Senate Majority Leader Mitch McConnell introduced legislation Thursday to provide cash payments to individuals and tax relief for people and businesses in the wake of the coronavirus pandemic. (AP)
“We need to help protect American workers, families and small businesses from this unique economic crisis that threatens to worsen with every single day,” McConnell said on the Senate floor as the legislation was introduced. “We need to have the American people’s backs.”
The $1,200 payments to individuals, or $2,400 payments to couples filing joint tax returns, would be reduced for those with incomes above $75,000, or $150,000 for couples, and would be eliminated for those with incomes of more than $99,000, or $198,000 for couples. The payments, which would be based on 2018 tax returns, would also be reduced for those who had little income.
In addition to delaying the tax filing deadline until July 15, the legislation would allow individuals to postpone paying their estimated tax obligations until Oct. 15 in an effort to stimulate the economy.
The bill also addresses some unintended consequences from the Tax Cuts and Jobs Act . It targets the so-called retail glitch by allowing companies to immediately write off expenses related to physical improvements instead of depreciating them over the course of 39 years. It also would restore the limits on "downward attribution" of the stock ownership of foreign corporations, undoing a change under the TCJA that subjected some foreign entities to additional tax and reporting requirements.
The legislation would also allow employers and self-employed workers to pay their 6.2% payroll tax obligations over the next two years. Employers that choose to defer payment must provide half of the total amount by Dec. 31, 2021 and the other half by Dec. 31, 2022.
The bill also provides that businesses can carry back losses from 2018, 2019 and 2020, for up to five years as in the past. Also, net operating losses would temporarily not be subject to a taxable income limitation, meaning they could fully offset income.
Businesses would also be able to increase the amount of interest expense they can deduct for the 2019 and 2020 tax years by raising the 30% limitation on adjusted taxable income to 50%, per Internal Revenue Code Section163(j) .
In an effort to encourage donations, the legislation would allow individuals to deduct up to $300 in charitable contributions, regardless of whether they itemize their returns or utilize the standard deductions.
To prop up ailing airlines, who had lobbied the government for relief, the bill would exempt them from paying some aviation excise taxes for 2020.
The senators’ effort to extend the tax-filing deadline mirrors legislation introduced earlier Thursday by other Republican lawmakers and a letter sent by House Ways and Means Committee Chairman Richard Neal, D-Mass., to Steven Mnuchin, secretary of the U.S. Department of the Treasury.
The legislation would also waive the 10% early-withdrawal penalty from qualifying retirement savings accounts for disbursements worth up to $100,000, if individuals are responding to “coronavirus-related purposes.”
Also Thursday, Senate Minority Leader Chuck Schumer, D-N.Y., announced a plan that would rely on expanding unemployment insurance in lieu of supplying direct cash payments.
His “employment insurance” or “unemployment insurance on steroids” would be worth 100% of workers’ wages, he said from the Senate floor Thursday.
McConnell said that he and his colleagues are standing by and waiting to begin negotiations with their Democratic counterparts to pass the legislation, and said Mnuchin would participate in discussions over the bill.
“We’re ready to act as soon as an agreement with our colleagues from across the aisle can be reached,” he said.
Senate Finance Committee ranking member Ron Wyden, D-Ore., was critical of McConnell’s bill, saying it seemed to put the needs of corporations before individuals.
“The pandemic is spreading, economic collapse is looming and Republicans seem to be prioritizing the corporate tax wish list over the economic well-being of people who are losing their livelihoods at this very moment,” he said in a statement. “While broad economic stimulus is needed, the first priority must be those who have no way to pay their bills for potentially months down the road.”
--Editing by Neil Cohen.
Update: This story has been updated to provide more detail on the bill along with lawmakers' reactions to it.
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