On Monday, Senate Republicans released a series of bills that comprise the HEALS Act, their version of the Phase 4 COVID-19 bill, as a counteroffer to House Democrats' HEROES Act. Although touted as the Republican bill, in fact, this was released piecemeal and some Republicans have opposed various provisions. The bill text, which spans 778 pages (compared to the 1,815 page of the HEROES Act) provides $1 trillion in additional COVID-19 relief. The HEALS Act faces strong opposition from Democrats and some Republicans, and is viewed as an “opening offer.” Thus, many anticipate that negotiations can begin in earnest now that both sides have released initial bill text. As a result, we felt it would be helpful to provide a high-level comparison of some of the more notable provisions as it may provide insight into the potential scope of a final bipartisan relief package.

Payroll Provisions

• The employee retention credit (ERC), which was included in the CARES Act (and is discussed in greater detail here) is proposed to be significantly broadened (similar to the HEROES Act). There are numerous proposed changes (most of which are similar to the HEROES Act). 
  • Changes similar to the HEROES Act 
    • Allowing a taxpayer that receives a Paycheck Protection Program (PPP) loan continued qualification for the ERC.
    • Increasing the amount of qualified wages that can be paid to an employee and the percentage of such wages that are eligible for the ERC.
    • Clarifying that qualified group health plan expenses can be treated as qualified wages even if no other wages are paid to an employee.
    • Expanding the scope of employers that are eligible for the ERC for all wages paid during a period in which the employer’s trade or business is fully or partially suspended due to a governmental order or has a significant decline in gross receipts during a governmental shutdown, or calendar quarter with significantly lower gross receipts.
  • Changes beyond the HEROES Act
    • Lowering the amount of the reduction in gross receipts required to qualify as an eligible employer from a 50-percent decline to a 25-percent decline compared to the same calendar quarter in the previous year. In contrast, the HEROES Act provided a phased-in partial credit for employers whose gross receipts declined by 10% to 50% from the previous year.
• While the HEROES Act provided for several new payroll tax credits, the HEALS Act provides for the new Safe and Healthy Workplace Tax Credit:
  • A 50% refundable payroll tax credit for an employer’s “qualified employee protection expenses,” such as testing, personal protective equipment, and cleaning supplies with certain caps based on the number of employees.

Paycheck Protection Program (PPP) Loans

• Congress would appropriate $190 billion to the continuation of the PPP loan program, but only for businesses with 300 or fewer employees with revenues down 50% or more due to the COVID-19 pandemic. These businesses would be able to take out a second loan equal to 2.5 times total monthly payroll costs up to $2 million, and these loans would be forgivable if at least 60% of the loan is used to cover payroll costs.
• The HEALS Act does not provide that a taxpayer is allowed a deduction for expenses paid from the proceeds of a PPP loan that is forgiven.

Proposed Changes for Business 

• Temporarily allow a full deduction for business meals.
• Provide a set of uniform procedures for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders. Through 2024, employees who perform employment duties in multiple states would be generally subject to income tax only in their state of residence and in any states in which they are present and performing employment duties for more than 90-days during the 2020 calendar year and more than 30-days during 2021-2024 calendar years. 

Proposed Changes for Individuals 

Both the HEALS Act and the HEROES Act provide for another round of economic recovery payments, although the amounts are different.

A&M Taxand Says

The discussion above covers only some of the tax-related provisions of the proposed HEALS Act.  As Democrats and Republicans dive into negotiations to pass a relief package prior to the congressional recess scheduled for August 10, we felt it was important to highlight some of the more significant provisions and contrast them to the HEROES Act to help our clients monitor the potential new legislation and plan accordingly. While there is nothing that is certain, in places where there is an agreement, there is an increased likelihood that the provision will be included in the final bill. However, as noted above, some Republicans are also strongly opposed to certain provisions reflected in the current Senate bill and there are numerous substantial differences between the relief packages. In light of the differences between the two proposals, it is important that clients work with their trusted advisors to navigate the landscape during this uncertain time. A&M will continue to monitor the evolving approach to COVID-19 relief on Capitol Hill and within the Administration, and will provide timely updates on new developments, which will be found here.