May 13, 2020

More Stimulus Coming Soon

House Democrats unveiled a $3 Trillion Bill to respond to health and economic problems brought about by the coronavirus pandemic. Dubbed the HEROES Act, which is a rather lofty mnemonic standing for the Health and Economic Recover Omnibus Emergency Solutions Act (“Omnibus” was clearly the filler word needed to complete the mnemonic). Lofty as the name is, the provisions in the Bill are equally lofty. This would represent the largest stimulus package ever. Many of the provisions will either be eliminated or modified when the final version of the legislation is finalized and agreed upon by both the House and the Senate, as the GOP and Dems are nowhere near a consensus. The bill, however, provides a useful reference to the sorts of measures that will be debated in this next round of coronavirus relief.

As it pertains to small businesses and individual taxpayers, the below provisions in the House Bill should be of interest:

  1. Elimination of the State and Local Tax (SALT) cap of $10K for tax years 2020 and 2021
    • Previously, taxpayers have been prohibited from deducting SALT taxes greater than $10K on their Schedule A, which has substantially reduced tax benefits under the TCJA for high-income taxpayers in high-tax states.
      • DARK HORSE OBSERVATION: This could result in substantial federal income tax savings which, if passed into law, should factor into your W-2 withholdings and/or estimated tax payments so as not to over-withhold.
  2. Extension of the $600 weekly unemployment expansion under the Pandemic Unemployment Assistance program to December 31st
    • DARK HORSE OBSERVATION: Self-employed (Sole Proprietors, independent contractors) individuals should be careful not to collect unemployment if they are being paid for services by their clients. It’s unclear how exactly states will figure out who is collecting unemployment that shouldn’t be, but you can bet audits will be substantially increased over the next year or two.
  3. Another round of stimulus checks that would increase the $500 payment per child to $1,200 per dependent, with a maximum total payment of $6,000 (2 spouses and 3 children @ $1,200/person). Under the CARES Act the dependent had to be your child but under the HEROES Act, anyone who would qualify as your dependent on a tax return would count.
    • The qualifying income limits remain unchanged but the Act would allow those who filed tax returns with an individual who did not have an SSN or ITIN to receive a payment.
      • DARK HORSE OBSERVATION: Be careful about filing your 2019 tax return if you haven’t already because you could cause yourself to be ineligible to the stimulus payment if your 2019 AGI is too high to qualify whereas your 2018 AGI qualified. Conversely, if you didn’t qualify for the first payment because you hadn’t filed your 2019 tax return (which had qualifying AGI) and your 2018 tax return did not allow for you to qualify, you very well may want to file your 2019 return now so that you have the best chance of qualifying for the next stimulus payment, should it come.
  4. Increasing the 8-week forgiveness window for Paycheck Protection Program loan forgiveness to 24 weeks. There is, however, no additional funding called for in this Bill for the PPP.
    • DARK HORSE OBSERVATION: Whether or not this passes, it looks inevitable that there will be some modification to the existing 8-week time period for loan forgiveness. What this looks like is highly uncertain and most companies have already made attempts to re-staff as much as possible to receive loan forgiveness. If you have no use for your employees right now and have the PPP funds in-hand, however, you may be well advised to just wait until you can put your employees to work in a productive manner in anticipation of favorable modifications to the 8-week provision.
  5. $10 Billion in increased funding for Emergency EIDL Grants
  6. Federal student loan payments suspended through September 30, 2021 with no interest accruing during that time
  7. Full COBRA subsidies for those who lost their employer-provided health care coverage

There is a lot to be added, deleted and modified over the next couple of weeks (if not months). The timing for passing a bill into law is unclear, mostly because the need is not as urgent and dire as it was prior to the passage of the CARES Act, as well as the significant divide between the priorities of Republicans and Democrats. We will be keeping a close eye on this for our clients and will keep this blog and our social channels updated with the latest information.

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