Top lawmakers in Washington are negotiating over a second round of COVID-19 stimulus and relief legislation, setting up the possibility of action as early as this month. The bill will likely carry a significant tax title and may continue or enhance several existing provisions enacted in response to the pandemic, along with new tax changes.
House Democrats already laid out their priorities in the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act that passed along party lines in May. The package includes some tax proposals that could gain bipartisan traction, such as such as expanding the employee retention credit and reversing IRS guidance denying deductions for expenses that result in loans being forgiven under the Paycheck Protection Program.
Republicans in Congress have floated several tax priorities in recent weeks, including return-to-work incentives for unemployed individuals and allowing businesses to accelerate tax credits. President Donald Trump has long supported suspending payroll taxes through the end of the year and cutting the capital gains tax rate, while White House economic adviser Peter Navarro has pushed for stimulus funding geared specifically toward U.S. manufacturing.
Additional direct payments to individuals could also be in the mix. The HEROES Act proposes a second round of $1,200 refund checks for each filing adult, subject to the same income phaseouts as before, plus $1,200 each for up to three dependents. Republicans have generally been cool to the idea, but Treasury Secretary Steven Mnuchin has indicated he would consider it.
The Trump administration is pushing for a package to be enacted before Congress departs for its August recess, but with a price tag no more than $1 trillion. Congress may also feel pressure to act with the unemployment benefits enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act expiring on July 31.
However, Republicans and Democrats must reconcile key differences first. Senate Majority Leader Mitch McConnell (R-Ky.) has been adamant that any additional stimulus legislation include protections for businesses from COVID-19-related lawsuits. Democrats have opposed granting such immunity but may be willing to compromise if the protections aren’t too broad. Similarly, while Republicans have balked at the $500 billion in state aid included in the HEROES Act, they may be open to limited or conditional aid.
Congress is currently in recess until July 20. The House adjourns again at the end of the month, while the Senate remains in session until Aug. 10, leaving just two weeks for the two sides to strike a deal.
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