Opening Salvo in Phase IV Negotiations Passes House of Representatives
Last Friday, the House of Representatives passed by a vote of 208-199 a Democratic-backed coronavirus economic recovery bill, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. House Democratic leadership drafted the legislation without Republican input and unveiled it earlier in the week, leading Republican leadership to dismiss it as a partisan exercise.
While the HEROES Act will not be taken up by the Senate, the bill serves as an important opening salvo by House Speaker Nancy Pelosi as negotiations continue between the House, Senate and the Trump administration on a “Phase IV” economic stimulus bill.
Cost estimates for the legislation are in excess of $3 trillion, and the bill includes provisions favored by Democratic lawmakers that are unlikely to remain in a final product. The bill would provide for a second round of payments to families, enhance the earned income tax credit, make the child tax credit fully refundable for 2020, and provide other assistance through expanded tax credits. State and local governments would receive more than $900 billion in assistance. The bill would also suspend the current limitation on the state and local income tax (SALT) deduction for 2020 and 2021.
Importantly for commercial real estate, the bill would limit several tax changes made recently in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including a relaxing of net operating loss limitations imposed by the tax reform bill in 2017.
Republican senators have expressed a desire not to rush the passage of a Phase IV bill, instead preferring to give the economic recovery legislation that has already been passed some time to work. Senate Majority Leader Mitch McConnell has not set a timeframe for passage of Phase IV legislation, and has insisted that any legislation must include liability protection for businesses that reopen.