After months of negotiation and wrangling over additional coronavirus (COVID-19) pandemic relief legislation, House and Senate leaders struck a bipartisan funding deal over the weekend.
The massive year-end deal [PDF 8.43 MB] (5,593 pages) includes over $900 billion for various COVID relief programs, government funding of $1.4 trillion, as well as a bevy of tax provisions.
Included in the tax provisions are a number of items directly related to COVID relief such as a provision allowing recipients of Paycheck Protection Program (PPP) loans to deduct associated costs. Similarly, the bill includes an extension and significant expansion of the employee retention credit originally enacted in the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act).
But the tax provisions in the legislation go far beyond simply COVID-19-related items. They address, among other things, extending (or in some cases making permanent) dozens of temporary tax measures. For example, the legislation would make the railroad maintenance tax credit permanent, would extend for five years the CFC look-though rule for controlled foreign corporations, and would extend and expand tax credits for renewable energy. The bill also includes significant other tax provisions (including changes relating to the low-income housing tax credit rate and to the depreciation of residential rental property), as well as provisions for disasters other than COVID-19.
Read a summary [PDF 246 KB], of the legislation provided by the House Ways and Means Committee.
Read a revenue estimate prepared by the Joint Committee on Taxation: JCX-24-20
The bill is expected to pass both the House and the Senate.
Tax provisions in the bill are included in Division N of the bill (the “COVID-Related Tax Relief Act”) as well as in Division EE, which addresses expiring provisions, miscellaneous tax provisions, and tax provisions for disasters unrelated to COVID-19.
Subtitle B of Title II of Division N of the bill includes the “COVID-related Tax Relief Act of 2020.” Some of the tax provisions in this part of the bill are:
Additional COVID-19 related measures (including extension of, and modifications to, the employee retention credit) are included in Division EE of the bill—the Taxpayer Certainty and Disaster Tax Relief Act. Division EE of the bill also addresses expiring provisions unrelated to COVID, miscellaneous tax matters, and tax relief for disasters other than COVID-19.
Title I of Division EE of the bill would make permanent certain expiring tax incentives and would provide temporary extensions (for varying periods of time) for other expiring provisions. Almost all of the Tax Code sections being extended currently are scheduled to expire at the end of 2020.
Provisions that would be made permanent include:
Provisions that would be extended for five years (i.e., through 2025) include:
Provisions that would be extended for three years (through the end of 2023) include:
Provisions that would be extended for one year include:
Assuming the bill is enacted, there would be a smaller number of provisions scheduled to expire at the end of 2021 than otherwise would be the case. Further, many of the provisions that the bill would make permanent or would extend for multiple years have broad and deep support.
Nonetheless, under the 2017 tax law (Pub. L. No. 115-97)—the law that is also referred to as the “Tax Cuts and Jobs Act” (TCJA)—amortization of research and experimentation expenses is scheduled to begin in 2022. The amount of business interest expense that can be deducted also is scheduled to be reduced, in effect, for many businesses at that same time. Potential efforts in 2021 or shortly thereafter to postpone or eliminate both of these scheduled changes could drive future legislation and possibly provide a vehicle for other extenders to be addressed as well.
Title II of Division EE of the bill contains a number of miscellaneous tax provisions, as well as some temporary provisions relating to COVID-19 relief. Provisions in this part of the bill include:
Title III of Division EE includes a number of tax provisions directed at disaster relief. These provisions, however, do not apply to areas subject only to the ongoing COVID-19 emergency proclamation. This part of the bill would:
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