000 or $1,600 per-child in excess of the present-law $2,000 per-child credit) is reduced by $50 for every $1000 in modified adjusted gross income in excess of $150,000 for joint filers ($112,500 for head of household filers and $75,000 for other filers). Once the excess credit amount is so reduced, the credit plateaus at $2,000, and then phases out at the present law levels established in the TCJA ($400,000 for joint filers, $200,00 for other filers).

Directs the Secretary of the Treasury to issue advance payments of the child tax credit, based on 2019 or 2020 tax return information. The payments are intended to be delivered on a monthly basis, but if the Secretary determines that this frequency is infeasible, the Secretary is directed to issue the payments as frequently as is feasible. The advance payments under this section do not begin until July 1, 2021, and will comprise in total half of the child tax credit for which the taxpayer is otherwise entitled to for 2021 (with the remaining half claimed on the 2021 tax return). Thus, under the advance payment provision, if the Secretary determined that a monthly payment was feasible, a taxpayer with two children above age 5 would receive $500 per month (2 x $3,000/12) for each of the six months remaining in calendar year 2021, for a total of $3,000. The remaining $3,000 would be claimed in 2021 on the taxpayer's tax return. If, however, the Secretary determined that it was feasible to make a payment every two months, each advance payment would total $1,000.

The taxpayer's child tax credit claimed on the 2021 tax return is reduced by the aggregate of advance payments paid by the Secretary. However, in the case of taxpayers who received an overpayment of the advance credit due to a child for whom the advance was paid in 2021, when in fact the child was no longer that taxpayer's dependent, the provision provides a hold-harmless amount on the repayment obligation. Under this hold-harmless amount, a taxpayer below the income threshold ($40,000 for a single taxpayer, $50,000 for a head of household, and $60,000 for a joint filer) will be protected from repaying up to $2,000 in overpayments per child that was incorrectly taken into account. The hold-harmless threshold is decreased to $0 as the taxpayer's income rises to double the threshold amount.

The Secretary is directed to establish an on-line portal to allow taxpayers to opt-out of receiving advanced payments and provide information regarding changes in income, martial status, and number of qualifying children for purposes of determining each taxpayer's maximum eligible credit.

Sec. 9612 — Application of Child Tax Credit in Territories

Instructs the Treasury Department to make payments to each “mirror code” territory for the cost of such territory's CTC. This amount is determined by Treasury based on information provided by the territorial governments. Puerto Rico, which does not have a mirror code, will receive the refundable credit by having its residents file for the CTC directly with the IRS, as they do currently for those residents of Puerto Rico with three or more children. For American Samoa, which does not have a mirror code, Treasury is instructed to make payments in an amount estimated by Treasury as being equal to the aggregate amount of benefits that would have been provided if American Samoa had a mirror code in place.

Part 3 — Earned Income Tax Credit

Sec. 9621 — Strengthen the Earned Income Tax Credit for individuals with no qualifying children

Expands the eligibility and the amount of the earned income tax credit for taxpayers with no qualifying children (the “childless EITC”) for 2021. In particular, the minimum age to claim the childless EITC is reduced from 25 to 19 (except for certain full-time students) and the upper age limit for the childless EITC is eliminated. This section also increases childless EITC amount by increasing the credit percentage and phaseout percentage from 7.65 to 15.3 percent, increasing the income at which the maximum credit amount is reached to $9,820, and increasing the income at which phaseout begins to $11,610 for non-joint filers. Under these parameters, the maximum credit amount in 2021 increases from $543 to $1,502. The provision contains special rules regarding the application of the credit for former foster youth and homeless youth.

Sec. 9622 — Taxpayer eligible for Earned Income Tax Credit in case of qualifying children who fail to meet certain identification requirements

Repeals the provision prohibiting an otherwise EITC-eligible taxpayer with qualifying children from claiming the childless EITC if he or she cannot claim the EITC with respect to qualifying children due to failure to meet child identification requirements (including a valid SSN for qualifying children). Accordingly, individuals who do not claim the EITC with respect to qualifying children due to failure to meet identification requirements would now be able claim the childless EITC.

Sec. 9623 — Credit allowed in case of certain separated spouses

Allows a married but separated individual to be treated as not married for purposes of the EITC if a joint return is not filed. Thus, the EITC may be claimed by the individual on a separate return. This rule only applies if the taxpayer lives with a qualifying child for more than one-half of the taxable year and either does not have the same principal place of abode as his or her spouse for the last six months of the year, or has a separation decree, instrument, or agreement and doesn't live with his or her spouse by the end of the taxable year. This change aligns the EITC eligibility requirements with present-day family law practice.

Sec. 9624 — Modification of disqualified investments income test

Increases the limitation on disqualified investment income for purposes of claiming the EITC from $3,650 (2020) to $10,000. The $10,000 amount is indexed for inflation.

Sec. 9625 — Application of Earned Income Tax Credit in Territories

Instructs Treasury to make payments to the territories that relate to the cost of each territory's EITC. In the case of Puerto Rico, which has an EITC, the payment is structured as a matching payment, wherein the Treasury will provide a match of up to three times the current cost of the Puerto Rico EITC, if Puerto Rico chooses to expand its current EITC. The other territories receive cost reimbursements of 75% of their EITC expenditures. The territories must provide Treasury with annual reports on the estimate of costs and a statement of costs with respect to the preceding year.

Sec. 9626 — Temporary special rule for determining earned income for purposes of the Earned Income Tax Credit

Allows taxpayers in 2021, for purposes of computing the EITC, to substitute their 2019 earned income for their 2021 earned income, if 2021 earned income was less than 2019 earned income.

Part 4 — Dependent Care Assistance

Sec. 9631 — Refundability and enhancement of Child and Dependent Care Tax Credit

Makes a number of modifications to the child and dependent care tax credit (“CDCTC”) for 2021. Makes the credit fully refundable and increases the maximum credit rate to 50 percent. Amends the phaseout threshold to begin at $125,000 instead of $15,000. Increases the amount of child and dependent care expenses that are eligible for the credit to $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals (such that the maximum credits are $4,000 and $8,000). At $125,000 the credit percentage begins to phase out, and plateaus at 20 percent. This 20-percent credit rate phases out for taxpayers whose AGI is in excess of $400,000, such that taxpayers with income in excess of $500,000 are not eligible for the credit.

Provides for a reimbursement of mirror code territories for the costs of this refundable credit in 2021. Additionally, for non-mirror code territories (Puerto Rico and American Samoa), provides a reimbursement for the aggregate value of such a credit, provided the territory develops a plan, approved by the Secretary, to distribute these amounts to its residents.

Sec. 9632 — Increase in exclusion for employer provided dependent care assistance

Increases the exclusion for employer-provided dependent care assistance from $5,000 to $10,500 (from $2,500 to $5,250 in the case of a separate return filed by a married individual) for 2021.

Part 5 — Credits for Paid Sick and Family Leave

Sec. 9641 — Extension of credits

Extends the Families First Coronavirus Response Act paid sick time and paid family leave credits from March 31, 2021 through September 30, 2021.

Sec. 9642 — Increase in limitations on credits for paid family leave

Increases the amount of wages for which an employer may claim the paid family credit in a year from $10,000 to $12,000 per employee and increases the number of days for which self-employed individuals can claim the credit from 50 to 60.

Sec. 9643 — Expansion of leave to which paid family leave credit applies

Expands the paid family leave credit to allow employers to claim the credit for leave provided for the reasons included under the previous employer mandate for paid sick time (e.g. if the employee has contracted COVID-19 or is caring for someone with COVID-19).

Sec. 9644 — Paid leave credits allowed for leave for covid vaccination

Expands the paid sick time and paid family leave credits to include leave taken to obtain a COVID-19 vaccine or to recover from an injury, disability, illness, or condition related to a COVID-19 immunization.

Sec. 9645 — Application of Non-Discrimination Rules

Prevents employers from claiming the credit if they make leave available in a manner that discriminates in favor of highly compensated employees, full time employees, or based on employment tenure with the employer.

Sec. 9646 — Reset of limitation on paid sick leave

Resets the ten-day limitation on the maximum number of days for which an employer can claim the paid sick leave credit with respect to wages paid to an employee. The current ten-day limitation runs from the start of the credits in 2020 through March 31, 2021. The new ten-day limitation applies to sick days after March 31, 2021. For self-employed individuals, the ten-day limitation resets on January 1, 2021.

Sec. 9647 — Credit allowed against hospital insurance tax.

Beginning after March 31, 2021, the credits for paid family and medical leave will be structured as a refundable payroll tax credit against the hospital insurance tax.

Sec. 9648 — Application of credits to certain governmental employers.

Allows state and local governments as well as Federal governmental instrumentalities that are tax-exempt 501(c)(1) organizations to access the paid sick time and paid family leave credits.

Sec. 9649 — Gross up of credit in lieu of exclusion from tax.

Increases the value of the credits by the amount equal to the OASDI and HI employer-share tax imposed on qualified paid family and medical leave wages for purposes of this credit.

Sec. 9650 — Effective date

The provisions relating to the payroll tax credits included in this title become effective for amounts paid with respect to leave taken after March 31, 2021. The provisions relating to self employed individuals becomes effective retroactive beginning after December 31, 2021.

Part 6 — Employee Retention Credit

Sec. 9651 — Extension of employee retention credit

Extends the employee retention tax credit, as added by the CARES Act and expanded and extended in P.L. 116-260, through December 31, 2021. Modifies the credit such that, beginning after June 30, 2021, the credit will be structured as a refundable payroll tax credit against the hospital insurance tax.

Part 7 — Premium Tax Credit

Sec. 9661 — Improving affordability by expanding premium assistance for consumer

Modifies the affordability percentages used for 36 (B) premium tax credits for 2021 and 2022 to increase credits for individuals eligible for assistance under current law and provides 36 (B) credits for taxpayers with income below 400 percent of the federal poverty line (FPL).

Sec. 9662 — Temporary modification of limitations on reconciliation of tax credits for coverage under a qualified health plan with advance payments of such credit.

For tax year 2020, modifies the repayment obligations for taxpayers receiving excess premium tax credits under Section 36 (B) so such payments are not subject to recapture.

Sec. 9663 — Application of premium tax credit in case of individuals receiving unemployment compensation during 2021

For 2021, provides advanced premium tax credits as if the taxpayer's income was no higher than 133 percent of the federal poverty line (FPL) for individuals receiving unemployment compensation as defined in section 85(B) of the Internal Revenue Code.

Part 8 — Miscellaneous Provisions

Sec. 9671 — Repeal of election to allocate interest, etc. on a worldwide basis

This provision repeals the election for U.S. affiliated groups to allocate interest expense on a worldwide basis. This change maintains pre-2021 policy regarding the allocation of expenses by eliminating the election that would be available starting in 2021. This change is effective for taxable years beginning in 2021.

Sec. 9672 — Tax treatment of targeted EIDL advances

Exempts Economic Injury Disaster Loan (EIDL) grants from tax and provides that such exclusion shall not result in a denial of deduction, reduction of tax attributes, or denial of increase in basis by reason of this exclusion from income. Directs the Secretary to prescribe rules for determining a partner's distributive share of amounts received through an EIDL grant.

Sec. 9673 — Tax treatment of Restaurant Revitalization Grants

Exempts Restaurant Revitalization Grants from tax and provides that such exclusion shall not result in a denial of deduction, reduction of tax attributes, or denial of increase in basis by reason of this exclusion from income. Directs the Secretary to prescribe rules for determining a partner's distributive share of amounts received through a Restaurant Revitalization Grant.

Subtitle H — The Butch Lewis Emergency Pension Plan Relief Act of 2021
Section-by-Section

Sec. 9701 — Short Title. The Act may be cited as the “Butch Lewis Emergency Pension Plan Relief Act of 2021.”

Sec. 9702 — Temporary Delay of Designation of Multiemployer Plans as in Endangered, Critical, or Critical and Declining Status. Under the legislation, a plan could retain its funding zone status as of a plan year beginning in 2019 for plan years that begin in 2020 or 2021. A plan in endangered or critical status would not have to update its plan or schedules until the plan year beginning March 1, 2021. This would provide a plan with flexibility and ease an administrative burden given the economic and financial turmoil resulting from the COVID-19 public health crisis.

Sec. 9703 — Temporary Extension of the Funding Improvement and Rehabilitation Periods for Multiemployer Pension Plans in Critical and Endangered Status for 2020 or 2021.

Under the bill, a plan in endangered or critical status for a plan year beginning in 2020 or 2021 could extend its rehabilitation period by five years. This would give a plan additional time to improve its contribution rates, limit benefit accruals, and maintain plan funding — all on its own terms. This provision is effective for plan years beginning after December 31, 2019.

Sec. 9704 — Adjustments to Funding Standard Account Rules. Funding shortfalls as a result of investment losses are generally required to be made up over a period of 15 years. Following the financial crisis of 2008, multiemployer plans were allowed to amortize investment losses from 2008 or 2009 over a period of 30 years. Under the legislation, for investment losses or reductions in regularly scheduled employer contributions, a plan could use a 30-year amortization base to spread out losses over time. Pension plans, participants, and plan sponsors need more stability and a longer period over which to pay for long-term liabilities that can stretch out for decades. This would help a plan weather this economic and financial storm. This provision is effective for plan years ending on or after February 29, 2020.

Sec. 9705 — Special Financial Assistance Program for Financially Troubled Multiemployer Plans.

About 10 million Americans participate in multiemployer pension plans and about 1.3 million of them are in plans that are quickly running out of money. Many of these troubled multiemployer plans cover workers who are on the front lines of the COVID-19 public health crisis, such as trucking, food processing, grocery store workers, and others. Even before the pandemic, workers, businesses, and retirees faced a crisis and were in dire need of our help. The economic catastrophe resulting from COVID-19 has exacerbated the multiemployer pension crisis and threatened the hard-earned pensions of even more workers and retirees. This threatens to bankrupt the Pension Benefit Guaranty Corporation (“PBGC”), impose damaging liabilities on thousands of businesses, and devastate communities across the country.

To address this crisis, the legislation generally would create a special financial assistance program under which cash payments would be made by the PBGC to financially troubled multiemployer pension plans to ensure that such plans can continue paying retirees' benefits. The PBGC would be provided with the amounts necessary to provide such payments through a general Treasury transfer.

Multiemployer pension plans that would be eligible for this program generally would include plans in critical and declining status and plans with significant underfunding with more retirees than active workers in any plan year beginning in 2020 through 2022. In addition, plans that have suspended benefits and certain plans that have already become insolvent also would be eligible.

Applications for special financial assistance under this program must be submitted no later than December 31, 2025. Once an application is approved, the payment made by the PBGC to the eligible multiemployer pension plan would be made as a single, lump sum payment. The amount of financial assistance would be such amount required for the plan to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051 with generally no reduction in a participant's or beneficiary's accrued benefit. Plans would be required to invest such amounts in investment-grade bonds or other investments as permitted by the PBGC.

By stabilizing these pensions, the special financial assistance program for financially troubled multiemployer plans would protect retirees who worked for decades to earn their benefits. It would also help businesses avoid crushing liabilities and support communities around the country.

In addition, the legislation would increase the PBGC multiemployer plans premium rate to $52 per participant starting in calendar year 2031. Such premium rate would be indexed for inflation.

Sec. 9706 — Extended Amortization for Single Employer Plans. In light of an ongoing pattern of interest rate and market volatility due to the COVID-19 public health crisis, the current law requirement to amortize funding shortfalls over seven years is no longer appropriate. Pension plans, participants, and plan sponsors need more stability and a longer period over which to pay for long-term liabilities that can stretch out for more than 50 years. Accordingly, under the bill, the following rules would apply to all single employer pension plans. All shortfall amortization bases for plan year 2019 or 2020 (at the election of the plan sponsor) and all shortfall amortization installments determined with respect to such bases would be reduced to zero. For all plan years beginning after December 31, 2019, all shortfalls would be amortized over 15 years, rather than seven years. The plan sponsor also may elect to apply this provision for the 2019 plan year.

Sec. 9707 — Extension of Pension Funding Stabilization Percentages for Single Employer Plans. In 2012, 2014, and 2015, Congress provided for pension interest rate smoothing in order to address concerns that historically low interest rates were creating inflated pension funding obligations, diverting corporate assets away from jobs and business recovery. Under interest rate smoothing, the interest rates used to value pension liabilities must be within 10% of 25-year interest rate averages. The smoothed interest rates would begin phasing out in 2021, with the 10% corridor around the 25-year interest rate averages increasing five percentage points each year until interest rates need only be within 30% of the 25-year averages. Because of this phaseout, smoothing would soon cease to have much effect. In order to preserve the stabilizing effects of smoothing: The 10% interest rate corridor would be reduced to 5%, effective in 2020. The phase-out of the 5% corridor would be delayed until 2026, at which point the corridor would, as under current law, increase by 5 percentage points each year until it attains 30% in 2030, where it would stay. A 5% floor would be put on the 25-year interest rate averages. This floor would establish stability and predictability on a longer-term basis, so that interest rate variations do not create excessive volatility. In addition, this floor would protect funding rules from the extremes of interest rate movements. This provision is effective for plan years beginning after December 31, 2019.

Section 9708 — Modification of Special Rules for Minimum Funding Standards for Community Newspaper Plans. Community newspapers are generally family-owned, non-publicly traded, independent newspapers. The recently enacted SECURE Act provided pension funding relief for a number of community newspaper plans by increasing the interest rate to calculate those funding obligations to 8 percent. Additionally, the SECURE Act provided for a longer amortization period of 30 years from 7 years. These two changes enable struggling community newspapers to stretch out their required pension plan contributions over a longer time period. The legislation would expand the SECURE Act relief to additional community newspapers.

Section 9709 — Cost of Living Adjustment Freeze. Under current law, various qualified retirement plan limitations are indexed for inflation. For 2021, the Code Section 415(c) annual contribution limit for defined contribution plans is $58,000 — and the 415(b)(1)(A) annual defined benefit limit is $230,000. In addition, for 2021, the 401(a)(17) annual compensation limit is $290,000. The legislation would freeze these limits starting in calendar year 2030.