Significant Challenges Remain In Congress: A Dec. 11 Shutdown And COVID Relief

At the top of Congress’ must-do list is reaching an agreement on government funding and preventing a government shutdown when federal funding lapses on December 11.

While few anticipate a repeat of the 35-day impasse that shuttered government from December 22, 2018 until January 25, 2019, pressure continues to build on Congress – in the midst of the COVID-19 pandemic – to address federal funding and provide additional COVID relief.

Congressional leaders are considering combining the two, possibly attaching short-term COVID relief to an end of year Omnibus funding package.

The U.S. House and Senate Appropriations Committees reached agreement on 12 common subcommittee allocations on November 24, just two days before Thanksgiving.

In addition to resolving major differences over funding, appropriators also face challenges this year coming to agreement over public policy concerns including the pandemic, social justice priorities, gun rights, abortion, and other pivotal issues.

While Congress remains committed to completing all 12 funding measures, a Continuing Resolution (CR) may be necessary to extend funding into the new calendar year for one or more of the annual bills where an impasse over policy or funding proves too challenging to reach consensus.

Late Thursday, House Majority Leader Steny Hoyer (D-MD) set a midnight Saturday deadline for negotiators to reach a funding agreement and avoid a partial government shutdown this week.

Meanwhile, last Tuesday a group of bipartisan Senators and House members injected new life into coronavirus relief legislation discussions.

Championed by Sens. Joe Manchin (D-WV), Susan Collins (R-ME) and others in both chambers, the bipartisan group released a $908 billion proposal, which would create short-term aid through the winter months with an expectation that President-elect Biden will pursue a larger package early in 2021.

The bipartisan working group is aiming to attach this proposal to an end of year government funding package before December 11.

House Speaker Nancy Pelosi (D-CA); Senate Minority Leader Chuck Schumer (D-NY); President-elect Biden; and Senator John Thune (R-SD), the number two Republican in Senate leadership, expressed support for the proposal.

Retreating from the $2.4 trillion pandemic relief package they had been pushing before the election, Pelosi and Schumer said, “we and others will offer improvements, but the need to act is immediate and we believe that with good-faith negotiations we could come to an agreement.”

The emergence of the bipartisan proposal places pressure on Senate Majority Leader Mitch McConnell (R-KY) who previously circulated a $500 billion proposal, which was immediately rejected by Senate Democrats.

The new coronavirus relief proposal includes $160 billion for state and local governments and would create a $300-per-week unemployment benefit for 18 weeks, as well as $31 billion for vaccine distribution and $28 billion to reestablish the paycheck protection program (PPP).

The framework also provides “short term Federal protection from Coronavirus related lawsuits with the purpose of giving states time to develop their own response.”

EMA signed a letter last week urging Congress to approve adequate liability protection.

However, the proposal does not include another round of $1,200 stimulus checks – a widely popular program created in previous COVID-19 stimulus legislation.

Senator Portman’s (R-OH) “Healthy Workplace Tax Credit” is not in the $900 billion bipartisan proposal, however, EMA continues to push for its inclusion in a letter recently sent to Congress.

Within funding to continue the PPP, the bipartisan framework allows for PPP “deductibility.”

While specifics are not yet available, the proposal could take the form of The Small Business Expense Protection Act, which would create a tax deduction for small businesses who used a forgiven PPP loan for eligible expenses.

Hundreds of trade associations are urging Congress to pass legislation before the end of the year that would make the Paycheck Protection Program loans tax-free.

The IRS interpretation that businesses cannot deduct expenses paid for with the forgivable loans would result in “a surprise tax increase of up to 37 percent on small businesses when they file their taxes for 2020,” over 100 industry groups, including Energy Marketers of America, argued in a letter Wednesday.

The regional and national associations urged Congressional leaders and President-elect Biden to support the inclusion of a healthy workplace tax credit in the next coronavirus relief package.

The organizations outlined their recommendations and emphasized how a tax credit would ensure that businesses and nonprofits, who are struggling financially, can meet unexpected expenses related to COVID-19.

As the year ends, PPP deductibility is quickly moving to the forefront of discussions, however, Senate Republicans’ targeted proposal released December 1 does not specifically address PPP deductibility.

Importantly, still largely unknown, is whether President Trump, as he faces the end of his presidency, will sign an Omnibus funding package in excess of $1 trillion, a defense authorization bill, and/or coronavirus relief legislation in excess of the Senate Republican proposal.

This lack of certainty creates additional challenges for congressional leaders as they work around the clock to finalize critical end of year legislation and fiscal year 2021 spending decisions.

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