On Friday, May 15th, the House voted to approve a $3 trillion coronavirus relief bill, the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act (the Act).  As currently written, it is unlikely the Act will pass the Senate. 

The White House has also indicated that it would veto the bill. However, the passage of the Act by the House signals the first step in negotiations between the House, Senate, and the Trump administration on the next coronavirus relief bill.

The bill is extremely lengthy at over 1,800 pages.  For comparison, the Families First Coronavirus Response Act is 44 pages and the Coronavirus Aid, Relief, and
Economic Security Act’’ or the ‘‘CARES Act’’ is 335.  HEROES is being described as a “messaging” bill indicating a Democrat wish list of legislative priorities.  It contains a significant amount of spending on policy preferences unrelated to the coronavirus pandemic.

Some of the major stipulation with bipartisan support that are more likely to survive a Senate version are below.

  • Stimulus Payments – the bill would provide a second round  $1,200 per person, but increasing payments for children to $1,200 ($2,400 for MFJ)and providing that this increased payment would be available for all dependents. This fixes the issue we saw in the CARES Act where many college students who were still claimed as dependents were not entitled to stimulus payments.  Additionally, undocumented immigrants who do not have a Social Security Number but do file taxes using an Individual Taxpayer Identification Number (ITIN) would be eligible for a payment.
  • Funding for state and local governments – The proposed legislation includes almost $1 trillion in funding for state, local, territorial and tribal governments. These funds are generally intended to help governments pay essential workers
  • Paid sick and family leave credits – maximum time period of eligibility is increased in addition to the maximum amount that can be paid per  day per employee
  • Extended unemployment benefits – The proposed legislation extends the weekly $600 federal unemployment payments provided by the CARES Act through January 31, 2021. Currently, this benefit ends July 31, 2020.
  • Reinstatement of Excess Business Loss Limitations – the Tax Cuts and Jobs Act (TCJA) of 2017 created a limit on the amount of business losses that non-corporate taxpayers could deduct. That limitation was removed by the CARES Act. The HEROES Act attempts to reinstate the limitation.
  • Expansion of the Employee Retention Tax Credit – this is one provision that many believe could make it in to the final bill. Under the HEROES Act, the credit would be increased from 50% to 80%, and the cap would be increased from $10,000 to $45,000.
  • Elimination of State and Local Tax Deduction Limit –  The HEROES Act would eliminate the deduction limit of $10,000 for 2020 and 2021 which was introduced by the TCJA in 2017.
  • The bill contains several changes to the Paycheck Protection Program (PPP) including:
    • Deduction of Expenses Generating PPP Loan Forgiveness
    • Increase covered period from 8 weeks to 24 weeks and from June 30, 2020 to December 31, 2020.
    • Allows for deferral of payroll taxes beyond the date forgiveness is granted

The PPP changes could potentially be introduced as a separate amendment.  The amendment has bipartisan support and makes the following changes to the Program:

  • Increase covered period from 8 weeks to 24 weeks and from June 30, 2020 to December 31, 2020,
  • Increase the maturity to 5 years,
  • Codifies relief from forgiveness reduction related to employers who are unable to rehire employees,
  • Eliminates limitation on non-payroll portion of a forgivable covered loan.

A discussion only version of the Amendment can be viewed HERE.

We will continue to monitor proposed COVID19 related legislation and keep you updated as we know more.

Please reach out to [email protected] with questions.

We are in this together,

Brinker Simpson & Company, LLC

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice & cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).