Analysis

Research, Testing Incentives Emerge As Virus Bill Contenders

By Alan K. Ota
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Law360 (July 20, 2020, 5:37 PM EDT) -- House Republicans are looking to rally bipartisan support for a batch of new proposals for tax incentives to support medical research, healthy workplaces and coronavirus testing as potential components of an emerging pandemic response package on Capitol Hill.

Rep. Kevin Brady, R-Texas, ranking member on the House Ways and Means Committee, has been working with other GOP tax writers to promote a half-dozen proposals introduced over the last two weeks in the hope that some of them might be included in the next bicameral package to address the pandemic's effects. Both parties are looking to quickly resolve differences between GOP-backed business incentives and Democratic relief measures passed by the House in the Health and Economic Recovery Omnibus Emergency Solutions Act, or Heroes Act, before the July 31 expiration of expanded jobless aid.

The new bills could move on their own or as part of a compromise bill that will be hashed out in Congress to counter economic fallout from the COVID-19 pandemic. Supporters said they believed several new parts of the plan could attract bipartisan support in looming bicameral negotiations on the pandemic-related legislation, including proposals for a healthy workplaces tax credit, a refundable business tax credit and research incentives.

"We will have a healthy economy package," Brady told Law360.

Rep. Tom Rice, R-S.C., has proposed H.R. 7615, which would provide a new refundable healthy workplaces tax credit that would cover 50% of the costs of anti-coronavirus measures including personal protection equipment, extra cleaning and workspace reconfiguration. The credit would be capped at $1,000 per employee for the first 500 workers, $750 apiece for the next 500 workers and $500 for each additional worker.

"We want to be part of an overall package to get the American economy moving again," Rice told Law360.

Another new proposal by Rep. David Schweikert, R-Ariz., would create a refundable 50% tax credit based on the average number of a company's full-time workers — capped at $250 or $500 per worker depending on the size of the business — to cover the costs of testing for the SARS-CoV-2 coronavirus or for COVID-19. Schweikert said his proposal was needed to "empower businesses to make expansive testing of their employees possible while helping to support a healthy labor force."

The House GOP plan also includes two proposals by Rep. Devin Nunes, R-Calif., to create an additional 14% research and development tax credit for certain qualified medical research expenses and to make refundable a portion of the research tax credit for startups with gross receipts of $1 million and with similar medical research expenses.

Brady said such proposals were "vital for America's future in order to increase investment in American innovation — leading to more cures not just to COVID-19, but for any future health crisis our country may face."

In a joint statement, Bobby Franklin, president and CEO of the National Venture Capital Association, and Linda Moore, president and CEO of TechNet, a technology trade group, said the House GOP proposals for incentives to support medical research reflected "policies that fit the unique business model of high-growth startups."

Despite such statements of support from business advocates, the newly unveiled items in the House GOP plan could face an uphill fight in the coming bicameral talks as both parties seek to advance their own priorities.

House Ways and Means Chairman Richard Neal, D-Mass., has said he remains open to several business tax incentives omitted from the Heroes Act, including medical research incentives and proposals by lawmakers in both parties to promote workplace safety and testing. But he also stressed the need to implement expanded benefits for families with children and other items in the Heroes Act. He has also pushed infrastructure financing incentives and the House-passed five-year reauthorization of the Fixing America's Surface Transportation Act.

"All the better news that we were receiving a month ago on coronavirus has now been reversed," Neal told Law360.

Neal and other Democrats also are pushing for another round of economic impact payments.

In the Senate, Finance Committee Chairman Chuck Grassley, R-Iowa, has voiced concern that embracing incentives to help businesses with cleaning and workspace reconfiguration would make it difficult to "know where you stop," and he has questioned whether there is an immediate need for refundable versions of business incentives such as the research and development tax credit.

On the stump in his home state last week, Senate Majority Leader Mitch McConnell, R-Ky., emphasized that the Senate GOP plan would include a four-year shield to protect businesses against COVID-19 liability lawsuits starting in December 2019 and would also focus on "kids in school, jobs and health care."

None of the new House GOP proposals appear, for now, to be part of the agenda for Grassley and other senior Republicans as they help to develop a Senate GOP pandemic action plan, which is expected to include funding for schools and a reshaped version of the expanded jobless aid enacted in the Coronavirus Aid, Relief and Economic Security Act or CARES Act.

But McConnell and Grassley have stressed the Senate GOP plan would be just an opening bid as both sides try to cut a deal, leaving room for President Donald Trump's call for a payroll tax cut and tourism tax incentives and other tax ideas from both parties. With lawmakers focusing more attention on the November elections, McConnell predicted it would be "much more challenging politically to get everybody in the same place" than last March 25 when the Senate voted 96-0 to pass the CARES Act.

While waiting for McConnell to unveil his Senate GOP pandemic plan, Brady and House GOP members of the Ways and Means Committee have looked to advance their modest proposals aimed at promoting medical research, workplace safety and worker testing as both sides hunt for ideas with potential to draw consensus support.

Brady told reporters last week lawmakers could face tough choices between broad proposals that focus on "common elements of financing, tax relief and assistance that help the broad economy recover" and stimulus packages tailored for "specific industries with unique challenges."

In addition to targeted incentives for medical research and healthy workplaces, Brady has called for more ambitious initiatives such as a permanent extension of temporary full expensing for business equipment, established by the Tax Cuts and Jobs Act , and a similar incentive for property and structures.

Brady said he generally favored broader proposals, but also pointed out that business advocates "brought some very smart packages to Congress" aimed at saving jobs in certain sectors.

"It's going to be an interesting conversation to see which direction Congress goes," Brady said.

--Editing by Robert Rudinger and Tim Ruel.

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

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