Analysis

GOP Sens. Plan Late-July Bargaining On Virus Tax Incentives

By Alan K. Ota
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our daily newsletters. Signing up for any of our section newsletters will opt you in to the daily Coronavirus briefing.

Sign up for our Public Policy newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!



Law360 (July 13, 2020, 3:03 PM EDT) -- Senate Republicans are preparing for tough bargaining in late July with their Democratic counterparts to hash out new tax incentives for businesses and workers aimed at countering the COVID-19 pandemic's economic effects and spurring growth.

Senate Majority Leader Mitch McConnell took off a face mask after a Republican policy meeting on Capitol Hill June 30. With him was Sen. Roy Blunt, R-Mo. (AP)

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said Republicans plan to make a fast push to advance GOP-backed business incentives and settle partisan differences on Democratic relief measures passed by the House in the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions Act, or Heroes Act, in May.

"It will start July 20 and be done by summer break," the top Senate tax writer told Law360, referring to the efforts by Senate Republicans to cut a deal on pandemic response legislation before a scheduled four-week recess starting the week of Aug. 10.

Democrats in both chambers have continued to push for ambitious proposals in the Heroes Act, including a second round of economic impact payments and expanded tax incentives for families with children.

Senate Majority Leader Mitch McConnell, R-Ky., said during a visit to a hospital in Bardstown, Kentucky, this month that he expected bipartisan talks to begin with the unveiling of a new GOP plan that would address "liability protection, kids in schools, jobs, and yes, health care." He said the package was sure to include a shield to protect businesses against COVID-19 liability lawsuits from December 2019 through 2024 and voiced interest in some additional economic impact payments for families with annual incomes of $40,000 or less.

Grassley said he doubted the final package would include an agreement on H.R. 2, the five-year replacement passed by the House for the 2015 Fixing America's Surface Transportation Act , because of deep differences over how to deal with a shortfall in gasoline tax revenue in the Highway Trust Fund. He made clear he remained open to several business tax ideas, including a payroll tax cut and extensions of several temporary incentives in the 2017 Tax Cuts and Jobs Act for investment and for research and development.

Grassley also expressed interest in Heroes Act provisions that would expand the employee retention tax credit enacted in March in the Coronavirus Aid, Relief and Economic Security Act to cover 80% — instead of 50% — of an employee's salary and expand eligibility to include recipients of Paycheck Protection Program loans.

"We've had businesses ask us to extend it," Grassley said, referring to the retention credit.

Decisions on an expanded retention credit and other potential components of Senate Republicans' emerging pandemic response package would hinge on his party's assessment of needs and the economy, Grassley said.

Senate Majority Whip John Thune, R-S.D., a senior member of the Finance Committee, said the tax-related provisions and other incentives in the package likely would be "driven by losses, be needs-based, targeted, as opposed to benefits that push money out."

"We will be looking at a lot of options, things that will get the economy cranking again," Thune told Law360.

Sen. Rob Portman, R-Ohio, said a temporary payroll tax suspension for workers and refundable versions of business tax credits could be part of a broader plan aimed at providing tax incentives to promote investment and jobs. Other proposals on the table include incentives to encourage tourism and help businesses cover pandemic-related costs.

Senate Republicans also have been exploring several proposals for refundable business tax credits, including Portman's idea for allowing a business to receive a refund, or cash payment, from the Internal Revenue Service for a share of its so-called general business credit, representing the cumulative value of various business credits, which can be carried back for one year or carried forward over 20 years under Internal Revenue Code Section 39 .

Republicans have raised concerns about the Heroes Act's proposed extension of the temporary $600 upgrade in the average weekly unemployment insurance benefit enacted in March, which expires July 31. But Portman said the GOP might agree to provide a reduced amount of extra jobless aid combined with language similar to his proposal for giving an unemployed worker who lands a job a bonus of $450 in continued weekly payments for several weeks.

"I think there's going to be some compromise on that. I'm working with Portman on it," Grassley said, referring to the jobless aid portion of the Senate GOP alternative to the Heroes Act.

In the House, Ways and Means Committee Chairman Richard Neal, D-Mass., has stressed his desire to advance an extension of soon-to-expire expanded jobless aid and other items, including a second round of economic impact payments and an expanded refundable earned income tax credit for workers without children. But he also voiced hope for an opening in bicameral talks to advance tax incentives for infrastructure financing and for renewable energy contained in the highway reauthorization bill passed by the House.

"There's going to be another agreement. There's no question about that," Neal told Law360, referring to prospects for a bicameral deal on pandemic response legislation by August.

While Neal tries to advance infrastructure funding and relief measures, Rep. Kevin Brady, R-Texas, the ranking member on Ways and Means, told reporters he and other GOP members of the committee were developing proposals to make full expensing permanent for business equipment, structures, and research and development expenses and to help companies "offset the cost of maintaining a healthy workplace."

Brady also has called for a reshaping of expanded unemployment benefits and bonus payments to reward jobless workers for taking new jobs, similar to Portman's proposal.

"Our actions ought to be targeted toward making sure the temporarily unemployed aren't permanently unemployed. I am convinced that means creating the right incentives to reconnect workers with their businesses," Brady said.

Senate Democrats, meanwhile, have put forth a compromise bill, S. 4143, that would adjust weekly upgrades in jobless aid by state, ranging from $600 if a state's three-month average jobless rate is at least 11%, to $100 if the average rate is at least 6% and less than 7%.

Sen. Ron Wyden, D-Ore., ranking member on Grassley's panel, said he believed his party's proposed jobless aid extension would gain support while senators are in their home states.

"I don't see how a senator can go home and make the case that there shouldn't be an extension of supercharged unemployment benefits," Wyden told Law360.

But Republicans have pushed back against the new proposal, citing concerns that the continuation of $600 in extra weekly jobless aid would have unintended consequences on businesses and on employment because it would exceed pre-layoff salaries of some unemployed workers.

Despite the dispute over jobless aid, Sen. Debbie Stabenow, D-Mich., said she believed both sides would try to resolve differences and work out an agreement before they begin the long August recess.

"It would be the height of irresponsibility if we left in August without taking any action," Stabenow told Law360.

--Editing by Robert Rudinger and Neil Cohen.

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

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Beta
Ask a question!