As the number of U.S. coronavirus cases continues to climb and one-fifth of the nation is now sheltering at home, Congress is planning to enact a third relief bill. The coronavirus stimulus bill is under discussion and Senate leaders hope to pass it the week of March 23.
Treasury Secretary Steven Mnuchin spoke to reporters this week and stated that the bill will be very expensive. He noted, "This is a big number. This is a very unique situation in this economy."
While negotiations are still in process, checks to individuals may be distributed as early as April 2020. The cost of the stimulus bill could reach $1 trillion.
Sen. Chuck Grassley (R–IA) is leading the Senate panel drafting the specific provisions. Grassley noted, "We are now working on a bold and comprehensive effort to provide additional relief to Americans and our economy in this challenging time."
Speaking on the Senate floor on March 19, Grassley explained multiple benefits that are under discussion for the new coronavirus relief bill.
- Checks — Up to $1,200 for individuals and $2,400 for couples.
- Tax Payments — Both filing of returns and tax payments would be deferred from April 15 to July 15, 2020.
- Quarterly Payments — The quarterly estimated tax payment deadline will be delayed for 180 days.
- Charitable Gifts — There will be no limit on the deductions for charitable gifts given to coronavirus relief organizations. There also will be a new "above the line" charitable deduction.
This third coronavirus relief bill combines direct payments to individuals, deferral of tax payments and increased charitable giving. A coalition of nonprofits has been advocating a universal charitable deduction. The coalition believes that a charitable deduction for nonitemizers will increase charitable giving. Sen. Grassley appears to be open to a modest amount of above–the–line deductions for charitable gifts. The final bill provisions should be available within the next week.
Families First Coronavirus Response Act
On March 18, Congress and the President enacted the Families First Coronavirus Response Act (H.R. 6201). The bill is designed to provide tax credits for small and medium-sized businesses. These tax credits will fund paid sick leave and family and medical leave.
- Employees — The act applies only to companies with fewer than 500 employees. Congress determined that larger employers would already have paid sick leave programs available and they do not qualify for any of the business credits.
- Business-Related Unemployment — The paid sick leave and family leave provisions do not apply if a business fails or there is a reduction in staff.
- Quarantined —The qualified employee must be quarantined due to an order by a doctor or government official. A caregiver for a quarantined employee may also receive two weeks of paid sick leave.
- Sick Leave — An employer must provide up to two weeks of paid leave for full-time employees who are quarantined or seeking care for the coronavirus. The paid leave must be directed by a doctor or government official. The two weeks of pay to the employee will not exceed $511 per day or $5,110 for the two-week period.
- Child Care — If an employee cannot work from home, but must stay home to care for children who are no longer in school or do not have child care, the employee may receive up to $200 per day paid sick leave for a two-week period.
- Family and Medical Leave — An employee may receive up to 12 weeks of leave if needed to care for a child due to the closure of a school or lack of child care. After the first two weeks of paid sick leave, the employee will receive the lesser of two-thirds of pay or $200 per day. The maximum employer payment would be $10,000.
- Notice — Employers are required to notify employees of this coronavirus paid sick leave or family and medical leave through an appropriate posted notice.
- Tax Credits — Employers will qualify for a quarterly credit against the 6.2% Social Security tax. If the sick leave payments, up to $511 per day or family leave payments of $200 per day, exceed the 6.2% Social Security tax, the employer will receive a refund from Treasury.
Tax Filing and Payments Delayed
On March 13, 2020, the President issued an emergency order and authorized the Secretary of the Treasury to "provide relief from tax deadlines to Americans who have been adversely affected by the COVID–19 emergency."
Treasury Secretary Steven Mnuchin responded by publishing Notice 2020-17 and changing the required tax payments date from April 15 to July 15, 2020.
After the Notice was published, several Senators and Representatives received communications from constituents who are tax preparers. As these tax preparers pointed out, taxpayers will be confused by having a requirement to file on April 15, but permission to defer payment of taxes until July 15, 2020.
On March 19, 2020, House Ways and Means Chairman Richard Neal (D–MA) sent a letter to Secretary Mnuchin and asked for both the filing and tax payment deadlines to be July 15, 2020. Neal stated, "Although Treasury's decision provided welcome relief for the federal income tax payment deadline, I believe that taxpayers require additional relief. I respectfully request that you immediately defer the deadline for all filing and tax payment obligations until July 15, 2020."
Sen. John Thune (R-SD) and Sen. Chuck Grassley (R-IA) also indicated their forthcoming coronavirus stimulus bill will require both filing and tax payments to be due on July 15, 2020.
On March 20, 2020, Sec. Mnuchin stated that both the filing date and payment of taxes will be deferred until July 15, 2020. The estimated amount of taxes that will be deferred for this period is $300 billion.
The filing relief does have limits. It excludes high–income corporations and individuals. Corporations with tax payments over $10 million and individuals with tax payments over $1 million must still file and pay by April 15, 2020.
Applicable Federal Rate of 1.2% for April -- Rev. Rul. 2020-9; 2020-15 IRB 1 (18 Mar 2020)
The IRS has announced the Applicable Federal Rate (AFR) for April of 2020. The AFR under Section 7520 for the month of April is 1.2%. The rates for March of 1.8% or February of 2.2% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2020, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return.