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Washington's Response to Coronavirus: Certain Tax Matters

March 18, 2020

The Phelps Tax Team is actively monitoring legislative and executive responses to the coronavirus.  Certain actions that have occurred to this point are discussed below. The Phelps Tax Team will continue to monitor these responses and provide periodic updates.

Legislation

H.R. 6201

Generally

On March 14, the United States House of Representatives passed H.R. 6201, the Families First Coronavirus Response Act (H.R. 6201). Late Monday, the House of Representatives passed H.Res.904, which enabled several technical corrections to be made to H.R. 6201. H.R. 6201 is being considered in the Senate, and reports indicate a Senate version of the bill could be sent back to the House for consideration as early as Thursday of this week.

Among other things, the current version of H.R. 6201 includes provisions that generally: expand coverage and eligibility under the Family Medical Leave Act (FMLA) for certain employees of employers with fewer than 500 employees for specified COVID-19-related events; require employers with fewer than 500 employees to provide 80 hours of paid sick leave to certain employees while away from work due to specified COVID-19-related events; and expand unemployment insurance benefits.

Tax Credits

H.R. 6201 provides refundable payroll tax credits for employers providing paid FMLA for up to 50 days or emergency sick leave for up to 10 days, as referenced above. The family leave credit would be for wages up to $200 per day, per applicable employee, subject to an overall cap. The sick leave credit would be for wages up to $511 per day, per applicable employee.

H.R. 6201 also provides for similar refundable credits for certain self-employed individuals, against their self-employment tax. Self-employed individuals could receive a family leave credit  of up to $200 per day for up to 50 days and a sick leave credit of up to $511 per day for up to 10 days.

Moving Forward

On Monday, President Trump suggested that the bill should be altered in the Senate to allow expanded sick leave for workers at large corporations, a move that would threaten to delay final action on the measure. While the Senate is in Washington this week, the House is on a scheduled weeklong break. At this time, Senate Majority Leader Mitch McConnell (R-KY) is encouraging his Senate colleagues to swiftly pass H.R. 6201. However, H.R. 6201 may be amended in the Senate, potentially altering the provisions discussed herein. In spite of further revisions to H.R. 6201 in the Senate, the Families First Coronavirus Response Act is expected to be passed by Congress and signed by President Trump.

White House Stimulus Proposal

There is bipartisan consensus that additional legislation is needed to induce additional capital into the economy. , the White House proposed a major economic stimulus package that could amount to $1 trillion or more, with a significant portion to fund a payroll tax holiday. The details of the White House’s economic stimulus package have yet to be released.

Tax Filing/Payment Relief

On Tuesday, President Trump declared, under the Stafford Act, the coronavirus pandemic a national emergency. Included in this declaration was instruction to Treasury Secretary Steve Mnuchin to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency (pursuant to 26 U.S.C. 7508A(a)). Section 7508A(a) of the Internal Revenue Code permits the Treasury Secretary to extend most federal tax deadlines for taxpayers affected by a federally declared disaster for up to one year.

Secretary Mnuchin announced the Treasury will allow taxpayers to defer payments to the IRS that are otherwise due on April 15 by 90 days (without incurring any interest or penalties for failing to pay by April 15). Individuals will be permitted to defer up to $1 million in payments, and corporations will be permitted to defer up to $10 million. This measure is projected to defer approximately $300 billion in tax payments to the IRS.  Importantly, taxpayers must still file returns by April 15, as this measure simply deferred payment due dates (and not filing deadlines).

It has been rumored that the administration is also considering delaying the estimated quarterly tax payments that self-employed workers and businesses pay the IRS throughout the year. The first payment is typically due April 15.