Negotiations on a stimulus bill that would roll back provisions of the Tax Cuts and Jobs Act continued to stall in the Senate as House Democrats circulated their own package expanding refundable credits for low-income households.
For the second time in two days, the Senate March 23 voted down a procedural step to advance the legislative vehicle for the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748).
Unable to achieve the 60 votes necessary for passage, Senate Majority Leader Mitch McConnell, R-Ky., reacted angrily after all Senate Democrats except Alabama’s Doug Jones voted against the motion. “The American people have had enough of this nonsense,” McConnell said on the Senate floor after the 49-46 vote.
Democrats warned Republicans before the vote that they wouldn’t be backing the measure because of what they called a $500 billion “slush fund” that could be used to bail out corporations.
Speaking before the vote, Senator Joe Manchin III, D-W.Va., told reporters that the bill doesn’t have enough to help healthcare workers in his state and around the country.
Republicans took to the Senate floor to attack Democrats for failing to support the bill and accused House Speaker Nancy Pelosi, D-Calif., of tanking negotiations between Senate Democrats and Senate Republicans. House Democrats, over the span of 24 hours, floated two versions of their own economic stimulus package, the Take Responsibility for Workers and Families Act, that greatly differed from the updated Senate bill that was circulated the day before.
Despite the animosity, negotiations in the Capitol were ongoing as Treasury Secretary Steven Mnuchin joined leaders on both sides to try to create consensus.
NOL Agreement – Sort Of
Businesses may be happy to hear that House Democrats included a temporary repeal of the taxable income net operating loss limitation in their package that would allow companies to use current losses against past profits. The provision has the backing of the U.S. Chamber of Commerce and would help companies get cash infusions. It was included in the latest Senate version.
Heritage Foundation senior policy analyst Adam Michel predicted that both sides would be able to agree on keeping the temporary repeal because it functions better than a bailout and would apply to all businesses equally.
“NOL expansion and filing/remittance delay are the most important pieces to get businesses the cash they will need to weather this crisis,” Michel told Tax Notes.
Businesses’ ability to carry back NOLs arising in 2018, 2019, and 2020 is more limited under the House proposal because the five-year carryback provision prohibits carrybacks to tax years beginning before January 1, 2015. But some businesses, referred to as “disqualified taxpayers,” won’t be able to carry back any losses — such as businesses that engaged in stock buybacks or handed out golden parachute payments to departing executive officers — since the TCJA became law.
The updated Senate bill similarly repealed the income limitation, but does not have disqualifying language for some companies, such as those that engaged in stock buybacks over the past two years.
House Democrats Focus on Tax Wish list
The House bills being circulated include many provisions lauded by House Ways and Means Committee Democrats over the past year, including the expansion of refundable credits.
The proposed bills would expand the earned income tax credit and make the child tax credit fully refundable, but those provisions will likely hit a roadblock with Republicans. Democrats also want a tax credit for hospitals and included a provision to provide governmental entities a tax credit for sick leave.
Democrats did not include a fix to the TCJA that allows retailers to write off investments faster. The so-called retail glitch, which is fixed in the Senate version, has long been a point of contention between the parties. Democrats have made it clear that they would like an expansion of the EITC and child tax credit in return for fixing the mistake made by Republicans when writing the 2017 tax law.
The Democratic bill would also increase direct payment amounts to $1,500 for individuals and $3,000 for joint filers, compared with the Senate’s $1,200 and $2,400, respectively.
Out for Good?
Senate Democrats succeeded in removing another fix to the TCJA to restore the limitation on downward attribution of stock ownership. The technical correction was in the Republican version of the bill rolled out on March 19 but was removed in the updated version after objections from Democrats.
The TCJA repealed section 958(b)(4), much to the chagrin of practitioners worried over the possibility of far more entities being considered controlled foreign corporations.
The latest draft of the Senate stimulus package also removed a provision delaying the estimated tax payments for corporations, but kept one delaying the payment of employer payroll taxes. House Democrats did not include a delay to employer tax payments in their version.
Senators also released language of a supplementary appropriations package to provide increased funding for federal agencies. The package would give the IRS an additional $250 million to implement changes needed to respond to the coronavirus outbreak.
Alexis Gravely contributed to this article.
Correction, March 24, 2020: The bill number for the Coronavirus Aid, Relief, and Economic Security Act is H.R. 748.