DC Tax Flash: Curtain To Rise Next Week On Phase Four Relief Package

Tax Alert

After a two-week break, the House and Senate return to session Monday to start serious work on another round of legislation aimed at relief and recovery from the coronavirus outbreak. 

The Democratic-controlled House is already on record with passage of the $3.4 trillion HEROES Act (H.R. 6800). Attention is now almost exclusively focused on the GOP-controlled Senate, where Majority Leader Mitch McConnell (R-KY) is putting together a less costly alternative, reportedly in the range of $1.3 trillion. "[N]ext week, we'll start socializing it with them, begin to discuss it with the Democrats and start the legislative process," Sen. McConnell said a few days ago. "I think you can anticipate this coming to a head sometime within the next three weeks," he predicted.

A top priority for Senate Republicans is a liability shield for businesses, schools and hospitals. "It must have–must–no bill will pass the Senate without, liability protection for everyone related to the coronavirus," Sen. McConnell says. He wants a five-year window of protection, starting from last December and lasting through 2024. The liability shield would cover all but grossly negligent or intentionally harmful practices, Sen. McConnell says.

A summary of the GOP-drafted liability proposal is posted here.

Other Senate GOP priorities include extending unemployment benefits, extra funding for schools to reopen and additional direct payments to taxpayers with tighter means testing.

Senate Democrat Priorities

​Top Senate Democrats are pushing for an aid package that could top the $3.4 trillion HEROES Act. Minority Leader Chuck Schumer (D-NY) yesterday proposed an additional $350 billion in federal spending for low-income and minority communities. It also includes several tax incentives for minority and low-income housing and entrepreneurship. A summary of the proposal is posted here.

Sen. Schumer has also urged for an extension of the Paycheck Protection Program, which provides forgivable loans to small businesses to sustain payroll during the quarantine.

Senate Democrats also want to include an extension of the additional $600 unemployment benefit bonus payments, further federal assistance to state and local governments, additional direct payments of $1,200 to taxpayers, a moratorium on housing evictions, more funding and new requirements for virus testing and more.

White House Priorities

In addition to liability protections, one of the president's top policy goals for the next relief package is a payroll tax holiday. "President Trump wants to provide relief to hardworking Americans who have been impacted by this virus and one way of doing that is with a payroll tax holiday,” a White House spokesman told reporters yesterday. "[H]e believes it must be part of any phase-four package."

Other potential relief items put forward by the administration include additional direct payments to citizens, tax incentives for travel and entertainment, and lowering capital gains taxes.

The Senate plans to be in session through August 7, while the House is aiming to recess for the summer on July 30. House Majority Leader Steny Hoyer (D-MD) has indicated that the House may stay in session an extra week into August if necessary.

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