COVID-19 stimulus talks stall

Tax Hot Topics newsletter Lawmakers in Washington have been unable to reach an agreement on the next round of COVID-19 stimulus legislation, which is expected to include a narrow but significant tax title.

Senate Republicans outlined their priorities in a $1 trillion package introduced on July 27. The proposal shares a handful of tax priorities with the $3 trillion bill passed by House Democrats in May, such as an enhanced employee retention credit and additional direct payments to individuals. However, the two sides remain far apart on several other issues. For more details on the Senate package, see our story, “Senate Republicans release stimulus proposal.”

Congress and the Trump administration were aiming to pass a second stimulus bill by July 31, when unemployment benefits provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act were set to expire, but the deadline passed without a deal. Discussions between Democratic leadership in Congress and the Trump administration continued through last week, but no breakthroughs were made. President Donald Trump responded to the stalemate by taking executive action, including issuing a memorandum instructing Treasury to defer certain employee payroll tax payments from September through the end of the year.

Many of the major differences on the stimulus bill are unrelated to its tax title and the package is expected to come together quickly once they are resolved. Other tax proposals with bipartisan support that could make the final cut include allowing Paycheck Protection Program (PPP) loan recipients to continue deferring payroll taxes after a loan is forgiven and reversing IRS guidance that denies deductions for expenses paid with forgiven PPP loans.

Although negotiations have stalled, lawmakers are still under pressure to enact legislation soon. The House and Senate have already left Washington to begin their August recess, but will return to vote if a deal materializes.

Dustin Stamper
Managing Director
Washington National Tax Office
T  +1 202 861 4144

Omair Taher
Washington National Tax Office
T  +1 202 861 4143

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