With little time left for negotiations prior to the August recess scheduled to begin August 7, Republicans have unveiled a $1 trillion stimulus plan that includes further stimulus payments and modifications to the Paycheck Protection Program.
“Surprisingly, the Senate version does not include the president’s payroll tax holiday that he requested, but instead has another round of stimulus checks which has bipartisan support,” said Julio Gonzalez, CEO and founder of Engineered Tax Services. “Their bill is clearly trying to limit tax provisions to things that will help get employees back to work safely.”
“There will be streamlined loan forgiveness for small PPP loans under $150,000, with an intermediate forgiveness process for loans under $1 million,” in the final agreement, he predicted. “Treasury Secretary Mnuchin said that the new $1,200 direct payments would be based on the same formula from the earlier aid bill, where people making $75,000 or less would receive the full amount, with those making more receiving less.”
“We are starting to see a compromise on state funding,” Gonzalez said. “I expect the proposal will not add additional funding to state and local governments but instead offer flexibility to the funds already allocated by the CARES Act,” he said.
There will be some back and forth negotiations, with the final package likely to be increased somewhat from the initial $1 trillion, according to Marc Gerson, a member in the tax practice of Washington law firm Miller & Chevalier and former majority tax counsel to the House Committee on Ways and Means.
“In addition to items in the Senate GOP proposal, there will be some transition from the increased unemployment amount, with some incentive for going back to work for employees,” he suggested. “Issues from the PPP regarding deductibility of expenses paid with forgiven PPP loans might be addressed in the final bill, and there may be some retirement provisions included as well.”
“On retirement, they will likely look at the Portman-Cardin bill,” he said.
The Retirement Security and Savings Act, introduced by Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Maryland, includes provisions to strengthen retirement security. It would allow workers to set aside more for their retirement, help small businesses offer 401(k)s and other retirement plans, expand access to retirement savings plans for low-income Americans that lack coverage, and provide more flexibility during retirement years.
The Heroes Act, which passed the House, also has some provisions that may find their way into the final bill, according to Gerson, including the temporary suspension of the state and local tax deduction limitation. “There may be a revisiting of some of the provisions in the original CARES Act, such as changes to the [net operating loss] rules and the employee retention credit,” hs suggested.
There will be pressure to get something done as quickly as possible, according to Gerson. “The prospects for legislation in the fall are not looking good, given the coming election,” he said. “There are a tremendous amount of threshold issues to be addressed. The fall session will be short, and there may be the need for further legislation to address the crisis, so they will probably pass a continuing resolution, and punt everything until a lame duck session after the election.”
