On May 15, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, a $3 trillion stimulus package that would provide additional relief during the ongoing COVID-19 pandemic. This relief is provided in several ways such as additional funding for state and local governments, additional stimulus checks for individuals, additional funding for COVID-19 testing, and emergency funding for the U.S. Postal Service. As of now there are no immediate plans for the HEROES Act to be considered by the Senate. This article briefly summarizes some of the proposed tax-related provisions of the HEROES Act.

SBA Paycheck Protection Program (PPP)

The HEROES Act makes several proposed changes to the PPP loans. First, the HEROES Act allows deductions for expenses paid with proceeds from the PPP loans which are ultimately forgiven. Additionally, it would allow for continuing deferral of payroll taxes even after the loan is forgiven. It would also extend the covered period for loan forgiveness from 8 to 24 weeks.

Payroll Credit

The HEROES Act proposes the addition of a new 50% refundable payroll tax credit for small businesses (no more than 1,500 employees and no more than $41.5M in gross receipts) to use for certain qualifying costs like rent, utilities, and mortgage payments. This credit would apply for expenses paid or incurred from March 12, 2020 to December 31, 2020.

State Tax Deduction

For the 2020 and 2021 tax years the HEROES Act eliminates the $10,000 cap on the state and local tax paid itemized deduction for individuals.

NOL Carryback

The HEROES Act proposes a limitation on the NOL carrybacks allowed under the CARES Act. This limitation would prevent taxpayers from carrying NOLs back to any pre-2018 tax years, effectively only allowing for carryback of 2019 and future NOLs.

Additional Stimulus Checks

Under the HEROES Act individuals would receive a second $1,200 check as well as $1,200 for any dependents (previously $500 under the first round of stimulus checks). The HEROES Act would also include dependents over the age of 17 including full-time students below the age of 24.

State and Local Government Funding

The HEROES Act includes almost $1 trillion of funding for state and local governments. These funds are intended to be used for the payment of essential workers.

Unemployment Benefits Extended

The HEROES Act proposes an extension of the weekly $600 federal unemployment payments through January 31, 2021. These payments are currently set to expire on July 31, 2020.

We will keep you updated as news of this legislation develops. Please visit our Coronavirus Resources & Information Center for more news and updates.