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House Sends Massive COVID-19 Relief Bill to Biden

Posted on Mar. 11, 2021

The $1.9 trillion pandemic relief bill approved by the House would raise taxes on some businesses and expand refundable credits as Democrats look to make some of its temporary tax changes permanent. 

The 220-211 House vote March 10 sends the American Rescue Plan Act of 2021 (H.R. 1319) to President Biden’s desk, and he is expected to sign it into law March 12, two days before the expiration of unemployment insurance benefits.

The bill is widely hailed by Democrats as a lifeline for average taxpayers, providing them with an expanded child tax credit and an expanded earned income tax credit. Democrats are expected to soon lay out a plan to make many of those temporary changes permanent.

House Ways and Means Chair Richard E. Neal, D-Mass., called it the most important vote of his 33-year career as a lawmaker.

The Ways and Means Committee played an instrumental role in drafting language to expand the child tax credit, including a plan to send periodic advance credits to parents. Expanding refundable credits has been on Neal’s to-do list for years, and he told reporters after the vote that he believes there could be a bipartisan solution to making the child tax credit expansion permanent.

“A lot of conservatives like the child issue,” Neal said, predicting that the credit could be expanded without the use of another reconciliation package. “I’ve got some ideas.”

The bill would increase the child tax credit to $3,000 per child and $3,600 for children younger than 6. The EITC would be available to more childless workers — including those as young as 19 — and over a wider income range.

However, the job of sending the advance credit to families under the stimulus bill could add complications for the IRS. “The administrative detail is going to be a bit of a challenge,” Neal said, but he added that the IRS indicated that it will be able to accomplish the task.

All House Republicans and one Democrat voted against the measure, with many claiming that it does little to fight the pandemic and instead helps further the Democrats’ liberal agenda. “This won’t lift people out of poverty; it will only create more barriers to getting out of it,” said Ways and Means Committee ranking member Kevin Brady, R-Texas.

Democrats included a provision in the bill to expand the employee retention credit to start-ups. The bill would also exclude the full or partial forgiveness of any college loan between December 31, 2020, and January 1, 2026, from a borrower’s income.

Business Tax Increases

To stay within the $1.9 trillion budget required by the reconciliation process, Democrats increased taxes on some companies.

The bill denies a deduction for compensation in excess of $1 million for the eight highest-paid employees — plus the CEO or CFO — of publicly traded companies. Under current law, the deduction is denied only for the three highest-paid employees.

The Senate also added a one-year extension of the business loss limitation rule created by the Tax Cuts and Jobs Act to pay for its provision to make the first $10,200 of unemployment benefits nontaxable income for 2020.

The loss limitation rule has been temporarily suspended, to the chagrin of some Democrats such as House Ways and Means Committee member Lloyd Doggett, D-Texas, and Senate Finance Committee member Sheldon Whitehouse, D-R.I., who asked their colleagues to reinstate the limitation, arguing that it only benefited the wealthy. 

Democrats also included in the bill a reduction to the threshold for when third-party payment processors must report information to the IRS. Under current law, companies like eBay and Airbnb must report when people are paid more than $20,000 over at least 200 transactions. The language in the bill would drop that threshold to $600 to capture more of the money earned by independent contractors in so-called gig economy jobs. The move would raise $8.4 billion over 10 years, according to the Joint Committee on Taxation.

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