A suggestion from White House officials to provide tax relief to industries affected by COVID-19 may be tough to implement without help from Congress.
President Trump floated the idea of a cut in the payroll tax to help bolster the economy, and news reports say the executive branch is considering deferring taxes for the cruise, travel, and airline industries, which have been especially hard hit by fears about the disease.
United Airlines and JetBlue recently announced that they would be reducing flights soon in response to decreased demand, and hotels have been hit by convention cancellations.
But any attempt to make tax deferrals available for a select group of companies would require the approval of Congress, which analysts said is highly unlikely right now.
“Tax deferrals is a very specified section of the tax code that is set by statute,” Jorge Castro of Miller & Chevalier told Tax Notes, pointing to the example of tax deferrals dealing with 401K plans.
Castro, who formerly served as a counselor to the IRS commissioner and as a congressional tax staffer, said the administration may try to extend filing deadlines and waive penalties. “This is typically done as de facto relief in response to natural disasters,” he said. But whether it would be able to do so is another question.
Natural Disaster?
George Callas, a former House GOP leadership tax staffer now with Steptoe and Johnson LLP, agreed that the administration has limited options for relief that don’t require congressional approval. And he doesn’t believe that penalty relief will apply since the epidemic is not a natural disaster.
Not only is the administration’s power unclear, but “it’s not clear to me what Congress could do, frankly, from a tax perspective,” Callas said.
But comparisons to natural disasters are being drawn. Speaking at the March 6 Federal Bar Association conference in Washington, Mark Warren, tax aide to Senate Finance Committee Republicans, likened the outbreak to a natural disaster when asked what relief is being considered on Capitol Hill for companies and individuals.
Warren said the tax code provides for a set of provisions when dealing with disaster relief but admitted that many of them won’t be useful in addressing what's now happening in the United States.
Any attempt to give some companies leeway in their filing obligations could also lead to a drop in revenue and be met with opposition from congressional Democrats already skeptical of corporate giveaways.
Steve Rosenthal of the Urban-Brookings Tax Policy Center said the constitutional duty to raise revenue lies with Congress, and that the administration would likely face problems in the Democrat-controlled House if it proposed cutting taxes for specific industries.
“I think they’re using coronavirus as an excuse to shove more money into industry, and it’s pretty poor tax policy,” Rosenthal said. “I think the problem at hand would be helping workers to make ends meet.”