By Stephen K. Cooper

Law360 (May 12, 2020, 7:07 PM EDT) -- House Democrats on Tuesday proposed another round of cash payments to provide economic relief from the novel coronavirus pandemic and more tax incentives for workers and businesses.

House Democrats said the Health and Economic Recovery Omnibus Emergency Solutions Act, or the HEROES Act, was desperately needed to address ruined state and local budgets as the number of U.S. deaths from COVID-19 rise above 80,000, the number of infections top 1.4 million and the country's unemployment rate hits 14.7%. The legislation includes the COVID–19 Tax Relief Act of 2020, which would revamp the Internal Revenue Service's economic impact payment program as well as institute a second round of payments to Americans.

The bill is the latest effort by House Speaker Nancy Pelosi, D-Calif., to address COVID-19, the highly contagious disease caused by the novel coronavirus that has shut down large portions of the U.S. economy. The legislation could pass the House as soon as this week, but Senate Republicans have expressed reluctance to pass additional legislation just yet. 

House Ways and Means Committee Chairman Richard Neal, D-Mass., said in a statement Congress needs to take "extraordinary, immediate action" to help Americans survive the economic and health consequences of the pandemic.

"Families are feeling the pain of a terrible one-two punch — a national public health emergency coupled with a historic economic downturn," Neal said.

The Democrats' bill comes about six weeks after President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act or CARES Act, a $2 trillion emergency spending bill that provided economic impact payments and established a paycheck protection program to help struggling businesses hold on to employees. Another measure to add more funding for the paycheck program was signed into law about three weeks ago.

Senate Majority Leader Mitch McConnell, R-Ky., said he wouldn't interact with House Democrats on the next virus relief bill until Republicans first reach an agreement with the Trump administration.

"We're going to insist on doing narrowly targeted legislation … that addresses the problems, the needs, and not the aspirations of the Democratic majority in the House," he told reporters.

The Democrats' legislation, which they estimate will cost more than $3 trillion, includes several long-standing Democratic priorities, such as temporarily repealing the cap on state and local tax deductions for 2020 and 2021. It would also expand the earned income tax credit to workers without children and increase the maximum amount of the credit to $1,487 this year.

The legislation would partially roll back a provision in the CARES Act that allowed companies to carry losses back to previous years. Under the new bill, companies would only be able to carry losses back to 2018 — not prior years when the tax rate was 35% instead of today's 21%.

House Democrats also want to retroactively revamp the economic impact payments from the CARES Act so that all dependents, including college-age students up to age 24, receive the $500 payment, not just those below age 17. Individuals with taxpayer identification numbers would be eligible for the payments, and parents who have past-due child support payments would not have their economic impact payments reduced to cover the arrears.

The legislation would institute a second round of economic impact payments in the form of refundable tax credits of $1,200 and $2,400 for individuals and married couples, respectively. In addition, those with three dependents would receive maximum payments totaling $1,200 under the bill. The credits would begin to phase out for those with modified adjusted gross incomes of $75,000 for individuals and $150,000 for married couples reported on 2018 or 2019 tax returns.

The bill would allow a $3,000 fully refundable child tax credit, which Democrats hope can be provided in the form of an advance payment. The child credits would be available in certain U.S. territories based on their mirror tax codes or through direct filing by residents with the U.S. Department of the Treasury..

The legislation would expand health care flexible spending arrangements this year to allow participants to carry over $2,750 in unused benefits from 2020 to 2021. It would also extend through 2021 the refundable payroll tax credits for paid sick and family leave that was enacted in the Families First Coronavirus Response Act.

Democrats also proposed making the CARES Act's employee retention credit worth 80% of qualified wages up to $15,000 per calendar quarter and up to $45,000 for the calendar year. The threshold for determining a "large employer" would be increased from companies with more than 100 employees to companies with more than 1,500 employees or gross receipts above $41.5 million.

The bill would provide a 50% refundable payroll tax credit for an employer's qualified fixed costs such as rent, mortgages and utility payments. Self-employed workers would also be eligible for a 90% refundable individual income tax credit, which phases out starting at $60,000 of adjusted gross income for individuals.

The bill would also increase the above-the-line deduction to $500 for unreimbursed out-of-pocket expenses of elementary and secondary school teachers. First responders would also be eligible for a $500 deduction for their unreimbursed costs for uniforms and tuition.

--Additional reporting by Alex M. Parker. Editing by Vincent Sherry. 

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