A proposed House bill, the Take Responsibility for Workers and Families Act, was released late on March 23, 2020. Notably different from the proposed Senate Coronavirus Aid, Relief and Economic Security (CARES) Act, it provides much more limited corporate tax relief. One similarity is an expansion of net operating loss (NOL) carryback, providing a five-year carryback of NOLs for NOLs arising in 2018, 2019 and 2020. Outside of this provision, many of the proposed Senate provisions were not included in the House bill, including: deferral of implementation of the excess business loss rules under section 461(l); allowance of immediate refundability of previously generated corporate AMT credits; reduction of the business interest limitation under section 163(j) from 30 percent to 50 percent; and repairing the “retail glitch” for qualified improvement property.
The House bill provides an employee retention credit to encourage employers to maintain headcounts even if employees cannot report to work because of issues related to COVID-19 (coronavirus). The House bill also proposes to build on the refundable tax credits for employers that offer paid sick leave and paid family and medical leave under the mandates established in the Families First Coronavirus Response Act (P.L. 116-27), which President Donald Trump signed into law on March 18.
Notable Business Stimulus:
- Employee Retention Credit. A tax credit to incentivize employers to keep their employees on payroll rather than laying them off. A fully refundable tax credit is available, tied to the payment of employee wages, against the employer’s share of Social Security taxes. All eligible employers would be permitted to claim an 80 percent credit on wages up to $10,000 per employee. Eligible employers must have no more than $41.5 million in gross receipts or no more than 1,500 full-time-equivalent employees to qualify. They must also have experienced a 20 percent loss in gross receipts in the current calendar quarter compared to the prior year calendar quarter. An eligible employer can no longer claim the credit if their trade or business earns greater than 90 percent of the gross receipts it had in the same calendar quarter in the prior year. The credit applies to wages paid from January 31, 2020, to December 31, 2020.
- Small Business Economic Injury Grants. Authorizes $100 billion in grants to small businesses that can demonstrate losses due to the outbreak.
- Small Business Disaster Loans. Authorizes an additional $184 billion in low-interest economic injury disaster loans to help small businesses that have suffered financial losses as a result of the outbreak.
- Small Business Payroll Support. Authorizes $300 billion in guaranteed, forgivable loans to cover short-term payroll costs.
- Small Business Debt Relief. Provides small businesses with relief from SBA loan payments, including principal, interest and fees for six months.
- Increasing Access to Capital. Eliminates fees and increases guarantees on SBA-backed 7(a) and 504 loans to increase access to capital for struggling firms.
- Employer Payroll Tax Credit for COVID-19-related charity care and other hospital facility expenditures incurred by hospitals.
Compared to the Senate bill, the House measure includes larger direct cash payments to individuals ($1,500 per individual, including children; up to $7,500 per family), including Social Security recipients. Further benefits available to individuals include: expansions of the earned income tax credit, the child tax credit, the child and dependent care tax credit and the exclusion for employer-provided dependent care. Several proposals for penalty-free access to funds in retirement savings accounts, temporary suspension of minimum distribution requirements and more generous rules governing retirement plan loans for individuals to fund emergency expenses related to the coronavirus are all similar to the Senate bill.
The measure also includes healthcare-related tax provisions that would provide relief to individuals and hospitals, as well as a variety of non-tax provisions addressing the impact of the coronavirus on individuals, and substantial additional federal spending to support coronavirus mitigation and response efforts.
Notable Individual Stimulus:
- Emergency Rental Assistance. $100 billion to provide emergency assistance to help low-income renters at risk of homelessness avoid eviction due to the economic impact of the coronavirus pandemic.
- Economic Assistance to Individuals. Provides $1,500 of immediate assistance per individual, up to $7,500 for a family of five. Households with 2020 income over $150,000 for a joint filer, $112,500 for a head-of-household filer and $75,000 for a single filer will be required to pay back part or all of the assistance payment over three years. For these households, the payment is a zero-interest loan.
Further details about both business and individual proposals are available in a summary prepared by the House Democratic staff.
OSAE Member Clark Schaefer Hackett (CSH) will continue to monitor this legislation and provide regular updates. All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a CSH professional. CSH will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.