Here are some highlights...
On why the CARES Act is not a stimulus bill:
The CARES Act was not trying to boost aggregate demand. It was about trying to put a floor underneath people and to make sure that businesses can stay afloat so that they don't have to lay off as many people as they are. Then we can help affected individuals that are laid off meet their obligations. We want them to be able to pay their rent and their mortgage, and we want them to be able to buy groceries. We know that they're not going to go out and book a vacation right now. We know that businesses largely aren't going to be expanding operations.
This bill is about economic relief. We are not trying to grow the economy with this. We're just trying to prevent it from backsliding even further.
On how the CARES Act differs from the Tax Cuts and Jobs Act:
The TCJA was quick. We passed that bill in about two months. Obviously, there had been lead-up to federal tax reform going back to 2010 and 2011. But in essence, we did the legislative process for the TCJA over two months.
Here with the CARES Act, we did it over two weeks. From the time that we actually saw legislative text from the Senate until the time they voted, it was six days. It moved at lightning speed. For everyone who said the TCJA was quick, this was even faster. We saw 10 different versions of legislative text in six days.
On key provisions of the CARES Act:
In the tax space, there were a couple of very key provisions. For individuals, the most important is the so-called recovery rebates. This is the $1,200-per-person and the $500-per-child payments that will be coming out over the next several weeks.
For businesses, there is the delay of employer-side payroll tax liabilities for a fairly significant amount of time — up to the end of 2022. This isn't a payroll tax holiday. The economics of it are slightly different.
There are also some other changes related to net operating losses and interest deductions and some of those other corporate income tax base provisions.
On how the bill supports small businesses and multinationals:
For C corporations and for the passthrough community, Congress has lifted the cap created by the TCJA on net operating losses. This is really important for ensuring that companies do not pay taxes on income they didn't have this year. But more importantly, we're going to allow them to carry back previous losses for up to five years. That's going to allow them to go back and amend previous returns and get this money fairly quickly.
For the larger companies, we have loosened the cap on the interest deduction that the TCJA created. Prior to the CARES Act, the TCJA said that in 2020 your interest deduction was capped at 30 percent of your EBITDA. We've loosened that from 30 percent to 50 percent.
On other ways to stimulate the economy:
We could make changes to the permanency of [TCJA accelerated expensing] that would have a boost as we come into recovery. We could look at expensing of structures, which we didn't do in the TCJA. Expand it to residential or commercial property, which could have asset lives reaching 39 years.
If we're concerned about budgets, we could use something called mutual cost recovery to try to mitigate the budgetary impact of those changes. That would be something that's front of mind as a way to help boost the economy once we get back to those sorts of conversations.