Coronavirus Economic Update, March 20, 2020

Coronavirus Economic Update, March 20, 2020

Mar 20, 2020

Client Alert

Brownstein Client Alert, March 20, 2020

With Phases One and Two of the economic stimulus now complete, Senate Republicans made the opening move in Phase Three negotiations with the introduction of the CARES Act. House Democrats are preparing to unveil their own Phase Three package, while other lawmakers have already begun preliminary Phase Four discussions. This memo outlines the latest developments in Washington, and is updated daily with the most recent news on top.


What to Watch Today

  • Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) will meet with around two dozen senators to discuss the CARES Act.
  • Treasury Secretary Steven Mnuchin, National Economic Council Director Larry Kudlow and White House Director of Legislative Affairs Eric Ueland will be on Capitol Hill for Phase Three negotiations.
  • White House Coronavirus Task Force press briefing at 11:45 a.m.
  • President Trump hosts a call with small businesses at 3:45 p.m.

Latest Developments

Congress

  • Senate Republicans introduce the CARES Act (S.3548)
    • Senate Majority Leader Mitch McConnell (R-KY) wants an agreement in principle by the end of the day, with final approval from the Senate on March 23.
  • Congressional coronavirus proposals:
    • Lawmakers call for tax filing deadline extension.
    • Senate Democrats release small business assistance proposal.
    • Sen. Jeanne Shaheen (D-NH) suggests a tax break for donations to charitable organizations.
    • Sen. Rick Scott (R-FL ) issues a proposal.  
  • House will not reconvene until Senate passes Phase Three deal.

Trump Administration

  • Treasury Department suspends tax filing and payment deadline to July 15, 2019.

Private Sector and Other Developments

  • A group of clean energy organizations sent a letter to Congress advocating for climate-conscious provisions.
  • The National Governors Association released a set of suggestions.

Congress

Phase Three Senate Proposal

On March 19, Senate Republicans introduced the Coronavirus Aid, Relief and Economic Security (CARESAct (S.3548). Brownstein has analyzed the following provisions in-depth:

  • Division ASmall Business Interruption Loans
  • Division BRelief for Individuals, Families and Businesses
    • Title I—Rebates and Other Individual Provisions
    • Title II—Business Provisions
  • Division CAssistance to Severely Distressed Sectors of the U.S. Economy
    • Title I—Economic Stabilization
    • Title II—Aviation Excise Taxes
  • Division D—Health Care Response
    • Title III—Labor Provisions

Click here for our breakdown of the new proposal.

Phase Three House Proposal

House Democrats held a conference call on March 16, but few details were leaked. According to reports, House Ways and Means Committee Chair Richard Neal (D-MA) advocated for more Unemployment Insurance assistance and means-tested cash payments. On this later point, however, there was uncertainty among lawmakers as to what the limit should be for the direct payments—suggestions of $50,000 and $75,000 were floated.

Other House lawmakers are working on legislation as well. House Select Committee on the Climate Crisis Chair Kathy Castor (D-FL), for example, has emphasized the importance of including climate-conscious provisions in the bill. She suggested that the bill should contain green energy tax credits and grid modernization that secures “the long-term success of solar, wind and other clean energy projects.” In addition to Castor, Reps. Gerry Connolly (D-VA), Paul Tonko (D-NY) and Doris Matsui (D-CA)—who sit on the Sustainable Energy and Environment Coalition—urged for the inclusion of climate provisions in the agreement.  

Other House Democrats are advocating for an expansion of refundable tax credits, particularly the Earned Income Tax Credit.

House Appropriations Chair Nita Lowey (D-NY) is also working on a package, but little is known about her efforts. For more information on the House process for Phase Three, see below.

Negotiations Outlook

Process: Senate Democrats and Republicans began meeting this morning to begin negotiations. We expect administration officials to be present as talks get underway this morning and continue to play a key role as the small groups/committees negotiate specifics within their jurisdiction.

Negotiations are expected to be led by the chairs and ranking members of the respective authorizing committees, plus a few select members, some of whom are included below:

  • Senate Banking Committee: Sens. Mike Crapo (R-ID), Pat Toomey (R-PA) and Sherrod Brown (D-OH)
  • Senate Health, Education, Labor and Pension Committee: Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA)
  • Senate Finance Committee: Sens. Chuck Grassley (R-IA), Rob Portman (ROH) and Ron Wyden (D-OR)
  • Senate Small Business Committee: Sens. Marco Rubio (R-FL), Susan Collins (R-ME), Ben Cardin (D-MD) and Jeanne Shaheen (D-NH)
  • Senate Commerce Committee: Sens. Roger Wicker (R-MS) and Maria Cantwell (D-WA)

Reactions: Senate Democrats were surprised that, in their view, the Republican bill does little to help address the massive health care crisis facing the country. Hospitals and health care workers, they believe, are in need of a lot of help. Democrats are also concerned that there is so little assistance for workers and they think more needs to be done to help workers, especially those who were laid off or had hours cut. Democrats are expected to focus on including stronger Unemployment Insurance provisions, the Murray-Gillibrand paid sick leave bill and a Marshall Plan for the health care industry to be able to respond to the crisis. Small business protections and loan forbearance are also high on the list. There’s also some desire to increase state and local aid.

Speaker Nancy Pelosi (D-CA) has called on Senate Majority Leader Mitch McConnell (R-KY) to engage in a “four corners” negotiation—a process that would include close coordination between her, House Minority Leader Kevin McCarthy (R-CA), McConnell and Senate Minority Leader Chuck Schumer (D-NY). However, despite having played a smaller role until this point, McConnell has insisted he will negotiate directly with Schumer during the upcoming Phase Three negotiations.

In light of this, Pelosi is appearing to rethink her negotiation tactic. She has instructed her committee chairs to provide her with legislative proposals, which she will compile this week, followed by a potential floor vote next week. There are also reports that a series of smaller, more targeted pieces of legislation may move more expeditiously through Congress, as opposed to a single large package. Finally, Pelosi is also reportedly considering an approach whereby the House would wait for the Senate to first pass legislation before making any changes.

Negotiations will continue today and through the weekend. The next vote on economic stimulus legislation is expected sometime next week. McConnell said on March 20 he wants an “agreement in principle” by the end of the day, with final Senate passage by March 23.

For our previous coverage of Phase Three negotiations, click here.

Phase Four

With Phase Three negotiations officially underway, hints of a possible Phase Four package have begun to emerge. A longtime, yet elusive, priority of Congress and the Trump administration has been a comprehensive infrastructure proposal. Thus far, details regarding total spending and corresponding offsets have caused infrastructure discussions to fall short of an agreement, but that could change amidst the coronavirus crisis.

Sen. Richard Shelby (R-AL) has indicated Phase Four negotiations have already begun, saying he is interested in pushing for the inclusion of an infrastructure package that would provide long-term growth for the United States.

Senate Environment and Public Works Committee Chair John Barrasso (R-WY), whose infrastructure proposal was endorsed by President Trump during the 2020 State of the Union address, has been similarly interested in pursuing infrastructure legislation. However, Phase Four negotiations remain in the early stages, making it difficult to determine which priorities may gain traction.

Other Congressional Proposals

  • Small Business Relief. A group of Senate Democrats released a proposal to support small businesses during the coronavirus outbreak. The COVID-19 Relief for Small Businesses Act would provide recover grants, expand small business lending programs and expedite federal government contracting, among other provisions. Read the full proposal here.
  • Assisting Charitable Organizations. Sen. Jeanne Shaheen (D-NH) introduced the Supporting Charitable Institutions Act, which would provide a 24% credit against contributions to charitable organizations, up to $6,000 for individuals and $8,000 for joint returns.
  • Scott Priorities. Sen. Rick Scott (R-FL) suggested in a Fox Business op-ed that lawmakers expand Unemployment Insurance programs and delay payments on mortgages, rents and utilities for individuals making less than $75,000 and businesses with fewer than 250 employees.

For other congressional proposals under consideration, click here.


Trump Administration

White House Actions

On March 20, Treasury Secretary Steven Mnuchin announced that, at the request of President Trump, the tax filing and payment deadline would be delayed three months from April 15 to July 15, 2020. The change applies to all taxpayers and businesses, who will not be subject to interest fees or penalties.

For previous coverage on the Trump administration’s approach, click here.


Private Sector

Clean Energy Organizations

Groups representing wind, solar, hydroelectric and energy storage companies urged Congress to provide emergency provisions to help to compensate for the slowdown of construction and to pass a new tax credit for energy storage facilities. The organizations specifically asked for an “extension of start construction and safe harbor deadlines to qualify for renewable tax credits to accommodate pandemic-related disruptions, and for renewable credits to be available for direct pay to facilitate their monetization. We also encourage enactment of a direct pay tax credit for stand-alone energy storage.” Signing the letter was the American Council on Renewable Energy, the American Wind Energy Association, the Energy Storage Association, the National Hydropower Association, the Renewable Energy Buyers Alliance and the Solar Energy Industries Association.

National Governors Association

The National Governors Association (NGA) released a list of provisions supported by the organization: 

  • dedicating at least 50 percent of supplemental funding (including direct funding and waiver request) to states;
  • increasing accessibility of the protective medical devices and development of in-need medical devices, such as ventilators;
  • Title 32 authorization to provide governors flexibility with National Guard use;
  • guidance on the implementation of the Defense Production Act; and
  • implementing an extended timeline for the completion of both the Census and REAL ID transition.

Other Private Sector Positions

For additional perspectives from the private sector, click here.

For additional information or assistance with a particular issue, please contact a member of the Brownstein Tax Policy Group.

Click here to read more Brownstein alerts on the legal issues the coronavirus threat raises for businesses.

This document is intended to provide you with general information regarding economic updates related to coronavirus. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.

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