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Practitioners Eye More Credits for Next Potential Coronavirus Bill

Posted on Mar. 30, 2020

Tax relief already enacted by Congress in the wake of the coronavirus pandemic, such as the employee retention credit, could be expanded in a fourth bill, practitioners are predicting.

A more generous version of the employee retention credit was proposed by House Democrats and could resurface in the next round of legislation, Loren C. Ponds of Miller & Chevalier Chtd. said March 27 on a webinar hosted by her firm. The credit was included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), which President Trump signed into law the same day.

The credit is available to employers whose operations are suspended because of a government order related to COVID-19 and to employers who have had a greater than 50 percent reduction in gross receipts compared with the same quarter in the prior year.

But Jorge E. Castro, also of Miller & Chevalier, said the text is a little unclear about which employers qualify, adding that he expects further clarifications from the IRS.

Ponds noted that the version of the credit in House Democrats’ bill (H.R. 6379) didn’t have such strict qualification rules. “That might be something that could be considered going forward,” she said.

Castro noted that the credit was one of the pricier provisions in the CARES Act. The Joint Committee on Taxation estimated (JCX-11-20) March 26 that it would cost $54.6 billion over 10 years.

Future legislation could also include an expansion of the credits offered in the Families First Coronavirus Response Act (P.L. 116-127), as well as expansions of the earned income, child, and dependent care tax credits, Ponds predicted.

Two technical corrections to the Tax Cuts and Jobs Act that didn’t make it into the final version of the CARES Act — one concerning section 965 transition tax overpayments and one related to section 958(b)(4) downward attribution — are less likely to resurface due to a lack of bipartisan support, Ponds said.

Marc J. Gerson of Miller & Chevalier said the interest in additional legislation is evident. “Even before the negotiations were completed on the CARES Act, you had legislators on both sides of the aisle already discussing the need for additional legislative packages to address the crisis,” Gerson said. “It’s envisioned that there will be a fourth and maybe even a fifth legislative package.”

The tax provisions in the CARES Act were widely applicable and generally what practitioners had expected to see, Gerson said, while additional legislation “may include more targeted tax relief provisions that are aimed at particular industries.”

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