The IRS finalizes tax-exempt non-reporting rules. Political advocacy groups organized as 501(c)(4) tax-exempts will not have to disclose the names of their donors to the IRS, according to final regulations approved yesterday. The groups have not had to make donor names public—the issue was whether they even had to report them to the IRS. Section 501(c)(3) and section 527 political groups must continue to report donor information to the IRS. Increasingly, political groups are organizing as (c)(4)s to avoid donor disclosure.
McConnell on next relief package: “Still a likelihood that more will be needed.” Senate Majority Leader Mitch McConnell told reporters yesterday that he’d support another COVID-19 relief package that is smaller than the $3 trillion bill the House passed in mid-May. He said the next bill “ought to be very carefully targeted to correct the mistakes that we certainly made in passing the multi-trillion-dollar [Coronavirus Aid, Relief, and Economic Security Act] in one week.” White House economic adviser Larry Kudlow suggested that the White House may support a weekly cash bonus to those who return to work but will oppose the provision in the House-passed Health and Economic Recovery Omnibus Emergency Solution (HEROES) Act extending federal unemployment benefits beyond July.
An expanded wage subsidy also gains support on the Hill. The Wall Street Journal reports (paywall) on a tax credit included in the HEROES Act to subsidize about 80 percent of an employer’s cost of retaining a worker. The employee retention tax credit would add $194 billion to the CARES Act’s $55 billion version. Lawmakers are giving the provision more scrutiny as workers continue to lose jobs and the CARES Act unemployment benefit expires at the end of July.
Senators offer a bipartisan bill to protect relief payments from private debt collectors. Senate Finance Committee Chairman Chuck Grassley and top Democrat Ron Wyden introduced the bill, which prevents by private debt collectors from garnishing CARES Act relief payments . The CARES Act did not explicitly prevent the practice and some taxpayers have lost their payments. Said Grassley, “We did not establish [payments] just so debt collectors could swoop in… Our bill will add additional protections from garnishment, preserving congressional intent and shielding folks who need the help.”
What about expanding the child tax credit? TPC’s Elaine Maag discusses how the HEROES Act would temporarily expand the child tax credit. For 2020 only, it would make the credit fully refundable, increase the maximum credit from $2,000 to $3,600 for children under 6 and to $3,000 for children older than 6, and extend eligibility to 17-year-olds. Elaine argues that while each of these changes would help families with children, Congress should focus on the full refundability provision, since it best targets very low-income families.
The State Tax and Economic Review for the fourth quarter of 2019 is available. TPC’s Lucy Dadayan explains that state tax revenues were strong through 2019, but will likely plummet in 2020 because of the COVID-19 pandemic. Before the pandemic fully hit the US in March, most states were on track to close their fiscal year 2020 budgets with no shortfalls and many had built their rainy day funds. But now, all states face drastically falling revenues and rising spending. Those robust rainy-day funds likely will not be a sufficient buffer for most states.
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