Tuesday June 2, 2020
Second Coronavirus Relief Bill
Senate Majority Leader Mitch McConnell indicated the Senate will consider the new coronavirus relief bill the week of March 16. If the House and Senate agree on a second coronavirus relief bill, it could be enacted very quickly.
There are four main provisions for the potential coronavirus relief bill. These have been released to the media, but there is still discussion underway about the final bill language. The four areas are free testing, paid sick leave, food assistance and a payroll tax reduction.
- Free Testing – The federal government would offer free virus testing for all Americans. This would also include those who do not have health insurance. Members of both parties recognize that the coronavirus problem can be contained only if there is widespread and readily-available testing.
- Paid Sick Leave – All employers would be required to provide up to two weeks of paid sick leave. While many Americans have sick leave at work, some individuals are gig workers or self-employed and do not have two weeks of sick leave benefits. Because the coronavirus quarantine is 14 days, it is important to provide sick leave to all individuals so those with actual or potential infections can complete the required two-week quarantine.
- Food Assistance – The bill envisions assistance for meals for seniors, student lunches and food banks. Nonprofits and military reserve units are already providing food assistance to individuals who are quarantined.
- Payroll Tax Reduction – The President has stated he desires to enact a payroll tax reduction between March and the end of 2020. Some Members of Congress are concerned that the payroll tax reduction would not provide a substantial benefit to low income workers. The House and Senate negotiators will be discussing whether or not to include a payroll tax reduction in the bill.
High Deductible Health Plans May Cover Coronavirus
In Notice 2020-15; 2020-14 I.R.B. 1, the Service provided guidance that enables High Deductible Health Plans (HDHPs) to cover testing and healthcare for the novel coronavirus (COVID–19).
The federal government desires to remove any barriers for testing and treatment of the coronavirus. The Notice acknowledges there is a public health emergency and it is important to reduce any delays or financial disincentives. Individuals covered by HDHPs must have ready access to both testing and treatment for the coronavirus.
The Notice enables individuals who are covered by these plans to still fund a health savings account (HSA) even though the plan now may provide coronavirus testing or treatment without a deductible.
The general function of an HDHP is to encourage individuals to cover part of their health care expenses through an HSA. However, the government has created exceptions for some preventive treatment provided by an HDHP.
The Service stated, “Due to the unprecedented public health emergency posed by COVID–19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID–19, a health plan that otherwise satisfies the requirements to be an HDHP under Section 233(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care, services and items purchased related to testing for and treatment of COVID–19 prior to the satisfaction of the applicable minimum deductible."
The Service is clear that the HDHPs may provide for testing and treatment of coronavirus with no deductibles.
Editor's Note: The federal government is making a major effort to enable health care professionals to respond to the coronavirus emergency. Dr. Anthony Fauci, Chief of the National Institute of Allergy and Infectious Diseases, stated this week to Congress that there needs to be increased testing capability. The outbreak of coronavirus in South Korea has been limited through the practice of testing over 20,000 individuals per day. Dr. Fauci notes that the USA is only testing about 1,000 individuals per day. There must be capability as soon as possible to test at a much higher level.
Nonprofits Ask for Coronavirus Tax Relief
On March 11, a coalition of 30 nonprofits sent a letter to Congress and sought assistance for their efforts to limit the damage of the coronavirus. Congress is discussing the passage of additional relief bills for coronavirus. The nonprofits explain why it will be important to include them in future coronavirus relief legislation.
- Nonprofits are Significant Employers - Nonprofits employ over 12 million individuals. They have total annual payrolls of approximately $826 billion. As a major employer, the nonprofit sector should be included in any relief bills passed by Congress.
- Payroll Taxes - There have been discussions underway in Washington about tax relief strategies. Because nonprofits do not pay income taxes, they would only benefit if the tax relief is in the form of reduced payroll taxes.
- Modest Size and Resources - The majority of nonprofits are local and community-based organizations. Few of them have endowments and many are living with minimal reserves. About one half of nonprofits have an estimated one month of cash reserves. The letter explains that 97% of nonprofits have budgets under $5 million and 88% have budgets less than $500,000.
- Nonprofit Services for Coronavirus Victims - Nonprofits provide many services to coronavirus patients. Meals on Wheels serves many coronavirus patients who are currently quarantined. According to the letter sent to Congress, there are "nonprofit food banks, shelters, domestic violence services, houses of worship, early care and education centers, after-school facilities and more that are being called on to feed, house, and care for people whose lives have been disrupted by closures, job loss and sickness."
- Declining Economy - Both for-profits and nonprofits face economic headwinds because there are many gatherings that are now prohibited. Concert hall performances, theater productions, educational programs, fundraising events and many other cultural and community events have been canceled. The elimination of these events will create funding challenges for nonprofits.
- Service Orientation - Nonprofits are the "economy’s shock absorber when crisis hits." Gifts to nonprofits are essential for supporting people in need throughout the nation. The vast majority of funding for nonprofits is quickly recycled to improve the lives of individuals in local communities.
Applicable Federal Rate of 1.8% for March -- Rev. Rul. 2020-6; 2020-11 IRB 1 (18 Feb 2020)
The IRS has announced the Applicable Federal Rate (AFR) for March of 2020. The AFR under Section 7520 for the month of March is 1.8%. The rates for February of 2.2% or January of 2.0% 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.