Congress adjourned for its August recess without a deal on a second round of COVID-19 stimulus legislation, leaving several significant tax proposals hanging in the balance.
Republicans and Democrats remain roughly $1 trillion apart on the overall size of the stimulus package, with funding for state and local governments making up much of the difference. The two sides must also find agreement on unemployment benefits and liability protections for businesses.
The eventual bill’s tax title is expected to come together quickly once these issues are resolved. Both sides are close on a second round of stimulus checks for individuals and enhancements to the employee retention credit. There is also bipartisan support for reversing IRS guidance requiring taxpayers to reduce their deductions by the amount of any loan proceeds forgiven under the Paycheck Protection Program.
The timing of a possible deal remains uncertain with the Senate out until Sept. 8 and the House adjourned until Sept. 14. While the House and some senators reconvened briefly to address issues related to the postal service, stimulus talks weren’t on the agenda. Lawmakers have given no indication that they will reconvene again before their scheduled returns to Washington, but the state of the economy and markets remain fluid and any sudden changes could force action.
Congress is also facing a Sept. 30 deadline to fund the government. Republicans and Democrats will be equally eager to avoid a government shutdown in the leadup to a major election and a must-pass spending bill could serve as a suitable vehicle for at least some stimulus provisions.
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