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DC Tax Flash: House to Consider $1.9 Trillion Virus Relief Reconciliation Bill

Tax Alert

The House is planning to debate virus relief reconciliation legislation (H.R. 1319) tomorrow with passage possible this weekend or sooner. First, the bill must move through the Rules Committee, where changes offered by Rep. John Yarmuth (D-KY) are expected to be adopted before the bill moves to the House floor.

Rep. Yarmuth's Manager's Amendment includes numerous revisions to the underlying bill, including changes to its multiemployer plan rescue provisions and the addition of a new reporting threshold for certain third party network transactions under Internal Revenue Code section 6050W(e). In general, an exemption for such reporting is allowed "if the aggregate payments do not exceed $20,000 or if the aggregate number of transactions does not exceed 200," the IRS explains. Yarmuth's amendment would, with some caveats, effectively lower that reporting threshold to $600.

Republicans have filed more than 50 other amendments with the Rules Committee. Most, if not all, are likely to be rejected by the panel tomorrow. 

The underlying reconciliation bill (H.R. 1319) includes numerous other tax policy provisions aimed at individuals and businesses. For individuals, the bill would provide $1,400 in economic impact payments, expand credits for children and child care, and expand the Earned Income Tax Credit.

The tax policy changes directed at businesses include provisions that would:

  • extend and expand credits for paid sick and family leave;
  • increase the exclusion for employer-provided dependent care assistance for 2021 from $5,000 to $10,500 (and from $2,500 to $5,250 for a married person filing separately);
  • repeal the election to allocate interest on a worldwide basis, which the Joint Committee on Taxation (JCT) says would raise $22.3 billion; and
  • extend and expand the Employee Retention Credit.

The bill also includes several pension-related provisions, including funding relief for multiemployer plans and a prospective cost of living freeze on certain qualified retirement plan limitations that would otherwise be indexed for inflation. The Ways and Means Committee notes that in 2021:

  • the annual contribution limit for defined contribution plans is $58,000;
  • the annual defined benefit limit is $230,000; and
  • the section 401(a)(17) annual compensation limit is $290,000.

Starting in 2030, the bill would freeze these limits as they are in place at that time.

The Budget Committee has issued a report (H. Rept. 117-7) to accompany H.R. 1319 that includes explanatory language, legislative history, budget scoring and other supplemental information. The report is currently available in the following four sections, as posted on the Rules Committee website:

Part 4 of H. Rept. 117-7 includes explanations of the tax policy changes in the bill, including reasons why the Ways and Means Committee supports each provision. This section of the report starts on page 1,311 of Part 4.

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