Fear and Loathing in Washington D.C.
There is a lot, and nothing, going on in Washington D.C. at the same time. Here is an update and our best guesses. You’re welcome.
PPP
Today is PPP Loan Forgiveness Day. That’s not actually a thing, but today is the first day the SBA will be accepting forgiveness applications. What to do? My recommendation is nothing. There is no reason to hurry, and Congress could very well make favorable changes.
There is significant pressure by banks to streamline the forgiveness process, with the most popular proposal to forgive all loans under $150k automatically. Remember, the banks wrote the law in the first place! It may be that the SBA has the authority to do this without Congress. And there is always the looming pen of President Trump (more on this below).
Senate
The Senate has not coalesced on a single bill. There is the Health, Economic Assistance,Liability Protection, and Schools Act (HEALS). Here are some of the proposed provisions:
· Extended Unemployment Benefits
· Additional $1,200 per taxpayer and $500 per dependent.
· Increase the Employee Retention Credit from 50%to 65%, and increase the cap from $10k to $40k.
· Add COVID-19 unemployment recipient to the eligible employees for the Work Opportunity Tax Credit (WOTC)
· Create a new Safe & Healthy Workplace Tax Credit equal to 50% of eligible employer expenses.
House
In May, the House introduced their additional stimulus bill,the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES). By the way, who comes up with these names? My guess is they come up with the acronym first, and back into it.
In any case, the HEROES Act is a laundry list of proposed changes:
· Additional $1,200 per taxpayer and an additional$1,200 per dependent.
· Expansion of the Earned Income Tax Credit (EITC)
· Increased Child Tax Credit
· Eliminate the cap on State and Local Taxes(SALT), currently at $10k.
· Increase of the Employee Retention Credit from 50%to 80% and increase from $10k to $50k.
· Extended Unemployment Benefits
· Etc.
Realistically, this bill has no chance of passage, but was a starting point for negotiations with the Senate.
White House
Because Congress can’t agree on anything, President Trump issued an Executive Order over the weekend that effectively defers all payroll (i.e. FICA, not income) taxes from September 1 through the end of 2020. The taxes, as reported by some, are NOT eliminated, just deferred for wages up to $8k per month.
We don’t know how this would actually be implemented, or if the Order will be challenged. When will the deferred taxes be due? If an employee makes more than $8k per month, do they still get to defer the amount under $8k?
The Order will probably be challenged in court, but, given that most employees would just have to come up with a large chunk of cash in April, 2021, I’m not sure this is anything more than a political stunt by President Trump. I don’t think it would provide substantive relief, although it sounds good.
Employers, who could already defer the payment of payroll taxes, really don’t benefit from anything here. The IRS just released the new 941 to report the deferrals, so who knows what the Order ultimately does to that.
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