Getting through 1,815 pages of the latest House bill no doubt takes a superpower! The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act is the latest legislative attempt to provide assistance during the global COVID-19 pandemic.
Now it's likely just a start to this round of D.C. debating. Please understand that items in the bill may not make it in their current form, or at all, to a final version. But it's always interesting to see what is in these early drafts because it gives an idea what is being discussed and what might creep into a future bill if it gets axed now.
Here's a high-level summary of key tax related provisions (apologies in advance, making things short lately is not easy).
Stimulus Payment Improvements - (Recovery Rebates/Economic Impact Payments/CHECKS!)
Changes the definition of children qualifying for an additional $500 recovery rebate from the child tax credit rules under IRC section 24(c) to section 152 dependents. Households would now get $500 for every qualifying dependent, not only children under age 17.
Changes the requirement to have a reported SSN to a TIN
Recovery rebates would no longer be offset by past-due child support
Additional rebate amounts of $1,200 per taxpayer ($2,400 for those MFJ), plus $1,200 for up to three dependents
Checks may not be signed by the President or any elected official
Broader Earned Income Tax Credit for Individuals With No Children
Minimum age to be eligible lowered; maximum age to be eligible increased from 65 to 66
Increased credits and phaseouts
The denial of a credit for taxpayers with excessive investment income would be removed
Allow taxpayers to use 2019 to calculate their 2020 credit
Enhanced Child Tax Credit for 2020
Significantly increased to $3,600 for children under age 6, $3,000 for other qualifying children
Children aged 17 would become available for the credit (normally cuts off at 16)
The credit would become fully refundable
The credit would be paid in advance on a monthly basis
Miscellaneous Individual Items
Expanded and fully refundable Child and Dependent Care tax credit for 2020
Increased exclusion for employer-provided dependent care for 2020
FSA participants would be able to carryover unused 2020 benefits to 2021
Removal of the $10,000 itemized deduction SALT cap for 2020 and 2021
Double the amount of above-the-line deductions for teachers out of pocket expenses
New tax deductions for first responders and front-line employees for certain out of pocket expenses
New employer tax credit for qualified pandemic-related employee benefit expenses
Excludes emergency financial aid payments from income
Employee Retention Credit
Repealing the inability to take both the ERC and a PPP loan
Increasing the credit percentage from 50% of qualifying wages to 80%
Increasing the per employee limitation on qualifying wages from $10,000 to $45,000
Changing the definition of a large employer to much greater than those with 100 employees
Creating phase-ins of the credit for certain scenarios
Confirms health plan expenses are considered wages for the purposes of the ERC
Allowing certain governmental employers to be eligible for the ERC
Paycheck Protection Program (PPP)
Clarifies PPP loan forgiveness is not included in gross income
Extends the covered period through the end of the year
Removes the 75/25 requirements related to payroll and other allowed expenses
Removes the disallowance of the employer payroll tax deferral for businesses receiving PPP loan forgiveness
Creates a safe harbor for borrowers who cannot rehire in the prescribed timeframe
Expands availability to all nonprofits
Changes the loan term to a minimum 5 years
(A separate House bill released today as well would increase the 8-week period to 12 weeks to allow businesses to maximize their loan forgiveness)
Miscellaneous Business Items
New business credit for certain fixed expenses
New tax credit for self-employed individuals who have experienced significant declines in income, replacing up to $45,000 in income
Enhancement of the employer tax credits for mandatory paid sick and family leave
Reinstatement of the limitation on excess business loss deduction for tax years 2018-2020
Disallow net operating loss carrybacks to tax years before 2018 (when tax rates were higher)
Restrictions on carrying back losses for companies paying excessive executive salaries or engage in buybacks
Stay tuned, even with a vote planned for Friday - this is probably far from over and unlikely to make it through unscathed!
Amie K
Material shared is for general information purposes only and not to be considered tax advice. Please contact your tax and business advisers for how this may apply to your unique situation!