Don't Mess With Taxes

UPDATE, July 28, 2020: We finally know how the Senate wants to handle additional COVID-19 economic relief. The GOP-crafted Heath, Economic Assistance, Liability Protection and Schools (HEALS) Act, like the already passed Democratic House bill, provides for another round of stimulus payments, but isn't quite as generous as far as dependents. It also drastically reduces federal unemployment assistance. Details on this opening gambit are in these articles from The Washington Post and CNBC.

Washington, D.C. watchers are used to federal lawmakers' last-minute struggles to create and pass legislation. Often though, we have to wait until the end of the year.

That's when must-pass bills are frantically written and rewritten <cough…looking at you 2017 tax reform process…cough> and debates go into the wee hours, with members of Congress and staff alike fuming over potentially ruined holiday plans. When this happens, the bills typically are larded with lots of unrelated items to secure approving votes.

Because of the timing, such measures usually are referred to as Christmas tree bills, conjuring the vision of a huge evergreen heavy with too many lawmakers' legislative ornaments.

Thanks to the coronavirus pandemic, it's Christmas in July.

Members of Congress, specifically Senators right now, are looking to include some of their favorite (and constituent-approved) proposals in what is probably the last big bill to clear Capitol Hill before the Nov. 3 election.

COVID-19 help plus voter appeals: In the midst of the economic chaos caused by the COVID-19 pandemic, Representatives and Senators are working on ways to continue relief options that are part of the Coronavirus Aid, Relief and Economic Security (CARES) Act that was enacted in late March.

They are facing an end-of-July deadline. That's when the CARES-created $600 a month in state-administered unemployment benefits expire.

That's also the deadline for getting any tangential COVID-19 provisions into the bill. I noted a couple of such efforts in my post earlier this week previewing the coming COVID-19 relief possible provisions.

There's the effort, yet again, by New York lawmakers to remove the state and local taxes (SALT) federal deduction cap, as well as a proposed new business tax credit to help offset the costs of making workplaces coronavirus safe.

Now Sen. Jodi Ernst is proposing tax breaks for essential COVID-19 workers.

Tax help for frontline workers: The Iowa Republican's Financial Relief Noting The Large Impact Of Our Nation's Essential Employees Act, or FRNTLINE Act, would suspend federal income tax for essential workers up to an annual income cap. That would be set at the highest level of pay for an enlisted person in the armed forces.

In addition, Ernst's bill would suspend federal payroll taxes for essential workers who earn up to $50,000 annually. Her tax proposals would be retroactive to April 1.

"These folks are the heroes who will help America beat this pandemic," Ernst said in a conference call with reporters. "It's time we pay them back." The tax-break eligible workers, per Ernst, would include nurses, truck drivers and grocery store workers, child care providers, and so many others."

PPP business deductions OK: Sen. John Cornyn, the senior GOP Senator from Texas, also is lobbying for his Small Business Expense Protection Act, S. 3612, to be added to the coming COVID-19 package.

Cornyn's bill would allow businesses that received Payroll Protection Program (PPP) loans deduct business expenses. A similar provision is part of the House's coronavirus relief bill, the HEROES Act, that the lower chamber approved in mid-May.

The need for this specificity comes thanks to the Internal Revenue Service, which following the enactment of the PPP said it would not allow business owners to deduct wages paid and other expenses that are covered by the forgiven loans. Businesses (and their tax pros) quickly noted that if those items aren't deductible, they could wind up with higher taxable income than if they hadn't gotten a PPP loan.

Cornyn's bill has 25 bipartisan cosponsors, including the leading Republican and Democrat on the tax-writing Senate Finance Committee (SFC).

Out-of-state tax break: Another SFC member, Sen. John Thune (R-South Dakota) also is looking at the next COVID-19 relief bill as a potential vehicle for his Remote and Mobile Worker Relief Act of 2020.

The bill, S. 3995, would offer tax relief for individuals who volunteered in other states during the pandemic and now are facing potentially hefty tax bills from those states where they offered their services.

The tax price of being a Good Samaritan was particularly problematic for health care workers from across the United States who went to New York in the early stages of the outbreak. However, Empire State members of Congress are likely to oppose Thune's bill since their state, like cash-strapped jurisdictions nationwide, need all the tax money they can get from residents and visiting workers.

Congressional COVID-19 tree trimming: So far, early reports say that only two items are for sure in the nascent Senate bill that must be reconciled with the House HEROES Act and approved by both chambers before going to the White House for signature into law.

Those are another round of stimulus checks similar to those created by CARES Act and added incentives for businesses to hire and retain workers. Both those basics are in the House bill.

Beyond that, get ready for Senators and Representatives to pull out their favorite policy ornaments. Whether there's any room for them on this coronavirus inspired legislative tree depends on the amenability of Congressional leadership and the possibility of amendments to any proposal.

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