Phase 4 Stimulus Bill-HEROES Act

The HEROES Act current provisions:

• Additonal Recovery Rebates that would be similar design to the recovery rebates in the CARES Act
  • dependent amount from $500 to $1,200 (up to three dependents).
  • extended to adult dependents (such as college students and disabled adults)
  • The Recovery Rebates will be protected from garnishment and would no longer be subject to reduction for past-due child support
  • allows those with any dependents to claim the $500 originally allocated to qualifying children.
• Expansion of both the Child Tax Credit (CTC)
  • making the CTC fully refundable and increasing its value to $3,000 ($3,600 for qualifying children under 6)
  • The CTC would be advanced on a monthly basis to help families with children through the crisis.
• Expansion of the Earned Income Tax Credit (EITC)
  • the earned income amount and phaseout maximum amounts are raised, increasing the benefit of the EITC for low-income individuals.
• The Child and Dependent Care Tax Credit (CDCTC) is also made fully refundable for tax year 2020 and the maximum credit is increased from $3,000 to $6,000 for a qualifying individual.
• Flexible Spending Arrangements (FSAs) for health expenses would be more flexible
  • longer grace periods,
  • permitting changes in elections,
  • and increasing permitted carryovers.
• A new above-the-line deduction for first responders
• A new 50 percent employer-side refundable Social Security payroll tax credit (30 percent for nonessential employees) for pandemic-related employee expenses paid by employers (up to $5,000 per calendar quarter).
• New above-the-line deductions up to $500 are created for first responders purchasing supplies and equipment and for COVID-19 front-line employees
• Individual taxpayers in higher-tax states would see a benefit through the elimination of the state and local tax deduction (SALT) limitation for the 2020 and 2021 tax years.
• Expands the Employee Retention Tax Credit (ERTC) established in the CARES Act by increasing the refundable payroll tax credit from 50 percent of qualifying wages to 80 percent, increasing the per-employee limitation to $15,000 per calendar quarter ($45,000 per year), and phasing in the credit for firms with gross receipts for the year that are between 50 percent and 90 percent of prior levels.
• Extends the covered period from June 30 to December 31, 2020 for PPP borrowers
• Eliminates the Treasury-instituted 75% rule to 60%.
• Allows PPP borrowers to also take advantage of the Employer Retention Tax Credit.
• PPP borrowers can deduct related expenses from their taxable income after receiving PPP loan forgiveness.
• Employers may claim a credit for 50 percent of qualified fixed expenses (matching what is covered in the PPP) up to expenses paid in calendar year 2019: $50,000, or the greater of 25 percent of wages paid or 6.25 percent of 2019 gross receipts.
• Self-employed individuals may claim a business interruption credit up to 90 percent of qualified self-employment income up to $45,000, reduced by income earned over $60,000 single ($120,000 joint) in 2020 and claimed against income loss that exceeds a 10 percent reduction from 2019 to 2020.
• Business would not be able to apply NOLs to tax years prior to 2018 as provided in the CARES Act.
• Reinstates the excess business loss limitation, meaning that individuals could not offset non-business income using pass-through business losses over $250,000 single ($500,000 joint).
• Extension of Federal Pandemic Unemployment Compensation benefits (including the $600/per week federal benefit) provided through the CARES Act through January 31, 2021.
• Provides 13 additional weeks of unemployment benefits for those who have exhausted state benefits through that period, which could extend the benefit to as late as March 31, 2021.

These are the initial provisions of the House bill.  This is currently under negotions and is expected to change before it is finally approved by the Senate.