Menu
Tax Notes logo

Dems Include Familiar Tax Provisions in Updated Relief Package

Posted on Sep. 29, 2020

A slimmed-down COVID-19 relief package from House Democrats would extend the Paycheck Protection Program, allow for tax deductions of affiliated expenses, expand the employee retention tax credit, and remove the $10,000 state and local tax deduction cap for one year.

The updated Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), released September 28, would cost about $2.2 trillion, according to a summary, and is meant to draw Republicans to the negotiating table.

The smaller package takes into consideration concerns that Republicans had with the initial $3.4 trillion package passed by the House in May. The updated HEROES Act also reflects some changes that have occurred in the four months since release of the first version, including updates to the PPP. The popular small business loan program was amended to allow small companies to take out another round of loans if they can show a 25 percent reduction in year-over-year revenue.

This number reflects the wishes of the U.S. Chamber of Commerce and the National Restaurant Association, both of which scoffed at the initial suggestion from Capitol Hill that a business should show a 50 percent reduction in revenue to be eligible for a second round of PPP loans.

Similar to the last HEROES Act, Democrats retained a provision that would allow the deductibility of expenses paid with PPP funds. That provision could receive bipartisan backing in the House and the Senate after lawmakers from both sides of the aisle pushed legislation to make this a law. 

Another measure that is likely to receive bipartisan backing is the expansion of the ERTC by increasing the applicable percentage of qualified wages that can be reimbursed from 50 percent to 80 percent. It also would increase the limit on wages taken into account from $10,000 per employee for the year to $15,000 per quarter.

Similar to the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), the HEROES Act would provide each taxpayer making $75,000 or less with a $1,200 economic impact payment and an additional $500 for each qualifying dependent. Democrats will likely face pushback from Republicans for including payments to those with taxpayer identification numbers in addition to those with Social Security numbers. Republicans criticized the plan, arguing that it would give money to illegal immigrants.

Sprinkle of SALT

Democrats included a provision to eliminate the $10,000 SALT deduction cap for 2020. The previous version would have eliminated the cap for 2020 and 2021. This will likely face an immediate backlash from Republicans, who accuse Democrats of helping coastal elites by eliminating the cap.

Republicans will also likely be unhappy that Democrats are persisting on paring back the net operating loss carryback provision that was formulated in the CARES Act. The updated HEROES Act, as in the original version, would permit a company’s losses from 2019 and 2020 to be carried back only to January 1, 2018, instead of the five years allowed in the CARES Act.

Republicans say that this provision helps small and large business owners realize capital when they need it most, but Democrats, led by House Ways and Means Committee member Lloyd Doggett, D-Texas, complained that it helps the wealthiest in society.

Copy RID