House Passes HEROES Act; Not Expected to Pass Senate

2020-05-19T20:32:09+00:00

On Friday, May 15th, the House voted to approve a $3 trillion coronavirus relief bill, the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act (the Act). The vote was split, 208-199, largely along party lines. Republicans have come out against the Act, and it is widely accepted that the Act will not pass the Senate. The White House has also indicated that it would veto the bill. However, the passage of the Act by the House signals the first step in negotiations between the House, Senate, and the Trump administration on the next coronavirus relief bill.

The Act is incredibly lengthy, with a total of 1,815 pages, and is generally believed to contain a Democrat “wish list” of provisions. While many of these provisions are not likely to make it into the final negotiated bill, some provisions may come out of negotiations with very few changes. Here’s a high-level look at some of the tax provisions contained in the Act:

  • More Stimulus Payments – the bill would provide another round of stimulus payments, keeping the amount at $1,200 per person, but increasing payments for children to $1,200 and providing that this increased payment would be available for all dependents. This fixes the issue we saw in the CARES Act where many college students who were still claimed as dependents were not entitled to stimulus payments.
  • Reinstatement of Excess Business Loss Limitations – the Tax Cuts and Jobs Act (TCJA) of 2017 created a limit on the amount of business losses that non-corporate taxpayers could deduct. That limitation was removed by the CARES Act. The HEROES Act attempts to reinstate the limitation.
  • Expansion of the Employee Retention Tax Credit – this is one provision that many believe could make it in to the final bill. Under the HEROES Act, the credit would be increased from 50% to 80%, and the cap would be increased from $10,000 to $45,000.
  • Elimination of State and Local Tax Deduction Limit – the $10,000 SALT deduction limitation was first introduced by the TCJA in 2017. The HEROES Act would eliminate the deduction limit for 2020 and 2021.
  • Elimination of Required Minimum Distributions for 2019 – since most people have already taken their 2019 RMD’s, the bill would allow for a 60-day rollover to allow individuals to put the funds back into the plan.
  • Deduction of Expenses Generating PPP Loan Forgiveness – under the CARES Act, PPP loan forgiveness income is tax free. However, the IRS issued guidance that business expenses used in calculating loan forgiveness (payroll, rent, interest, and utilities) are non-deductible.  The Act would override the IRS ruling making these expenses tax deductible.

Please contact your HBK advisor if you would like to discuss what these provisions may mean to you. We will continue to monitor tax legislation and provide updates as necessary.

About the Author(s)

Amy is a Principal and the Chair of the Tax Advisory Group at HBK CPAs & Consultants. The Tax Advisory Group is a group of highly specialized professionals who provide tax training to our team members, oversee compliance with tax policies in order to mitigate risk to the firm, and provide tax planning and consulting services for our clients.

Amy specializes in estate, gift, trust, individual, and nonprofit taxation. She is skilled at researching complicated tax issues, consulting on complex estate plans, and providing guidance for our clients to ensure they are in compliance with their tax filing responsibilities.

Amy enjoys sharing her knowledge and passion for tax planning with clients and other professionals. She is a frequent speaker at bar association and estate planning council events, and has authored many articles discussing tax planning techniques and compliance issues.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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