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Estimated reading time: 6 minutes

I’ve been asked a lot recently about section 230 – a phrase that’s been tossed around a lot with respect to stimulus checks.

Section 230 isn’t a tax provision (in fact, there isn’t even a section 230 in the Tax Code): it’s actually a telecommunications law. And I’m not a tech or intellectual property lawyer: my focus is tax. But in the spirit of trying to explain what section 230 has to do with stimulus checks – which are tax-related – I’m going to give you a quick summary. If you need a deeper dive, there’s some good stuff out there from tech lawyers.

What is Section 230?

Section 230 is part of a law – the Communications Decency Act (CDA of 1996) – which was passed in 1996. It provides liability protection for social media companies like Twitter and Facebook with respect to content posted by their users.

The meaty part is here:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

47 U.S. Code § 230

And you can find the full text of the law here.

What the law does, basically, is say that you can’t hold these companies – and other intermediaries like Internet Service Providers (ISPs) – legally responsible for things that other people post. There are some exceptions including conduct that is criminal, as well as copyright and other intellectual property, but the idea is that you – not the platform – should be responsible for your conduct, not Twitter or Facebook. Without section 230, companies might be so scared of being sued that they would either have to monitor everything posted all of the time – or they might just throw in the towel and decide not to provide the service at all.

Why Does Section 230 Exist?

The history of the bill dates backs to a 1995 court ruling against the online service, Prodigy. Prodigy isn’t around anymore, but back in the day, it was a top online service platform, along with CompuServe – another blast from the past. In 1994, an anonymous user created a post accusing Stratton Oakmont (a securities firm founded by Danny Porush, Brian Blake, and Jordan Belfort – if that last name rings a bell, you’ve likely seen Wolf Of Wall Street) of fraud. Stratton Oakmont sued the anonymous user and Prodigy for defamation. They won, with the court holding that since Prodigy did some moderation, it should be treated as a publisher. The case was Stratton Oakmont, Inc. v. Prodigy Services Co., (N.Y. Sup. Ct. 1995).

(Fun fact: In 1996, Stratton Oakmont shut down – for fraud – after it was expelled from the National Association of Securities Dealers (NASD) because it posed “an ongoing risk to the investing public.” A few years later, Porush and Belfort went to prison on securities fraud and money laundering charges.)

In 1996, section 230 was signed into law to rebut the presumption under Stratton Oakmont that companies should be treated as a publisher under the law. Now, if tech companies moderate some material – like keeping adult content away from children – they are protected from liability for other user content. In other words, if Facebook takes down sexually explicit content, I can’t use that as a justification to sue Facebook because my brother called me a name online. And, in the same vein, a restaurant can’t sue Facebook because it got a bad review from a customer.

Not everyone is a fan of section 230, including the President.

Why Does The President Want To Repeal Section 230?

In May of 2020, Twitter fact-checked some of the President’s tweets related to voting by mail. That resulted in a war of words with the President. On May 28, 2020, President Trump issued an Executive Order, targeted at tech companies, including Twitter, stating that, “Twitter now selectively decides to place a warning label on certain tweets in a manner that clearly reflects political bias.” He called for legislation to fix what he saw as a problem, specifically calling for a repeal of section 230, but Congress did not act.

The Stimulus/Spending/Extenders Bill

So what does this have to do with taxes? Remember the stimulus/spending/extenders bill? That bill passed the House and Senate and landed on the President’s desk, where he signed it – but only after pausing a few days to insist on some changes, including higher stimulus checks ($2,000 per person) and elimination of what he deemed wasteful spending.

When the President signed the bill into law, he said he was doing so with the understanding that the Senate would consider three things:

The Senate will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud.

President Trump statement, December 27, 2020

He specifically signaled for the repeal of section 230 after signing the bill into law – even though there’s no mention of section 230 in the stimulus/spending/extenders bill.

What About The NDAA And That Veto?

When the bill went back to Congress, Senate Majority Leader Mitch McConnell (R-KY) urged his colleagues to overturn the veto, saying, “For the brave men and women of the United States armed forces, failure is not an option. So when it is our turn in Congress to have their backs, failure is not an option here either. I urge my colleagues to support this legislation one more time.” The veto was quickly overridden with a House vote of 322-87 and a Senate vote of 81-13 on January 1, 2021.

McConnell Ties Checks To Section 230

However, a few days before the veto override vote, on December 29, 2020, Sen. McConnell had acted on section 230. He introduced a bill that would have done what the President asked: tie the increase in stimulus checks to $2,000 to the repeal of section 230. It was a combined, not a stand-alone, bill. McConnell’s bill would have also required a bipartisan commission to study the “integrity and administration” of the 2020 election.

You can read the text here. It was not seriously considered.

We Have A New Congress

So what comes next?

The new Congress – the 117th – has already been sworn in. Under the Constitution:

The Congress shall assemble at least once in every year, and such meeting shall begin at noon on the 3d day of January, unless they shall by law appoint a different day.

20th Amendment, section 2

That happened on schedule this year.

Any changes to existing laws, including a repeal of section 230 or increases to stimulus checks, must be taken up by the new Congress. Stay tuned.

Earlier this week, the President suggested that he might not sign the stimulus package/spending bill (you can read about what happened – and what it meant – here). However, tonight, the President did sign the bill into law.

The bill would do a few things, including:

  • Issue stimulus checks of $600 per person;
  • Extend unemployment benefits; and
  • Expand PPP, offering more loans, and allowing for deductibility.

You can read my summary and related bills here:

On Monday, the House still intends to introduce a bill to raise the stimulus checks to $2,000 per adult. The Senate has not indicated that it will take up the bill, though the President says that, “The Senate will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud.”

You can read the entire White House statement here.

Stay tuned!

Estimated reading time: 6 minutes

If you’ve been reading the news, you know that there is some controversy surrounding the recent stimulus/spending bill passed by Congress.

(You can read my summary of the complete bill here, and you can find more detailed information about stimulus checks here and PPP here.)

It hasn’t yet been signed into law. Here’s what you need to know.

Background

On Sunday, December 20, 2020, Congress reached an agreement on the stimulus package. The House voted on the measure on Monday, December 21, 2020, where it passed by a vote of 359-53. The Senate voted on the measure just before midnight, where it passed by a vote of 92-6. That same day, Treasury Secretary Mnuchin went on a morning talk show to promise that stimulus checks would start showing up in bank accounts next month.

Mnuchin even took to Twitter on Tuesday, December 22, 2020, to praise the bill.


That same day, those close to the President, including White House spokesperson Ben Williamson, signaled that the President was expected to sign.

Only that didn’t happen. The President called the bill “a disgrace” and suggested that he would not sign unless the stimulus checks – which were slated to be an additional $600 per person – were increased to $2000 per person, and “wasteful spending” was removed from the bill.

He posted a video to Twitter with his comments. You can watch it here:

In the video, he says, “I am also asking Congress to immediately get rid of the wasteful and unnecessary items from this legislation, and to send me a suitable bill, or else the next administration will have to deliver a COVID relief package, and maybe that administration will be me.”

House Speaker Nancy Pelosi immediately responded on Twitter, saying that Democrats could vote (as soon as Thursday) to approve the checks:

If you’re wondering about that language, initially, stimulus package discussions did not include Senate Majority Leader Mitch McConnell in a leadership role. Before the election, the negotiations were largely between Pelosi and Mnuchin: the $600 amount was reportedly Mnuchin’s proposal. An earlier proposal by the House in May would have increased the checks to $1,200 each – the same as before – but the GOP-led Senate was concerned at the time that the amount was too big and did not take up the bill. However, the Senate proposal in July did include $1,200 checks.

President Trump raised the idea of larger checks last Thursday, while negotiations were ongoing. That amount did not appear in the final bill because of opposition, largely in the Senate and from Mnuchin.

So Why Is All Of That Other Stuff In The Bill To Begin With?

There are a few things going on.

First, this is not just a stimulus bill: it’s also an appropriations and extenders bill.

Each year, Congress has to pass a budget for the fiscal year. Unlike most taxpayers – who operate on a January 1 to December 31 year – the government’s new year begins on October 1 and runs through September 30. Congress is supposed to pass a budget by that time or there is no money to fund the government.

Unfortunately, Congress tends to kick the can down the road until close to the deadline. If there’s still no budget, the government can’t operate, so Congress passes a series of what’s called continuing resolutions, or CRs, in the meantime to keep funding going. If there’s no budget and no CR, then the government will shut down. We barely avoided a shutdown in 2014, again in 2015, and in 2016. The government did shut down in 2018 (for three days) and 2019 (for 35 days, the longest in our history).

That’s what happened here. The budget did not pass before October 1, so we’ve been keeping the lights on in government through a series of CRs. The most recent approvals are slated to run out on December 29, 2020.

So rather than negotiate several bills, Congress created one monster bill. It includes our normal appropriations bill (yes, that level of spending, including foreign aid, is in every bill, every year). It also includes a tax extenders bill – that’s when Congress extends expiring tax provisions. And it includes the stimulus package.

That’s why it’s so big (over 5,000 pages) and why it costs so much ($2.3 trillion).

What Can’t Congress Just Amend?

It feels like it would be easy to just make a quick amendment, right? That’s what Trump and Pelosi have suggested. But it’s actually not that easy.

To get it done quickly, it would require unanimous consent in the House and the Senate. Remember those votes? Originally, 128 House members voted no. And six members of the Senate voted no. A unanimous vote in both chamber is unlikely to happen.

That’s especially true because of the cost. The payments already cost roughly $170 billion. Increasing them would add nearly $375 billion, bringing the cost of the direct checks to over half a trillion. Many fiscal conservatives will not want to see that level of spending in the bill – especially because it would topple the $1 trillion mark, which was the unofficial cap for many.

And what about the “wasteful spending” in the bill? While it’s true that there’s a lot of pork – there always is – it was negotiated between Democrats and Republicans during the year. Agreeing unanimously on those changes is unlikely.

Some taxpayers have also suggested bifurcating the bill. That sounds like an easy task, but it’s not. That would likely send Congress back to the drawing board on both, delaying the budgets and checks.

Can’t Congress Override Any Veto?

The votes should be there, based on the original votes, to override a veto. And the Senate was already prepared to vote on the President’s proposed veto of the defense spending bill on December 29, 2020. So, what’s another veto override vote?

For one thing, the President hasn’t actually vetoed the stimulus/spending bill yet. He hasn’t even used the word veto. He’s just suggested that he won’t sign.

Typically, a veto happens when the President returns the bill to Congress, usually with an explanation attached. If there’s no veto, for the bill to become law, it needs to be signed by the President. If the President doesn’t sign it with ten days – and Congress is in session – it also becomes law.

However, if the President refuses to sign the bill while Congress is adjourned, he clearly can’t return it: that’s a pocket veto and Congress cannot override it.

Second, it’s politically delicate. The Senate does not want to increase the cost of the bill, but they are also mindful that bigger checks are something that many Americans want. In another election year – the Georgia runoffs are still to come – this could be problematic.

Finally, the veto process would likely take weeks. That would delay checks and shut down the government – a dicey prospect with tax season coming.

So What Comes Next?

To be honest, I’m not sure. The President is not expected to remain in DC for negotiations: his schedule has him traveling to Mar-a-Lago today (Wednesday).

I’ll let you know when there are further developments.

Where Can I Find Out More?

I’m posting regular updates on my Facebook page, and it’s been a great conversation. Come join us!

Estimated reading time: 5 minutes

(Author’s Note: The bill passed in the House and Senate on December 21, 2020, after this piece originally appeared.)

Congress has finally agreed on a COVID relief package. It is the first significant stimulus action from Congress since the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act was signed into law in March of 2020.

There’s no text available yet (I’ll post a link when it’s available), but based on reports from those involved, here’s a quick look at what likely made it in the bill – and what didn’t. Note that this could change, since there has not yet been a vote, with Sen. Mitch McConnell (R-KY) promising to do it as soon as possible (I’ll update when I have more details).

What’s In.

Unemployment Assistance. The bill would extend the pandemic unemployment insurance programs – those created under the CARES Act – by a reported 11 weeks through March of 2021. The bill would also extend the federal supplement unemployment insurance benefits, but at half the former rate (just $300 per week).

Paycheck Protection Program & Small Business Assistance. The bill would expand the PPP program to allow some businesses to receive an additional loan. Also included? Loan simplification for those borrowing $150,000 or less. However, it’s still not known whether business expenses paid for with the proceeds of PPP loans would be fully tax deductible – some deductibility was expected to be included but with safeguards (we’ll need to wait for the final text for the details).

From Rep. Nancy Pelosi (D-CA): The agreement includes over $284 billion for first and second forgivable PPP loans, expanded PPP eligibility for nonprofits and local newspapers, TV and radio broadcasters, key modifications to PPP to serve the smallest businesses and struggling non-profits and better assist independent restaurants, and includes $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions. The agreement also includes $20 billion for targeted EIDL Grants which are critical to many smaller businesses on Main Street.

Employee Retention Tax Credit. The agreement extends and improves the Employee Retention Tax Credit.

Earned Income Tax Credit & Child Tax Credit Tweaks. The agreement allows families to receive EITC and CTC based on their 2019 income. That significantly impacts those families whose incomes were reduced because of COVID.

Transportation Funding. The bill is expected to extend the Payroll Support Program (PSP), which provides loans to the struggling airline industry. The proposal would also provide additional funding for airports, motorcoach and bus companies, public transit systems, and Amtrak.

Health Care, Including Vaccine Development & Distribution. The bill would send more more to hospitals and health care providers, and provide more money for testing. The proposal would also provide millions in grants and funding for vaccine development, infrastructure, and distribution.

Education Funding. The proposal would send billions in additional funding to schools, including private schools.

Student Loan Extensions. The bill would extend federal student loan forbearance provisions (those are current set to expire on January 31, 2021).

Rental Assistance. The package would allow for an extension of the eviction moratorium through January 31, 2021. There are also funds for rental relief, to be used for future rent and utility payments and back rent owed or utility bills.

Food Assistance. The agreement is expected to increase food stamp benefits (Supplemental Nutrition Assistance Program, or SNAP) . It would also expand the Pandemic-EBT program to cover families with children in child care, and provide support for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to allow participants to purchase additional fruit and vegetables. Seniors are also included, with funding for senior nutrition services, including Meals on Wheels, and the Commodity Supplemental Food Program to provide food boxes to more senior citizens.

Post Office. The proposal makes clear that the $10 billion of aid initially earmarked for the USPS in the CARES Act would not require repayment.

Excess Funds. The bill was held up due to a controversy over what to do with excess funds from the CARES Act with Democrats wanting to re-allocate them and many Republicans siding with Treasury Secretary Mnuchin about sending those funds back to the general fund. The final bill is expected to include compromise language.

Stimulus Checks. A last minute push to include stimulus checks was successful. New checks worth $600 per person (yes, for children, too) are included in the new relief package. As before, checks will begin to phase out for those who earn $75,000 ($150,000 for married couples filing jointly). According to reports, adult dependents – those over age 18 – still won’t qualify. However, those individuals who file jointly with a person who uses an ITIN will be allowed to collect a check (though the person with the ITIN will not).

3-Martini Lunches Are Back. The bill reportedly includes a provision to increase the business meals deduction to 100% (it’s currently 50%) for 2021 and 2022.

What’s Out

State and local funding. Originally included in the bill, state and local funding has been removed. However, Congress did extend the deadline for states and cities to use pre-approved money in the CARES Act. States like mine (Pennsylvania) that had not spent all of their fundingwould lose it if not spent by the end of the year; the deal would instead extend the deadline until the end of next year.

Liability Protections. Providing liability protections for corporations as a result of the pandemic has been a serious stumbling block between the Senate and the House. The framework had originally suggested that there was “[a]greement in principle as the basis for good faith negotiations” but it faltered.

CARES Act corrections/clarifications on stimulus checks. Earlier this year, the House hoped to see some language which would replace the term “dependent” with “qualifying dependent” for purposes of the first stimulus check. Other corrections included coding payments to prevent offsets and making clear that representative payees could receive checks. There’s no indication that those corrections/clarifications will be included in this most recent relief package.

Cost

The total price tag of the bill is estimated to be $2.3 trillion, but that includes funding of about $1.4 trillion in “catchall” government spending.

Estimated reading time: 6 minutes

(Author’s Note: The bill passed in the House and Senate on December 21, 2020, after this piece originally appeared.)

When Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March of 2020, the law included provisions intended to help businesses. One of the most popular is known as the Paycheck Protection Program, or PPP.

The program is precisely what it sounds like: billions in (potentially) forgivable loans to keep workers on the payroll. The loans were targeted to businesses and that included sole proprietorships, independent contractors, gig-economy workers, and self-employed individuals. Businesses could use the money for employee salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments. Funds could also be used for family, medical, and sick leave.

The money went quickly: the program opened on April 3, 2020, and closed on April 16, 2020. An additional $310 billion was approved for a second round of PPP funding shortly after; that program closed on August 8, 2020. In total, the PPP resulted in over five million loans totaling $525 billion. According to SBA data, about a quarter of all loans were $150,000 or less.

As of today, the SBA is no longer accepting PPP applications from participating lenders. But that is changing: the latest stimulus bill from Congress, which passed on December 21, 2020, includes some significant updates, including new funding.

Here’s a look at what you need to know:

PPP Second Draw

The bill would expand the PPP program to allow some businesses to receive an additional loan. The second loan, called a “PPP second draw” loan, is targeted to smaller and harder-hit businesses.

In order to receive a second draw PPP loan, eligible entities must employ 300 or fewer employees and have used or will use the full amount of their first PPP loan. Businesses with multiple locations that are eligible may employ not more than 300 employees per physical location.

Businesses must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Businesses that aren’t in business for all quarters must demonstrate appropriate reductions during the months they were in business (for example, they can compare earlier 2020 quarters rather than compare to 2019). And, applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.

A business that was not in operation on February 15, 2020 is not eligible for an initial PPP loan and a second draw PPP loan.

Eligible & Ineligible Entities

Eligible entities must be businesses, as before, and also include certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.

Ineligible entities include those listed in 13 C.F.R. 120.110 (those typically not eligible for SBA business loans) unless otherwise made eligible by statute or guidance (that includes, for example, nonprofits and religious organizations such as churches).

Also not eligible? In response to a great deal of outcry, public companies may not apply. Additionally, any entity “primarily engaged” in political or lobbying activities, including those organized for research or advocacy in areas such as public policy or political strategy (an entity that describes itself as a think tank in any public documents is a clear red flag) cannot apply. And in a nod to politics, any entity affiliated with businesses in China, and any registrants under the Foreign Agents Registration Act, are barred from participation as well as any entity that receives a grant under the Shuttered Venue Operator Grant program.

Some specific exceptions and waivers apply, including some expanded provisions for first-time borrowers.

The bill also clarifies that some EIDL borrowers may also apply for a PPP loan.

Borrowing

Generally, businesses can borrow up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year. Entities in industries assigned to NAICS code 72 (Accommodation and Food Services) may receive loans of up to 3.5 times their average monthly payroll costs.

Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020. A seasonal employer is one who operates for no more than seven months in a year, or earned no more than 1/3 of its receipts in any six months in the prior calendar year.

Tax Provisions

The bill also makes clear that PPP forgiveness is not taxable (it’s excluded from income).

In the case of a partnership or S corporation, any amount excluded from income is treated as tax-exempt income for purposes of sections 705 (determination of basis of partner’s interest) and 1366 (pass-thru of items to shareholders). Any resulting increase in the adjusted basis of a partner’s interest in a partnership under section 705 is equal to the partner’s distributive share of deductions resulting from those expenses.

And despite significant push-back from Treasury and in the face of IRS guidance to the contrary (Rev Rul 2020-27), Congress did include deductibility in the bill. Deductions are allowable for expenses paid with the proceeds of a forgiven PPP loan (as before, tax basis and other attributes of the borrower’s assets will not be reduced). That’s retroactive to date of enactment of the CARES Act (March 27, 2020).

This is true for first and second draw PPP loans.

Forgiveness

Under the bill, borrowers can choose a covered period of between 8 and 24 weeks (that’s the time period to spend funds on qualified expenses for purposes of forgiveness). The definition of qualified expenses has expanded, too, to more closely mirror what was offered in earlier versions of the stimulus bills, including the skinny bill. Those expenses include software, cloud computing, human resources, payroll, billing and accounting, costs related to “property damage and vandalism or looting due to public disturbances” that occurred during 2020 not covered by insurance, supplier costs, and worker protection related to social distancing, sanitation or other safety requirements.

The bill also creates a simplified forgiveness application (”not more than one page in length”) for loans up to $150,000. The application will require description of the number of employees the borrower was able to retain because of the covered loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. And of course, borrowers will have to attest that they provided the right documents and complied with the loan requirements.

The bill also repeals the requirement that borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Clean Up

And remember those EIDL loans? Under the CARES Act, $10,000 of those loans was treated as an advance (also called a grant) that didn’t have to be repaid. But the law also required those funds to be docked from PPP loans: that’s no longer the case as the section of the CARES Act is repealed.

Disclosures

And in a nod to public concerns about PPP forgiveness, if the President, Vice President, the head of an Executive department, or a Member of Congress (or their spouses) receives a PPP loan, disclosure is required within 30 days of forgiveness. Those folks are also barred from receiving a loan in the future.

More Info About Stimulus

The PPP is just a piece of the larger stimulus bill. You can read my summary of the stimulus bill here.

Estimated reading time: 9 minutes

(Author’s Note: The bill passed in the House and Senate on December 21, 2020, after this piece originally appeared.)

So you know how folks throw around adjectives and superlatives all of the time? And sometimes you just don’t believe them?

If you hear anyone describing the latest stimulus bill from Congress as “huge” or “giant” or even “ginormous,” believe them. It’s so large that aides had trouble printing it:

And again while trying to upload it to the internet:

Eventually, the text was made available on the House website. It’s 5,593 pages long. You can take a peek here (downloads as a PDF).

The bill passed in the House and the Senate. In the Senate, the late-night vote was 92-6, with only the following Senators voting no: Marsha Blackburn (R-TN), Ted Cruz (R-TX), Ron Johnson (R-WI), Mike Lee (R-UT), Rand Paul (R-KY) and Rick Scott (R-FL).

Here’s what’s you need to know:

What’s In.

Spending. The bill costs $2.3 trillion which sounds like a lot considering earlier this month, some in Congress were balking at anything over $900 billion. The majority of the price tag ($1.4 trillion) and a lot of the bill (about 1,815 pages) is a catchall budget package to keep the lights on for the remainder of the fiscal year.

More Spending. In addition to the general budget provisions, there are special Covid-related spending add-ons, including transportation dollars, additional money for health care, including vaccine development & distribution, and additional funding to schools, including private schools.

The Usual Suspects. A budget bill wouldn’t be a budget bill without special interests and earmarked projects like those “sense of Congress” sections and requests for reports (fun fact: the word “report” or “reports” appears more than 1,000 times in the bill). I may do a review of those in a separate article, but I’m a tax writer and I know that’s not what you’re here for…

Unemployment Assistance. Around the 2,000 page mark, the bill tackles unemployment benefits.

The bill would extend Pandemic Unemployment Assistance (PUA) benefits created under the CARES Act through March 14, 2021. Individuals receiving benefits as of March 14, 2021 could continue through April 5, 2021, as long as they have not maxxed out their week count (it had been 39, but would be upped to 50).

The bill would also extend the federal supplement unemployment insurance benefits, but at half the former rate (just $300 per week), starting after December 26, 2020, and ending March 14, 2021.

Finally, the bill would extend Pandemic Emergency Unemployment Compensation (PEUC) benefits through March 14, 2021. As with PUA, individuals receiving benefits as of March 14, 2021 could continue through April 5, 2021, as long as they have not maxxed out their week count (it had been 13 but upped to 24).

Returning To Work Requirements. One of the real sticking points of continued unemployment compensation is a concern about paying benefits when individuals refuse to go back to work. Under the bill, states must provide a suitable method (including phone line, email, or online portal) for employers to notify the state when an individual refuses to work or accept an offer of work when they do not have good cause. The state must also provide a “plain language notice” about return to work laws, rights to refuse to return to work or to refuse suitable work and information on contesting a claim denial. The notice must also include an explanation of what constitutes suitable work, including a claimant’s right to refuse work that poses a risk to health and safety.

Second Round Of Stimulus Checks

Stimulus Checks. The tax-related bits of the bill kick in around page 1,966. New checks worth $600 per person (yes, for children, too) are included in the new relief package. As before, checks will begin to phase out for those who earn $75,000 ($150,000 for married couples filing jointly). Adult dependents – those over age 17 – still won’t qualify. However, those individuals who file jointly with a person who uses an ITIN will be allowed to collect a check (though the person with the ITIN will not). You can read more details on stimulus checks in this more detailed article.Forbes AdvisorSecond Stimulus Check Calculator: How Much Will You Receive And When?

Payroll Tax Provisions

Extension of Deferred Payroll Taxes. On August 8, 2020, President Trump issued a directive to the Department of Treasury to allow for the deferral of payroll taxes for the period of September 1, 2020, through December 31, 2020. Under the terms of the directive, penalties and interest on deferred unpaid tax liability were to accrue beginning on May 1, 2021. The bill would extend the repayment period through December 31, 2021, meaning that penalties and interest on deferred unpaid tax liability will not begin to accrue until January 1, 2022.

Employee Retention Tax Credit. The agreement extends and improves the Employee Retention Tax Credit. Specifically, under the CARES Act, the credit only applied to wages paid after March 12, 2020, and before January 1, 2021: the bill would extend the wage period through July 1, 2021. The credit – which used to be equal to 50% of the qualified wages each quarter – has been bumped to 70% and can be used in conjunction with PPP money for wages that are not paid for with forgiven PPP proceeds. And best of all, the $10,000 per employee limit which used to be the aggregate for all quarters is now the limit per quarter. One more tweak: the gross receipts test has been changed to 80% of receipts for the same calendar quarter in 2019.

Paycheck Protection Program

Paycheck Protection Program. The bill would expand the PPP program to allow some businesses to receive an additional loan. The second loan, called a “PPP second draw” loan, is targeted to smaller and harder-hit businesses. Those are businesses with 300 or fewer employees who have used or will use the full amount of their first PPP. They must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Generally, businesses can borrow up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year. The maximum loan amount is $2 million, and for forgiveness purposes, the 60/40 cost split between payroll and non-payroll costs will continue to apply.

The bill also makes clear that PPP forgiveness is not taxable. It further makes clear that deductions are allowable for expenses paid with the proceeds of a forgiven PPP loan (additionally, tax basis and other attributes of the borrower’s assets will not be reduced). That’s retroactive to date of enactment of the CARES Act (March 27, 2020).

The bill creates a simplified forgiveness application (”not more than one page in length”) for loans up to $150,000. The application will require description of the number of employees the borrower was able to retain because of the covered loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. And of course, borrowers will have to attest that they provided the right documents and complied with the loan requirements.

I know you’ll have more questions on this: I am planning a deeper dive and I’ll link to it when it’s available.

Individual Income Tax Breaks

Earned Income Tax Credit (EITC) & Child Tax Credit (CTC) Tweaks. The bill would allow families to receive EITC and CTC based on their 2019 income. That significantly impacts those families whose incomes were reduced because of COVID since your credit is typically higher as you earn more money.

Charitable Giving. In a welcome break, the bill would change the maximum dollar amount for above-the-line adjustment for charitable giving from $300 per return to $600 for a joint return) for 2021. You can find out more about the temporary deduction here (note that the linked article still has the $300 limit since there has not yet been a vote). Additionally, the suspension of limits on cash gifts has been extended through 2021.

Expanded Flexible Spending Arrangements (FSAs). The bill would allow taxpayers to carry amounts from FSAs forward into 2021 (and again into 2022). This would apply to FSAs for health care and dependent care.

Medical Expense Deduction Floor. Beginning in 2021, the medical expense deduction floor is moved permanently to 7.5%. That means that you can deduct (assuming you itemize) medical expenses which exceed 7.5% of your adjusted gross income. Previously, the needle had moved to 10% (and then came down again).

Volunteer Firefighters and Emergency Medical Responders Benefits. The bill would exclude certain state and local benefits for volunteer firefighters and first responders from income.

Change In Education Benefits. Beginning in 2021, the qualified tuition deduction would be replaced. Instead, the phase-out limits on the Lifetime Learning credit would be increased to $80,000 ($160,000 for married filing jointly).

Full Deduction For Business meals. 3-Martini Lunches Are Back. The bill includes a provision to increase the business meals deduction to 100% (it’s currently 50%) for 2021 and 2022.

Social Services

Rental Assistance. The package would allow for an extension of the eviction moratorium through January 31, 2021. There is also $25 billion for rental relief, to be used for future rent and utility payments and back rent owed or utility bills.

Food Assistance. The bill increases food stamp benefits (Supplemental Nutrition Assistance Program, or SNAP). It would also expand the Pandemic-EBT program to cover families with children in child care, and provide support for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to allow participants to purchase additional fruit and vegetables. Seniors are also included, with funding for senior nutrition services, including Meals on Wheels, and the Commodity Supplemental Food Program to provide food boxes to more senior citizens.

What’s Out

Student Loan Extensions. The bill will not extend federal student loan forbearance provisions (those are current set to expire on January 31, 2021).

State and local funding. Originally included in the bill, state and local funding has been removed. However, Congress did extend the deadline for states and cities to use pre-approved money in the CARES Act. States like mine (Pennsylvania) that had not spent all of their funding would lose it if not spent by the end of the year; the deal would instead extend the deadline until the end of next year.

Liability Protections. Providing liability protections for corporations as a result of the pandemic has been a serious stumbling block between the Senate and the House. The framework had originally suggested that there was “[a]greement in principle as the basis for good faith negotiations” but it faltered.

Cost

The total price tag of the bill is estimated to be $2.3 trillion, but again, that includes funding of about $1.4 trillion in “catchall” government spending.

Once More With Feeling

This is a summary only: remember, it’s a huge bill. Keep checking in for updated coverage.

Estimated reading time: 2 minutes

Remember the flurry of Internal Revenue Service (IRS) notices that got sent out in mid-November? Many of those notices – especially those notices of intent to levy (CP504) – were sent out without regard for individual taxpayer circumstances, with tax practitioners reporting receipt by taxpayers previously marked as CNC (currently not collectible), taxpayers with pending offers, and taxpayers who have already resolved liabilities.

Many practitioners – like me – responded by reaching out to Congress and demanding action.

It appears that Congress heard our pleas. A group of senators have sent a letter to the IRS, asking for some relief.

The letter, which is addressed to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig, begins, “The pandemic has created unique challenges for the Internal Revenue Service (IRS), tax practitioners, and taxpayers alike. It is clear that Americans need a concerted effort by the IRS to work in good faith with them to address the challenges facing taxpayers during this pandemic.”

The letter urges that “more action is needed to alleviate the burdens placed on taxpayers and their advisors.”

That action includes a COVID-related First Time Abatement option; written guidance that would allow IRS representatives to grant reasonable cause and COVID-related abatement requests; and a dedicated telephone number to request COVID-related penalty relief.

And that mail backlog – the one that stands at 3 million pieces? The senators asked the IRS to consider stopping sending correspondence until the backlog is resolved.

“Taxpayers expect fair treatment from their government, and the current unwillingness to provide an expedited process for taxpayers and their advisors to request pandemic-specific relief places an undue burden on them,” the senators advised.

Fourteen senators signed the letter. They are:

Kevin Cramer (R-ND)
John Kennedy (R-LA)
Dianne Feinstein (D-CA)
Kyrsten Sinema (D-AZ)
Ted Cruz (R-TX)
Mark Warner (D-VA)
Benjamin L. Cardin (D-MD)
Jeanne Shaheen (D-NH)
Thom Tillis (R-NC)
John Boozman (R-AR)
M. Michael Rounds (R-SD)
Joni K. Ernst (R-IA)
Catherine Cortez Masto (D-NV)
Thomas R. Carper (D-DE)

(Yep, I’m wondering why literally dozens of other senators didn’t seem think this was a priority.)

You can read the letter here (downloads as a PDF).

Congress is making some progress on a COVID relief package. If it advances, it would be the first significant stimulus action from Congress since the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act was signed into law in March of 2020.

A second relief bill was introduced and passed in the House in May of 2020; the bill, known as the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, was not taken up by the Senate with Senate Majority Leader Mitch McConnell (R-KY) suggested that the timing was not right. In July of 2020, the Senate unveiled a series of proposals referred to as the Health, Economic Assistance, Liability Protection, and Schools Act, or HEALS Act, which also did not move forward.

And then, mostly crickets.

Now, a bipartisan group has rolled out a package that has garnered some interest. It’s called the Bipartisan Emergency COVID Relief Act of 2020 and is a considerably slimmed down version of the CARES Act 2.0.

What’s In.

Here’s a look at some of what’s in the bill so far:

Unemployment Assistance. The bill would extend the pandemic unemployment insurance programs – those created under the CARES Act – by 16 weeks. Those are set to expire in December and would, under the new relief package, now expire in April of 2021. The bill would also extend the federal supplement unemployment insurance benefits – but at half the former rate (just $300 per week) – from the end of December to April.

Paycheck Protection Program & Small Business Assistance. The bill would expand the PPP program to allow some businesses to receive an additional loan (eligibility would be limited to small businesses with 300 or fewer employees that have sustained a 30% revenue loss in any quarter of 2020). Also included? Loan simplification for those borrowing $150,000 or less, and – you know you were waiting for it – business expenses paid for with the proceeds of PPP loans would be tax deductible.

Transportation Funding. The bill would extend the Payroll Support Program (PSP), which provides loans to the struggling airline industry, through March 31, 2021. The proposal would also provide additional funding for airports, motorcoach and bus companies (including school bus companies), public transit systems, and Amtrak.

Health Care, Including Vaccine Development & Distribution. The bill would send more more to hospitals and health care providers, and provide more money for testing. The proposal would also provide $6 million in grants and funding for vaccine development, infrastructure, and distribution.

Education Funding. The proposal would send $82 billion in additional funding to schools, including private schools.

Student Loan Extensions. The bill would extend federal student loan forbearance provisions through April 30, 2021 (those are current set to expire on January 31, 2021).

Rental Assistance. The package would extend the eviction moratorium until January 31, 2021 (it’s currently set to expire on December 31, 2020).

Food Assistance. The agreement would increase food stamp benefits (Supplemental Nutrition Assistance Program, or SNAP) by 15% for four months. It would also expand the Pandemic-EBT program to cover families with children in child care, and provide support for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to allow participants to purchase additional fruit and vegetables. Seniors are also included, with funding for senior nutrition services, including Meals on Wheels, and the Commodity Supplemental Food Program to provide food boxes to more senior citizens.

Post Office. The proposal makes clear that the $10 billion of aid initially earmarked for the USPS in the CARES Act would not require repayment.

Excess Funds. The bill would end the controversy over excess funds from the CARES Act, re-allocating unused Treasury direct loans and excess funds from Federal Reserve facilities, and reinvesting unspent balances of funds remaining from the PPP back into the PPP.

Liability Protections. Providing liability protections for corporations as a result of the pandemic has been a serious stumbling block between the Senate and the House. The framework suggests that there is “[a]greement in principle as the basis for good faith negotiations.”

What’s Out

And here’s what’s not in the bill:

Stimulus Checks. Despite calls for another round of stimulus checks, there is no plan to issue a second stimulus check. On Tuesday, Treasury Secretary Steven Mnuchin proposed including stimulus checks worth $600 in the relief package, but in return, further reducing unemployment benefits.

CARES Act corrections/clarifications on stimulus checks. Earlier this year, the House hoped to see some language which would replace the term “dependent” with “qualifying dependent” for purposes of the first stimulus check. Other corrections included coding payments to prevent offsets and making clear that representative payees could receive checks. There’s no indication that those corrections/clarifications will be included in this most recent relief package.

Cost

The total price tag of the bill is estimated to be $908 billion.

#TaxTwitter has been abuzz about a flurry of notices of intent to levy (CP504) sent to taxpayers this week. The notices appear to have been sent out without regard for individual taxpayers circumstances with tax practitioners reporting receipt by taxpayers previously marked as CNC (currently not collectible), taxpayers with pending offers, and taxpayers who have already resolved liabilities.

Typically, when you receive a notice like this, the best plan is to reach out to the Internal Revenue Service (IRS) even if you aren’t sure that you know. Taxpayers are directed to call the number on the notice (for a CP504, that’s 1.800.829.8374); alternatively, some practitioners opt to dial in to the Practitioner Priority Service (PPS).

I tried both. For two days. More often than not, I received a recording advising that “due to extremely high call volume,” no one could answer. Then, a disconnect.

I finally got a real person this morning after waiting on hold for some time. Unfortunately, they advised that they could not assist because all of the levy notices were above $25,000, which would require a transfer to a different department. I was advised that there is no direct number, so if I was disconnected, I’d have to call back. You can already guess what happened.

Several hours later, I still hadn’t reached a resolution for my clients. I was irritable and I tweeted about it. Again (since I started complaining Tuesday).

I was in good company: many of my fellow tax professionals were also spending hours on hold without being able to resolve their clients’ issues (most of which seem to be related to these forms CP504).

But then I saw responses from two Brians (Brian Wolfe, CPA, and Brian Streig, CPA):

And I was a little embarrassed, to be honest. Because that’s a drum that I normally beat: it’s important to let Congress know when IRS falls down. And it’s just as important to remember that the lack of service has everything to do with a lack of resources: IRS funding has declined by more than 20% since 2010 (you can check out the numbers in graph form from the Tax Policy Center here).

Before you cheer, let me explain why that’s not a good thing. Those cuts affect taxpayer services. It means longer wait times on phones for taxpayers and tax practitioners to resolve tax issues and results in impossibly long delays in opening mail and processing requests. It means that victims of identity theft will wait longer for relief (including refunds). It means that it’s harder to dispute a tax liability. It means that it’s more difficult to resolve disputes and controversies, including Innocent Spouse matters. It means that you may not get a timely tax refund or stimulus check.

And without resources, there’s no incentive for IRS to focus audit efforts on big dollars. As the agency points out, “[t]he typical audits for higher-income taxpayers involve at least three different tax years, often include related entities, and routinely take years to resolve.” By comparison, “audits of low- and moderate-income tax returns take less time to resolve.”

(You can check out audit stats and more in the 2019 IRS Data Book (downloads as a PDF).)

I represent taxpayers on all ends of the income spectrum. And I prefer a well-staffed IRS for every single one of those taxpayers. I want to be able to get information about the process, stop ill-timed collections, and negotiate the best deals for my clients as quickly and efficiently as possible. That’s the best result for all: IRS can close those cases and my clients can sleep at night.

So, that’s why when I saw those tweets, I was taken slightly aback. I constantly advocate for a funded IRS – because that benefits taxpayers and this time, I hadn’t. So, I stopped whining for a bit and like my colleagues, reached out to my Senators and my Representatives.

I was subsequently asked to share my letter, so I am (with some language explaining who I am and where I live/work in their districts redacted or lightly edited) below:

Dear Senator Casey:

My name is Kelly Phillips Erb and I am tax attorney.

I have a good working relationship with the IRS, and was even on the dais at the National Press Club for the Tax Commissioner’s Annual Speech a few years back at the request of then Commissioner John Koskinen. I say that to offer context, since I know that the sense is that tax practitioners are generally adversary to IRS. While I certainly want to protect and advocate for my taxpayers, I also have respect for those at IRS.

That said, the current level of service provided to tax practitioners and taxpayers is appalling. The mail is not being opened and lien and levy notices are being generated, alarming taxpayers that their property may be seized. In some cases, these notices would be administratively barred due to pending Offers, etc., but the IRS is simply not opening the mail.

Checks and wires are being lost and misdirected. Some clients have called in a panic because they are receiving bills for tax liabilities that have already been paid.

The most frustrating part is that you cannot reach anyone at IRS to resolve these issues. For example, if you call the number on the levy notices (1.800.829.8374) and scroll through the menu, you will eventually hear a message that you cannot reach an agent because of “extremely high call volume.” The line then disconnects.
The Practitioner Priority Service (PPS) is no better. If you can get through (most recently, it took me two days), you will be disconnected.

It’s important to understand that many of these notices are time-sensitive and the inability to reach anyone – by mail or phone – has real consequences. Taxpayers can have their property – including bank accounts – seized. Wages and Social Security payments can be garnished. These are terrible results in the best of times, but are especially difficult in the middle of a pandemic when many people are out of work.

I know that it’s popular to complain about the IRS, but that’s not what I am doing. I am asking you to focus attention on the agency that collects our revenue and keeps the doors open and the lights on in government. Those lost checks are lost opportunities and lost dollars. Inaccurate or late notices are efficient and cost not only taxpayers time and money directly, but also waste government resources. And trying to collect from those who simply do not have the money at this time is not just illogical, it’s cruel.

I ask that you take immediate action:

  • Ask the IRS to stop sending out notices without opening the mail;
  • Insist that more phone and other representatives be made available to taxpayers and practitioners;
  • Direct that levy and other notices receive automatic extensions; and
  • Finally, please adequately fund the IRS.

Thank you for your consideration.

Sincerely,

Kelly Phillips Erb

Hopefully, that gives you some direction/inspiration for your own letters. You’re welcome to use some or all of my language in your own letter (except for my name, of course, because that would just be weird).

And if you’re looking for the best folks to send your letters to, you can find your Representative (with contact info) here. You can find your Senators (with contact info) here.

Our schools stopped in-person instruction due to the pandemic in March. Within a few weeks, it was evident that we were going to have to make some changes. My daughter, who was studying for the German AP exam, was encouraged to practice at home. Since I could – at best – only order a Kolsch and a pretzel in German, it was clear that we would need some outside help. Ditto for Calculus: even though I love math and yes, was on the math team in school (insert geek joke of your choice here), I could not, years later, be reliably depended on to calculate the derivative of an indefinite integral without a refresher. We eventually signed up with an online tutoring service to help fill in the blanks.

Several weeks later, I started receiving questions from parents in similar situations. Many asked whether parents could claim a tax deduction for virtual tutors and other resources to help out with school during COVID. My answer, each time: unfortunately, no.

When the questions kept coming (What about extra computers? Can I deduct the cost of faster internet?), I reached out to my representatives in Congress. I asked Sens. Pat Toomey (R-PA) and Bob Casey, Jr (D-PA) whether there might be any tax measures specifically geared to parents who were paying more out of pocket as a result of virtual education.

Sen. Toomey’s office assured me that more funding was on the way for schools, writing, “These funds should be focused on ensuring students and faculty are safely back in the classroom this fall. From the experience this past spring, every parent knows that virtual education is no substitute for in-person instruction.” But his office did not provide any input on tax measures tailored to those parents who could not send their children back to school.

Sen. Casey’s office, however, directed me to S. 4488, the Tax Relief for Families Suffering from Government-Mandated Shutdowns Act of 2020. The bill was introduced by Sen. Rand Paul (R-KY) and would provide tax deductions for certain business expenses, dependent care expenses, and elementary school education expenses, including virtual and at-home learning. It was referred to the Senate Committee on Finance, where it currently sits.

You can read the bill here (downloads as a PDF). It’s not that long as tax proposals go (just eight pages), but to save you from even more online reading, here’s a quick summary: 

  • Deductions for Unreimbursed Business Expenses. The bill would essentially undo part of the Tax Cuts and Jobs Act (TCJA) and again allow tax deductions for unreimbursed business expenses. That’s been a hot topic for many employees this year. Currently, you cannot deduct home office expenses if you are an employee; the same is true for other unreimbursed business expenses. It’s one of several changes intended to be absorbed or mitigated by the doubling of the standard deduction. But now that those costs are going up, not all taxpayers are happy with the change.
  • New Deduction for Household & Dependent Care Services. The bill would introduce a new deduction (a new section 224 in chapter 1, subchapter B) for household and dependent care services in an amount equal to employment-related expenses during the year. There would be no double-dipping allowed, so if the costs were already covered under a dependent care assistance programs or already claimed as part of the dependent care credit, the deduction would be disallowed.
  • Deduction for Elementary & Secondary School Expenses. The bill would also create a deduction for eligible “tuition and related expenses” plus certain “qualified expenses” up to $1,000. “Tuition and related expenses” would include expenses for tuition, fees, academic tutoring, and special needs services in connection with the enrollment or attendance at an elementary or secondary school student at a public, private, or religious school, as well as boarding expenses. “Qualified expenses” would include expenses for books, supplies, and other equipment connected to enrollment or attendance at an elementary or secondary school student at a public, private, or religious school, as well as expenses for the purchase of any computer technology or equipment or internet access and related services used by you, your spouse or your dependent “during any of the years such dependent is in school.” The term schools would also include home schools.
  • Deduction for Internet Expenses. The bill would also allow a specific deduction under section 62 (so, that means it applies to business expenses) for access to the internet. But don’t get too excited: it’s not to exceed $500 for the year.

There’s a lot to sort out in this bill, and I think it’s safe to say that it won’t sail through as-is. But it is evidence that Congress is clearly aware that the pandemic has changed not only the way we do business with our employers, but also the way that we run our homes. Certain expenses – like faster internet and academic tutoring – are clear consequences of remote schools and novel work arrangements. And pullbacks on other deductions – like the home office deduction – that didn’t attract much attention when they went into effect beginning in 2018, are now viewed by many as too restrictive.

Whether those things should change, and whether tax breaks are the way to do it, aren’t settled. But what is clear is that the questions are being asked – and Congress is paying attention.

(You can read more about working from home here.)

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