Analysis

Democrats Aim To Expand Child Tax Incentives In Virus Bill

By Alan K. Ota
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Law360 (May 4, 2020, 5:45 PM EDT) -- House Democrats are looking to provide broader incentives for families with children to counter the impact of sweeping school closures and other community restrictions in the next relief package to address the COVID-19 pandemic.

House Ways and Means Chairman Richard Neal, D-Mass., said he was looking for ways to advance new tax incentives and broader relief payments for families with children in a virus relief package that is a top priority for the House Democratic Caucus. He said the needs of families with children exceeded the scope of economic impact payments authorized in March by the Coronavirus Aid, Relief and Economic Security Act . That law provided payments of $1,200 for taxpayers earning up to $75,000 and couples earning up to $150,000, and $500 for children younger than 17.

"We're going to have to do something. This clearly is not going to be enough," Neal told Law360.

Under consideration are proposals for another round of economic impact payments for adults and a broader group of children, including those in school younger than 24, and for an expanded version of the temporary child credit of $2,000 — which is set to revert to $1,000 after 2025 — enacted under the 2017 tax overhaul .

Rep. Rosa DeLauro, co-chairwoman of the Democratic Steering and Policy Committee, said she was trying to build consensus in her caucus for a proposal to raise the temporary $2,000 child tax credit to $3,600 for children under age 6 and to $3,000 for other children through the end of 2025.

"I'm going to try to get it in there. It's a firm way to keep people out of poverty," DeLauro, D-Conn., told Law360, referring to the proposal to broaden the child tax credit.

Such efforts to advance new incentives for families with children have drawn a muted reaction from many Republicans, who have said they want more time to evaluate the impact of the first wave of economic impact payments and of the $484 billion package of funding for small business loans, hospitals and testing enacted in April.

Rep. Liz Cheney, R-Wyo., chairwoman of the House Republican Conference, made clear that she doubted Republicans would be willing to support the new virus relief measure developed by House Democrats, for now, as they continue to weigh different ideas.

"What we need to do now is take a pause," Cheney told Law360.

Lawmakers on both sides predict there will be difficult negotiations on the next round of legislation. Democrats are pushing for aid for state and local government, more payments for families and incentives for frontline workers. Republicans are making the case for business tax incentives and a potential shield to temporarily protect businesses as they reopen during the pandemic from legal liability for people who become infected with the novel coronavirus.

The push to expand the child tax credit could revive a longstanding fight over the size of certain tax incentives for children available both to working and unemployed parents, said Robert Rector, a senior research fellow at the conservative Heritage Foundation. He said a big increase in the child tax credit could be viewed as reversal of past GOP efforts to attach work requirements to federal largesse, such as the 1996 welfare overhaul.

"I think they better find a way to restore employment in the U.S. instead of continuing to find out ways to undermine it and hand out more and more aid to people who need jobs," Rector told Law360.

He noted that several Republicans had raised similar concerns about the potential unintended effects of expanded jobless aid in the CARES Act on the job search efforts of 30 million recent applicants for such benefits.

If DeLauro's ambitious push to boost the child tax credit loses traction, one alternative would be for lawmakers to consider a potential proposal to simply remove the current $1,400 cap on refundable child tax credit payments under the 2017 law.

Chuck Marr, senior director of federal tax policy for the Center on Budget and Policy Priorities, said there was a strong argument for removing this limit on refundable payments of the child tax credit to ensure families with the greatest financial need get more help.

"The children that would benefit most from child tax credit don't get the full amount. Right now, children are even more vulnerable because the economy is in a free fall," Marr told Law360.

Whatever happens to proposals to expand the temporary $2,000 child tax credit, lawmakers in both parties are rallying behind the idea of expanding eligibility for economic impact payments for children to cover college students.

Rep. Angie Craig, D-Minn., has taken the lead in pushing for H.R. 6420, the All Dependent Children Count Act, aimed at expanding access to $500 economic impact payments to older children.

The measure would reshape the CARES Act by inserting a more generous definition of a dependent child in Internal Revenue Code Section 152(c) , which includes nonstudents younger than 19, students younger than 24 and disabled people. The measure has 149 co-sponsors, including eight Republicans.

Rep. Phil Roe, R-Tenn., told Law360 that he supported the Craig bill as a way to "extend relief to dependents regardless of their age." Roe said parents of children in college "are just as deserving of relief as those of younger dependents in this economic situation as many college students will likely be forced to rely on their parents as we await our country opening back up."

Proponents of the Craig bill say families have been hurt both by delays in the delivery of economic impact payments for qualified children and the lack of payments for older children. The IRS announced last week that some families seeking economic impact payments for qualified children may have to wait until 2021 when they can "claim the additional amount when you file your 2020 tax return." The agency also confirmed that taxpayers "with dependents 17 and older won't get more money for those dependents."

As the IRS continues to process economic impact payments for children, Rep. Jimmy Gomez, D-Calif., said there was a good chance that Craig's bill could move with strong consensus support because lawmakers have heard in their local communities about the problems of families with older children.

Craig said she hoped to work with allies in both chambers to "fix this immediately."

"In the middle of a pandemic, we need to look out for our working families and make sure we are doing everything we can to provide financial support to those most in need," Craig told Law360.

--Editing by Tim Ruel and Neil Cohen.

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

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