The Senate is back, the House is not. Negotiations over the next round of economic stimulus will top the agenda. Two big issues are emerging: whether businesses that reopen should be protected from legal liability if workers or customers contract COVID-19 and whether to assist state and local governments hobbled by the pandemic. House Speaker Nancy Pelosi wants to include $1 trillion in aid to subnational governments. Senate Majority Leader Mitch McConnell wants states to declare bankruptcy instead. At various times during the week, President Trump appeared to back both views.
The IRS will not allow companies to deduct expenses covered by PPP loans. The agency announced last week that wages and other expenses paid with Paycheck Protection Program loans are not tax deductible. House Ways and Means Committee Chair Richard Neal says he’ll try to “fix this in the next response legislation.” Senate Finance Committee Chair Chuck Grassley said Congress intended for the covered costs to be tax free, but hasn’t said if Congress should reverse the IRS decision.
Senators try to encourage firms to rehire workers. GOP Sen. Josh Hawley proposed a refundable tax credit to offset 80 percent of payroll cost for rehired workers making up to the median wage, or about $49,000 annually. Democratic senators Mark Warner, Bernie Sanders, Doug Jones, and Richard Blumenthal released a plan last week to provide government grants that would cover wages and benefits for rehired workers making up to $90,000.
A payroll tax holiday? Not such a great idea. TPC’s Howard Gleckman weighs the benefits of a payroll tax holiday promoted by President Trump. It won’t help the unemployed and is unlikely to create much stimulus, since it won’t boost spending by consumers unwilling or unable to shop.
There’s an easy way to speed up Coronavirus Rebates. TPC’s Elaine Maag writes that many internet-less Americans may not receive cash payments because they can’t update their addresses or bank account numbers for the IRS. “There is an easy solution: The federal government could set up a secure telephone line for people to call in their information.”
Can heirs keep a coronavirus rebate sent to a person who has died? TPC’s Janet Holtzblatt explains that the decedent passed away in 2020, the answer seems to be “yes.” But if the decedent passed away in 2018 or 2019, the answer is “it depends.”
TIGTA: Clean Air Tax Credit largely claimed by companies that did not comply with requirements. The Treasury Department’s Inspector General for Tax Administration found that 10 firms claimed more than $1 million each in Clean Air Tax Credits between tax years 2010 and 2019, covering 99.9 percent of total credits. The ten firms were not in compliance on 87 percent of their claimed credits, worth $893,935,025.
Is an economic impact payment political? President Trump’s signature appears on the coronavirus relief checks from the US Treasury. Urban Institute senior fellow Jack Smalligan, who worked on similar relief programs for presidents George W. Bush and Barack Obama, told The Hill that he couldn’t “think of any kind of comparable action by those presidents to associate themselves so overtly with what is essentially government assistance.” TPC’s Gene Steuerle argues that adding Trump’s name to the checks slowed the process, and “reinstates a bad precedent for political interference in the operations of the IRS.”
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].