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House GOP Bill Offers COVID Relief Through Tax Credits

Posted on Nov. 2, 2020

A set of tax incentives intended to strengthen healthcare is part of a new pandemic relief bill announced by House Republicans to counter Democrats’ package.

The Commitment to Defeat the Virus and Keep America Healthy Act (H.R. 14), introduced October 30, is cosponsored by a group of House Republican leaders, including Ways and Means Committee ranking member Kevin Brady of Texas and Minority Leader Kevin McCarthy of California.

“Through tax incentives we expand access to affordable, quality healthcare, help businesses create safe workplaces for their employees and customers, and reward businesses for producing crucial medicines and medical supplies here in America rather than in China,” Brady said in a release.

The bill includes a medical and drug manufacturing income tax credit of 10.5 percent on profits from the sale of active pharmaceutical ingredients that are produced domestically — effectively halving the corporate tax rate for eligible profits.

It also includes a 30 percent credit for new investments in advanced medical manufacturing equipment and machinery that are used to produce drugs and medical devices in the United States. The credit would drop to 20 percent in 2028 and 10 percent in 2029, and phase out in 2030.

To encourage medical research, the Republicans propose two additions to the research credit: a bonus 14 percent credit for qualified costs associated with developing infectious disease countermeasures in addition to the regular credit, and a refund of the credit for small businesses engaged in medical research.

“If a company engaged in R&D activity related to medical countermeasures generates $10 million in R&D tax credits in a year, it would be eligible for a tax refund of $10 million to provide it with additional liquidity to continue its drug development,” a summary of the bill explained.

A healthy workplace tax credit is also part of the legislation and would provide a refundable credit for 50 percent of costs incurred by businesses that implement COVID-19 mitigation measures, such as testing, personal protective equipment, and cleaning costs.

The credit would be limited to $1,000 per employee for the first 500 employees, $750 per employee for the next 500 employees, and $500 for each employee after 1,000.

Other tax provisions included in the legislation are a reduction in the adjusted gross income threshold needed to claim a medical expense deduction and relaxed passive loss rules for investments that passthrough entities make in specified medical research.

The Republican bill comes after the House already passed two wide-ranging Democrat-sponsored coronavirus relief bills. Most recently, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 925) passed the chamber October 1.

However, the Senate hasn’t taken up either House-passed bill and has failed to pass legislation of its own, casting doubt on the possibility of further coronavirus relief by year-end. Senate Finance Committee member Rob Portman, R-Ohio, predicted October 30 that a relief bill would pass after the November 3 elections, but Senate Majority Leader Mitch McConnell, R-Ky., said the same day that nothing is likely to pass until early next year.

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