By Dylan Moroses

Law360 (April 14, 2020, 6:57 PM EDT) -- A provision in the recently passed coronavirus relief law removing limitations on excess business losses for pass-through entities mostly benefits those earning more than $1 million, Democratic lawmakers said in a report released Tuesday.

A Joint Committee on Taxation distributional analysis on a provision in the Coronavirus Aid, Relief and Economic Security Act that suspends limitations on excess business losses for pass-through entities found that almost 82% of the break's benefit would go to those earning more than $1 million, according to a JCT letter sent to Sen. Sheldon Whitehouse, D-R.I., and Rep. Lloyd Doggett, D-Texas. Tom Barthold, the JCT chief, wrote in response to the lawmakers' April 7 request for information about the provision. That letter was not immediately available publicly.

The CARES Act, which President Donald Trump signed into law last month, included language that allows businesses, both corporate and pass-through, to carry back losses from 2018, 2019 and 2020 for up to five years. The JCT previously found that the provisions together would cost about $195 billion over 10 years.

The JCT analysis shows that the bill disproportionately benefited wealthy earners and businesses instead of providing much-needed funding to state and local governments to help them get resources to hospitals and frontline workers, Whitehouse said.

"This analysis shows that while Democrats fought for unemployment insurance and small business relief, a top priority of President Trump and his allies in Congress was another massive tax cut for the wealthy," Whitehouse said.

Doggett, meanwhile, said the pass-through business loss provision cost more than the funding provided in the CARES Act to state and local governments and hospitals. Both Whitehouse and Doggett suggested that the business loss provision should be repealed.

The suggestion for withdrawal of the provision drew criticism from Michael Zona, a spokesman for Sen. Chuck Grassley, R-Iowa. 

"The CARES Act helps businesses keep the lights on and employees on payroll as much as possible to get through this crisis," Zona said. "Every senator criticizing this provision voted for this bipartisan bill, so their complaints about a law they helped write simply stink of partisan politics."

The Democratic lawmakers also inquired last week about other business loss tax breaks in the CARES Act available to corporations to see how those provisions were included in the legislation and ultimately passed into law.

On Friday, they wrote to leaders of the Trump administration's coronavirus task force, including Treasury Secretary Steve Mnuchin and acting director of the Office of Management and Budget Director Russell Vought requesting information about how the net operating loss provisions were crafted and briefed.

For example, the lawmakers asked questions about a provision that suspends limitations on those losses temporarily, so they can fully offset income.

In its initial estimate of the CARES Act, the JCT found that the tax provisions in the legislation overall would cost about $706 billion in 2020, but those losses would be offset somewhat when delayed taxes are recouped later. Over the next decade, the legislation's tax provisions would cost about $591 billion, according to the estimate.

--Additional reporting by Stephen Cooper and Theresa Schliep. Editing by Joyce Laskowski. 

For a reprint of this article, please contact reprints@law360.com.