House passes $3 trillion stimulus package

In an effort to further support the economy during the pandemic closures, the House of Representatives passed the fourth COVID-19-related stimulus package, the Health and Economic Recovery Omnibus Emergency Solutions (Heroes) Act. The $3 trillion bill contains multiple spending measures designed to encourage employers to retain employees, provide additional economic impact payments to individual taxpayers and their families, extend the weekly unemployment compensation payments through January 2021, and further modify tax and benefit changes from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Tax Cuts and Jobs Act.

The centerpiece of the plan is nearly $1 trillion of aid to state and local governments, which, it seems clear, will require financial assistance to get through this crisis. Some in the Senate may resist state and local aid, but this appears to be the issue that will drive negotiations forward since the current bill is unlikely to pass the Senate as is. Many of the tax items included in this bill could find their way into final legislation.

Reports indicate it may be June or later before any compromise is reached on a new stimulus package. While talks continue between the administration and lawmakers, there appears to be no rush in pushing another piece of legislation through as we saw with the first three (and one-half). However, on May 13, Federal Reserve Chairman Jerome Powell urged Congress to consider another ambitious fiscal rescue package, warning that the economy may need additional support to avoid a cycle of business failures, job losses and bankruptcies. The combination of further business closures, rising unemployment claims and the financial condition of the states may pressure Congress to reach a compromise.

Improvements to employee retention credit (ERC)

• The applicable percentage of qualified wages reimbursed increases to 80% from 50%.
• The gross receipts requirement is modified to allow for a partial credit with a decline on gross receipts between 10% and 50% compared to same calendar quarter of previous year.
• The wage limit per employee rises to $15,000 per quarter; limited to $45,000 per calendar year.
• Large employer redefined to mean greater than 1,500 full-time employees and gross receipts of greater than $41.5 million in 2019.
• Health plan expenses can be considered qualified wages even when no other wages are paid to the employee.