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HILL TAX BRIEFING: Virus Panic Prompts Trump Call for Tax Relief

March 12, 2020, 10:04 AM

The government is planning a series of tax relief measures as the spread of the new coronavirus worsens in the U.S., some of which President Donald Trump laid out last night.

Trump said he will instruct the Treasury Department to defer tax payments—without interest or penalty—for certain individuals and businesses. He also called on Congress to provide “immediate payroll tax relief,” a policy option that has so far been met with a tepid response from lawmakers on both sides.

“Hopefully they will consider this very strongly,” Trump said.

The moves come as lawmakers and Treasury were facing mounting pressure to act. Yesterday Sens. Bob Menendez (D-N.J.) and Patty Murray (D-Wash.) asked the IRS to be flexible with the April 15 filing deadline, a request Minority Leader Chuck Schumer (D-N.Y.) backed.

Extending the filing date isn’t an easy feat. It’s a headache for the IRS, states, and tax software providers that have already programmed their systems to use the April 15 date as the end of the tax season, said Mark Steber, senior vice president and chief tax officer at Jackson Hewitt Tax Service Inc.

“It’s not as simple as it might sound,” he said.

That date is also used in leasing and employment contracts, Steber said. Jackson Hewitt, for example, has a contract with Walmart Inc. to offer tax assistance services in thousands of store locations that expires on April 15, he said.

The government needs to consider the confusion an extension would create for taxpayers, who are used to the current filing deadline, said Robert Kerr, executive vice president of the National Association of Enrolled Agents. He also noted that it’s possible for individuals to get an automatic six-month extension to file by filling out Form 4868 without the government doing anything.

“We already have a solution to this problem,” he said.

House Vote: The House is expected to vote today on a bill that would provide emergency paid sick leave, broader unemployment benefits, and free testing for the virus. The Senate isn’t likely to act before its week-long break.

Unless the White House would support the measure, the Senate is unlikely to take it up, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said yesterday.

House Ways and Means Committee Chairman Richard Neal (D-Mass.) said yesterday that while he has discussed the bill with Mnuchin, they didn’t discuss its cost.

Stimulus Efforts: A payroll tax cut, something the administration has floated, would be an ineffective stimulus measure to combat the virus’s economic fallout, according to the Institute on Taxation and Economic Policy.

Cutting the payroll tax—a levy imposed on employees, employers, and self-employed individuals to fund Social Security—would primarily benefit higher earners, according to an analysis from the group. Specifically, half the boost from a 2 percentage point decrease would go to the top 20% of earners, and nearly a quarter of the bottom quintile wouldn’t see any benefit.

“The president’s proposal is pretty clear. He wants to see cash in the hands of workers, and our small businesses to weather the storm,” House Ways and Means Committee ranking member Kevin Brady (R-Texas) said yesterday.

Tourism’s Ask: The tourism industry is asking lawmakers for three items as it weathers the downturn in travel: an employee retention tax credit, help for employees who need time off, and deferred tax payments for the first or second quarter.

The decline in international visitors and the cancellation of U.S. events is having a “crippling effect” on the industry, said Tori Emerson Barnes, executive vice president of public affairs and policy at the U.S. Travel Association.

Banking Sector: The pandemic comes as banks are going through a major change in the way they calculate the reserves they record to cover future losses on loans. A new accounting standard, the current expected credit losses standard, went into effect at the beginning of this year.

“Banks are scrambling right now; trying to figure this out on the run is tough,” said Fred Cannon, director of research at Keefe, Bruyette & Woods. “We expect many, but not necessarily all of them, to take into account a diminished prospect for the economy in their quarterly number.”

Read more from Nicola M. White.

Census Impact: The virus could also hinder door-to-door visits tied to the 2020 Census. In that scenario, the census should be extended, said House Oversight and Reform Committee Chairwoman Carolyn Maloney (D-N.Y.). It’s set to begin today on a national scale.

The outcome of the count could change opportunity zones.

Trump Nominee

The Senate Finance Committee yesterday signed off on Trump’s nominee to be assistant Treasury secretary for financial markets.

The panel OK’d Kipp Kranbuhl along a party-line vote. He’s currently principal deputy assistant secretary for financial markets. Read more.

Property Tax Bribes

ProPublica reported yesterday that the Trump Organization paid bribes to lower its property tax bills on several New York City properties in the 1980s and 1990s.

Two employees of the assessor’s office told the news outlet that they received envelopes of cash from middlemen representing various property owners. Three others said they had indirect knowledge of the payments, according to ProPublica.

“To be clear, at no time did the Trump Organization or any of its employees or principals ever pay anyone for the purpose of unlawfully obtaining a lower tax valuation,” Alan Garten, the Trump Organization’s chief legal officer, told ProPublica.

Beyond the Beltway

GILTI Bill Falls: A Utah effort to shield foreign income from tax has fallen apart without a final vote in the state Senate. The bill (S.B. 53) would have meant taxpayers could subtract a new category of federal foreign income from their adjusted gross income.

Today is the last day of the state legislature’s 2020 session. The 2017 tax overhaul created global intangible low-taxed income, which was meant to discourage companies from shifting income to controlled foreign corporations in low-tax countries.

Howard Stephenson, president of the Utah Taxpayers Association, which strongly supported the bill, said it died as senators became increasingly hesitant about tax cuts.

“The bill is basically dead because the Senate decided they weren’t going to address taxes this session,” Stephenson said.

Read more from Tripp Baltz.

Tax Conformity: Indiana lawmakers have moved forward a plan to bring the state tax code in line with federal rules, and the measure is headed to the governor.

The changes will decrease state revenue by roughly $7.9 million in fiscal year 2020 and $6 million in 2021.

Alex Ebert has more.

—With assistance from Allyson Versprille, Kaustuv Basu, Erik Wasson, Courtney Rozen, and Lydia O’Neal.

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Sony Kassam at skassam1@bloombergtax.com

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