President Trump signed into law an economic relief package that will send rebate checks to taxpayers and roll back some provisions of the Tax Cuts and Jobs Act after it was approved by the House.
Flanked by congressional Republicans at the signing ceremony March 27, Trump said the bill will bring urgently needed relief to businesses and individuals. At the ceremony, Senate Majority Leader Mitch McConnell, R-Ky., thanked Democrats for working with Republicans to pass the largest-ever relief package in record time.
The House sent the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) to the president after it was approved by voice vote earlier the same day, despite threats by a lawmaker to hold up the bill.
House members had rushed back to the Capitol to ensure that the measure passed without delay after Rep. Thomas Massie, R-Ky., threatened to ask for a quorum, which would have required at least 216 lawmakers to vote on the measure.
While many on the floor expressed displeasure with parts of the bill for not doing enough to help average taxpayers, none were willing to vote against it.
House Ways and Means Committee Chair Richard E. Neal, D-Mass., praised the bill, and particularly a provision giving employers a tax credit for retaining employees during the economic downturn.
The credit will be available to businesses that have had to fully or partially suspend operations as the result of a government order or have seen their gross receipts decline by more than 50 percent compared with this quarter last year. The credit will fully cover 50 percent of the wages paid by an employer during the shutdown, up to $10,000 per employee.
Ways and Means Committee ranking member Kevin Brady, R-Texas, similarly lauded provisions delaying corporate payroll tax payments and modifying net operating loss rules.
“Businesses can keep their payroll taxes in their bank accounts this year and quickly turn their mounting losses into tax relief so they have more cash on hand to keep workers and to survive,” Brady said.
The law modifies the section 172 NOL rules by temporarily repealing the 80 percent NOL limitation and allowing deductions for loss carryovers and carrybacks to fully offset taxable income for tax years beginning before January 1, 2021. It will let businesses carry back losses for up to five years before the year of the loss.
The CARES Act also modifies the net business interest deduction limit from 30 percent of adjusted taxable income to 50 percent for tax years beginning in 2019 or 2020. For tax years beginning in 2020, businesses may elect to compute the interest expense limitation based on their 2019 ATI.
The new law fixes a flaw in the TCJA that excluded qualified improvement property from qualifying for bonus depreciation.
It also establishes special rules for the use of retirement funds, provides an exclusion for employer payment of student loans, excludes telemedicine services from high-deductible health plan rules, allows a one-year deduction for both itemizers and non-itemizers for cash contributions to charities of up to $300, and waives the federal excise tax on distilled spirits used to make hand sanitizer.
More on the Way
Several House Democrats hinted that there would be more to come to help taxpayers as the effects of the coronavirus continue to unfold. “As far as I am concerned, this is far from the last coronavirus bill,” said taxwriter Dwight Evans, D-Pa.
After the House passed the bill, Neal said in a statement that a fourth response package should include expansion of the earned income and child tax credits “to provide assistance to individuals who need it the most and who will immediately spend that money on life’s essentials.”
Another taxwriter, Rep. Bradley Scott Schneider, D-Ill., said he will continue to monitor the situation and make sure that the bill’s provisions function smoothly, adding that more relief may come. “As this pandemic continues to evolve, we must be ready to continue seeking solutions to help our communities weather this crisis and recover,” he said.
House Majority Leader Nancy Pelosi, D-Calif., told reporters that committee chairs will be working on a phase 4 bill in the coming weeks.