Article written by:
Rob Roll, CPA
Manager, Tax and Business Advisory Services
On Friday, May 15, 2020, the United States House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. The bill appropriates approximately $3 trillion of federal spending and is intended to be “Phase 4” of the effort to fight the economic downturn caused by COVID-19. The previous stimulus package, the CARES Act, was signed into law by President Trump on March 27th.
The Democrat-drafted 1,815-page bill is expected to be met with resistance in the Republican-led Senate and is not expected to become law in its current form. However, Republicans, Democrats, and the White House have indicated that they are open to passing another stimulus package. The HEROES Act is widely seen as the Democrats’ “opening bid” in these negations and contains many tax and non-tax provisions. Here are some highlights:
Tax-related provisions
- Authorizes an additional round of Economic Impact Payments (“stimulus checks”) of $1,200 per individual with the following enhancements over the previous round:
- All dependents, not just qualifying children, would qualify for the additional $500 Economic Impact Payment.
- Individuals who have Taxpayer Identification Numbers, but not Social Security numbers, would qualify for payments. Previously, only individuals with Social Security numbers qualified.
- Protects Economic Impact Payments from being taken by garnishment or levy, or to satisfy past-due child support.
- Reinstates the limitation on the deduction of excess business losses. This limitation was temporarily suspended under the CARES Act.
- Disallows the carryback of net operating losses to years prior to 2018. The CARES act allowed losses to be carried back up to four years.
- Removes the $10,000 cap on the deduction for state and local taxes for individuals.
- Clarifies that expenses used to qualify for loan forgiveness under the Paycheck Protection Program are deductible. The IRS recently issued a notice stating those expenses would not be deductible.
- Increases the Child Tax Credit to $3,000 from $2,000 and makes it fully refundable.
- Doubles the child and dependent care tax credit and makes it fully refundable.
- Enhances the Employee Retention Payroll Tax Credit enacted under the CARES Act and creates a refundable payroll tax credit for fixed costs (rent, utilities, etc.) paid by businesses that were shut down due to COVID-19.
- Creates a partially refundable tax credit for certain self-employed individuals who experience a significant loss of income due to COVID-19.
Non-tax provisions
- Over $925 billion of financial assistance for state, local, tribal, and territorial governments to help them deal with the economic fallout of COVID-19.
- Additional $10 billion for the SNAP program, also known as food stamps.
- Additional $10 billion for grants to small businesses.
- Appropriates $5 million to upgrade the House of Representatives’ information technology infrastructure to better enable remote work.
- Many changes and updates to Medicaid and Medicare coverage and funding formulas.
GBQ is continuing to monitor additional legislative changes and updates. Be sure to see our COVID-19 Resources page for additional guidance.
