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House Approves Phase 4 COVID-19 Relief Legislation
On May 15, the House passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), a $3 trillion “phase 4” bill providing supplemental funding and other provisions in response to the COVID-19 pandemic.
The bill now goes to the Senate where it is not expected to advance anytime soon. Senate leaders have noted they are focused on the implementation of previous COVID-19 legislation, and don’t see a need for further legislation in the near term. While the Senate is expected to eventually consider legislation, such legislation will likely be substantially different from the HEROES Act, and focus on Republican priorities, such as further funding for the Paycheck Protection Program and liability protection businesses reopening as states begin to lift pandemic public health related policies.
The HEROES Act includes substantial economic relief to individuals, state and local governments, and to a lesser extent, businesses. It also includes additional public health resources to address pandemics needs, among many other provisions.
Despite the best efforts of low-income housing tax credit (LIHTC) advocates, the HEROES Act does not include any LIHTC provisions, such establishing a minimum 4 percent rate for tax-exempt private activity bond-financed LIHTC properties, or lowering the 50 percent test threshold for tax-exempt bond financed properties. However, advocates are continuing to press Congress, especially the Senate, to address these proposals to address the immediate pandemic needs in the pending legislation. Given the likely longer timeline for the next bill as compared to previous COVID-19 legislation, there is still a chance that LIHTC provisions could be added.
See below for selected bill highlights.
State and Local Government Relief
The HEROES Act would provide almost $1 trillion of relief to state and local governments to assist with added costs associated with the public health emergency amid significant revenue shortfalls.
More Economic Relief Payments
The HEROES Act would authorize an additional $1,200 in relief payments to individuals and $2,400 to joint filers, which starts phasing out at $75,000 annual income for individuals and $150,000 for couples. Families would receive an additional $1,200 for each dependent up to three dependents. Dependents over 17 would become eligible for the $500 per child sent to families under the CARES Act, allowing college students and adult dependents to receive catch-up payments.
The bill would allow any individual with a taxpayer identification number (TIN) to receive a payment. Payments are now available only to those with Social Security numbers. Making payments to those with TINs faces significant resistance from Republicans and is unlikely to survive in any final legislation.
Paycheck Protection Program Changes
The HEROES Act extends the Paycheck Protection Program (PPP) through the end of 2020 rather than ending June 30, enabling banks and other lenders to make PPP loans through the end of the year, and employers to reinstate headcount reductions, which occurred between February 15 and April 26. If an employer is unable to rehire a pre-Feb. 15, 2020 employee or demonstrate inability to find a replacement, the loan forgiveness amount is not reduced due to a headcount reduction. Reversing the position of IRS Notice 2020-32, bill would allow expenses paid for with PPP loan funds and forgiven to be deductible. Furthermore, interest on any debt obligation incurred before the loan, would be a forgivable expense. The bill does not provide for additional funding, but specifies that funds from cancelled PPP loans is to be used to extend PPP loans to businesses with 10 or fewer employees.
Selected Tax Provisions
Employee Retention Credit. The HEROES Act would increase the employee retention tax credit from 50 percent to 80 percent of qualified wages and increase the per-employee limit to $15,000, as well as redefine a large employer as a business with more than 1,500 employees, instead of more than 100 employees. More wages would qualify because all wages paid by a smaller employer qualify for the credit, while large employers can claim wages paid only when an employee isn’t providing services.
Net Operating Losses. The HEROES Act includes several provisions related to net operating losses (NOLs), which were modified in the CARES Act to allow carrybacks of up to five years. The HEROES Act would reinstate and make permanent the limitation on excess business losses for passthrough businesses and restrict carrybacks to tax years after Jan. 1, 2018.
Repeal State and Local Tax (SALT) Deduction Limitation. The HEROES Act would repeal the $10,000 state and local tax deduction limitation enacted in 2017 for calendar years 2020 and 2021. This provision is fiercely opposed by Republicans.
Supplemental Housing and Community Development Appropriations
The HEROES Act also includes about $200 billion for affordable housing and community development programs. See below for a summary.
U.S. Department of Housing and Urban Development
- $100 billion for a new Emergency Rental Assistance program, distributed to the recipients of HUD’s Emergency Solutions Grant (ESG) program with some significant revisions, to assist renters who are at risk of being homeless or unable to maintain housing stability
- $11.5 billion in Homeless Assistance Grants, in addition to the $100 billion for emergency rental assistance through ESG
- $14 billion for Tenant-Based Rental Assistance, including $10 billion in Housing Choice Voucher funding for people experiencing or at risk of homelessness and survivors of domestic violence
- $5 billion in Community Development Block Grants
- $2 billion in public housing operating funding
- $1.2 billion to provide staffing, services and other resources for Section 202 housing for the elderly program, including $500 million in additional funding for elderly housing
- $750 million in Project-Based Rental Assistance
- $200 million for Section 811 housing for persons with disabilities
U.S. Department of the Treasury
- $75 billion to create a Homeowners Assistance Fund at the state, local, and tribal levels to help homeowners with mortgage payments, insurance, property taxes and other costs
- $1 billion for Treasury’s Community Development Financial Institutions Fund to respond to the COVID-19 impact in distressed communities
U.S. Department of Agriculture
- $309 million for rural rental assistance
Eviction and Forbearance provisions
Notably, the HEROES Act also amends the eviction moratorium and multifamily forbearance provisions in the CARES Act. The bill extends the CARES Act eviction moratorium to all renters, and applies the moratorium retroactively to the CARES Act effective date. Furthermore, the bill extends the time period for the moratorium to March 2021. The legislation also extends the multifamily property forbearance to apply to 1-4 unit properties as well as all multifamily properties—not just those with federally backed mortgages or federal assistance. Moreover, the HEROES Act aligns the forbearance period to that of the eviction moratorium (12 months).