Tax Provisions for COVID-19 Relief: Subtitle G—Budget Reconciliation Legislative Recommendations Relating to Promoting Economic Security (R46680, Version 1)
Summary
A Congressional Research Service report, R46680, dated February 11, 2021, summarizing the tax provisions in Subtitle G of the budget reconciliation recommendations that House Ways and Means Committee Chairman Richard E. Neal released on February 8, 2021. The proposals would provide a one-time direct payment of $1,400 per person, temporarily expand the child tax credit with part of it paid in 2021, and expand the earned income tax credit for workers without qualifying children. They would also extend the paid sick and family leave credits and the employee retention tax credit, enhance the health insurance premium tax credit, and exclude advances against Economic Injury Disaster Loans that are not repaid and Restaurant Revitalization Fund grants from income. The report lists the COVID-19 laws already enacted and points to Joint Committee on Taxation revenue estimates.
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Tax Provisions for COVID-19 Relief: Subtitle
G—Budget Reconciliation Legislative
Recommendations Relating to Promoting
Economic Security
February 11, 2021
Congressional Research Service
https://crsreports.congress.gov
R46680
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Contents
Tables
Table 1. COVID-19 Tax Relief—“Budget Reconciliation Legislative Recommendations
Relating to Promoting Economic Security” ...................................................................... 3
Table 2. Estimated Cost of Subtitle G Revenue Provisions of the Budget Reconciliation
Legislative Recommendations ...................................................................................... 12
Contacts
Author Information ....................................................................................................... 15
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
he 117th Congress is considering Coronavirus Disease 2019 (COVID-19)-related relief and
T economic stimulus legislation. On February 8, 2021, House Ways and Means Committee
Chairman Richard E. Neal released nine legislative proposals to be considered under the
budget reconciliation instructions. 1 This report summarizes the tax provisions in Subtitle G,
“Budget Reconciliation Legislative Recommendations Relating to Promoting Economic
Security.”
The current proposed COVID-19 tax relief would
provide a one-time direct payment of $1,400 per person to eligible households;
temporarily expand the child tax credit for low- and moderate-income families,
with a portion of the credit issued in 2021 before income taxes are filed;
temporarily expand the earned income tax credit (EITC) for workers without
qualifying children;
temporarily expand the child and dependent care credit for most taxpayers and
temporarily expand the exclusion for child and dependent care expenses;
modify and extend the payroll tax credits for employer-provided paid sick and
paid family leave;
further extend the employee retention tax credit;
temporarily enhance benefits and/or expand eligibility for the health insurance
premium tax credit (PTC);
repeal a provision that allows worldwide allocation of interest for the foreign tax
credit limit, decreasing foreign tax credits in some cases; and
provide that advances against Economic Injury Disaster Loans that are not repaid
and grants under the Restaurant Revitalization Fund will be excluded from
income and deductions for associated expenses will be allowed.
Current consideration of COVID-19-related tax relief follows the enactment of other laws
addressing the COVID-19 crisis: (1) the Coronavirus Preparedness and Response Supplemental
Appropriations Act, 2020 (P.L. 116-123); (2) the Families First Coronavirus Response Act
(FFCRA; P.L. 116-127); (3) the Coronavirus Aid, Relief, and Economic Security (CARES) Act
(P.L. 116-136);2 (4) the Paycheck Protection Program and Health Care Enhancement Act (P.L.
116-139); and (5) the Consolidated Appropriations Act, 2021 (P.L. 116-260). 3
Other pandemic-related tax policy proposals were considered in the 116 th Congress, but not
enacted. In the House, tax relief was also considered in the Heroes Act (H.R. 8406, adopted as
H.R. 925; H.R. 6800). 4 Legislation introduced in the Senate (the American Workers, Families,
and Employers Assistance Act [S. 4318]; the Supporting America’s Restaurant Workers Act [S.
1 For information on budget reconciliation, see CRS Report R44058, The Budget Reconciliation Process: Stages of
Consideration, by Megan S. Lynch and James V. Saturno. For information on the budget resolution for 2021, which
contains reconciliation directives, see CRS Report R46675, S.Con.Res. 5: The Budget Resolution for FY2021 , by
Megan S. Lynch and James V. Saturno.
2 For more on tax provisions in the CARES Act, see CRS Report R46279, The Coronavirus Aid, Relief, and Economic
Security (CARES) Act—Tax Relief for Individuals and Businesses, coordinated by Molly F. Sherlock.
3
For more information on the tax provisions in this legislation, see CRS Report R46649, The COVID-Related Tax
Relief Act of 2020 and Other COVID-Related Tax Provisions in P.L. 116-260, by Molly F. Sherlock et al.
4 For more information on tax provisions in the Heroes Act, see CRS Report R46358, Heroes Act: Revenue Provisions,
coordinated by Molly F. Sherlock.
Congressional Research Service 1
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
4319]; and the Restoring Critical Supply Chains and Intellectual Property Act [S. 4324]) would
have provided tax relief intended to alleviate the economic effects of the COVID-19 pandemic. 5
Table 1 of this report summarizes the tax provisions in Subtitle G, “Budget Reconciliation
Legislative Recommendations Relating to Promoting Economic Security,” and provides links to
CRS resources containing additional information. Joint Committee on Taxation (JCT) revenue
estimates for these provisions are included in Table 2.
Additional Resources
Joint Committee on Taxation, “Estimated Budgetary Effects Of The Revenue
Provisions Of The Chairman’s Amendment In The Nature Of A Substitute To The
Budget Reconciliation Legislative Recommendations, Scheduled For Markup By
The House Committee On Ways And Means On February 10, 2021,” JCX-9-21,
February 9, 2021, at https://www.jct.gov/publications/2021/jcx-9-21/.
Joint Committee on Taxation, “Description Of The Budget Reconciliation
Legislative Recommendations Relating To Prompting Economic Security,” JCX-
3-21, February 8, 2021, at https://www.jct.gov/publications/2021/jcx-3-21/.
5 For more information on the Senate proposals, see CRS Report R46470, The American Workers, Families, and
Employers Assistance Act (S. 4318): Title II—Revenue Provisions and Other “HEALS Act” Tax Provisions,
coordinated by Molly F. Sherlock.
Congressional Research Service 2
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Table 1. COVID-19 Tax Relief—“Budget Reconciliation Legislative
Recommendations Relating to Promoting Economic Security”
Section Title Description CRS Resources
Subtitle G—Promoting Economic Security
Part 1—2021 Recovery Rebates to Individuals
Recovery Rebates to Would enact a third round of direct payments for For background, see
Individuals individuals and households (“stimulus checks”). These CRS Report R46415,
payments would be structured as refundable tax credits CARES Act (P.L. 116-136)
against 2021 income taxes, but would be issued (and Direct Payments:
hence received) in 2021, as opposed to 2022 (when Resources and Experts,
2021 income tax returns will be filed). Amount and coordinated by Margot
eligibility for the advanced credit would generally be L. Crandall-Hollick.
based on information from 2020 income tax returns
(or 2019 returns, if 2020 returns have not been filed CRS Insight IN11576,
when the advanced credit is initially issued). For COVID-19 and Direct
households whose payment was based on 2019 income Payments to Individuals:
data, and who would be eligible to receive a larger Comparison of the Second
payment based on 2020 data, the IRS would be directed Round of “Stimulus
to issue a supplementary payment (a “top up”) within Checks” in P.L. 116-260 to
90 days of the tax filing deadline or September 1, 2021, the First Round in the
whichever date is earlier. CARES Act (P.L. 116-136),
by Margot L. Crandall-
Payments would generally be issued per household and
Hollick.
equal the sum of $1,400 per eligible individual ($2,800
for married joint filers) and $1,400 for each eligible CRS Insight IN11575,
dependent (including older children and adult COVID-19 and Direct
dependents). For each individual who died before Payments to Individuals:
January 1, 2021, the payment amount would be Frequently Asked
reduced from $1,400 to $0. Questions (FAQs) About
the Second Round of
The payment would phase out ratably (i.e.,
“Stimulus Checks” in P.L.
proportionally) between $75,000 and $100,000 for
116-260, by Margot L.
single filers, $112,500 and $150,000 for head of
Crandall-Hollick.
household filers, and $150,000 and $200,000 for
married joint filers. The larger the total credit amount, CRS Insight IN11580,
the faster the payment would phase out using this COVID-19 and Direct
method. Payments: Summary of the
CASH Act (H.R. 9051,
Eligible individuals and dependents would generally
116th Congress)
need to have a social security number (SSN) to receive
Modifications to “Stimulus
the payment. (Adoption taxpayer ID numbers would
Checks”, by Margot L.
also be valid for dependents.) The maximum payment
Crandall-Hollick.
amount ($1,400) would be reduced to $0 for each
otherwise eligible individual or qualifying dependent
who does not have an SSN (i.e., they have an individual
taxpayer identification number, or ITIN, instead). This
provision would not apply to married members of the
Armed Forces if at least one spouse had an SSN. In
such cases, they would be eligible for up to $2,800. If
no eligible individual had an SSN (i.e., an unmarried
taxpayer does not have an SSN or neither spouse of a
married joint filing couple has an SSN), they would still
receive a payment for a qualifying dependent with an
SSN.
The advanced payment of the credit would generally be
exempt from offset by Treasury prior to when the
payment is issued for certain past-due debts owed by
the recipient (including past-due child support).
However, the amount the taxpayer would claim as a
Congressional Research Service 3
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
credit on their 2021 tax returns would generally be
subject to offset.
For eligible individuals who did not file a 2020 or 2019
income tax return, the IRS would be given broad
authority to make payments based on information
available to the Treasury.
If a direct payment was made to an individual or
organization serving as the taxpayer’s representative
payee (“payee”) or fiduciary for a federal benefit
program, the proposal explicitly states that it shall be
used only for the benefit of the entitled beneficiary.
Would direct Treasury to make payments to the U.S.
territories (mirror code and non-mirror code) equal to
the aggregate amount issued to their residents as a
result of this provision. (Many territorial residents will
receive this benefit under a version of the provision
administered via the territorial government, rather than
the IRS.)
These payments would not be taxable. In addition, like
other tax credits, these payments would not count as
income or resources for a 12-month period in
determining eligibility for, or the amount of assistance
provided by, any federally funded public benefit
program.
If a taxpayer received a larger advanced credit in 2021
than they were eligible for on their 2021 income tax
return, they generally would not be required to pay it
back. If an individual received an advanced payment less
than what they were eligible for on their 2021 income
tax return, they could claim the difference on that
return (filed in 2021).
Part 2—Child Tax Credit
Child Tax Credit For 2021, would temporarily increase the amount of For background, see
Improvements for the child tax credit for low- and moderate-income CRS Report R41873, The
2021 taxpayers to up to $3,600 per child for a young child Child Tax Credit: How It
and up to $3,000 for older children by modifying Works and Who Receives
several provisions of the existing credit. First, the bill It, by Margot L. Crandall-
would eliminate the earned-income-based phase-in of Hollick.
the refundable portion of the child credit (often
referred to as the “additional child credit” or ACTC) CRS Report R46502, The
and eliminate the maximum amount of the ACTC Child Tax Credit: Selected
($1,400). Hence, the child credit would be “fully Legislative Proposals in the
refundable” and available to otherwise eligible 116th Congress, by
taxpayers with no earned income. Second, the bill Margot L. Crandall-
would increase the maximum age for an eligible child to Hollick.
17. Third, the bill would increase the maximum amount
of the credit from $2,000 per child to $3,600 per child
for a young child (0-5 years old) and $3,000 per child
for an older child (6-17 years old). This increase in the
maximum child credit of $1,600 per child for young
children and $1,000 per child for older children would
gradually phase out at a rate of 5% as income exceeded
specified thresholds until the credit amount equaled the
current-law maximum of $2,000 per child. These
thresholds would be $75,000 for single filers, $112,500
for head of household filers, and $150,000 for married
Congressional Research Service 4
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
joint filers. (The actual income level at which the credit
phased down to $2,000 per child would depend on the
number and age of qualifying children.) The credit
would then remain at its current-law level and phase
out when income exceeded the current-law thresholds
of $200,000 ($400,000 for married joint filers).a
Would direct the Treasury to issue half of the expected
2021 credit in monthly payments beginning July 1, 2021
(the Treasury could issue the payments less frequently
for the last six months of 2021 if they deemed monthly
payments were not feasible). The remaining half of the
total 2021 credit would be claimed on a 2021 income
tax return filed in early 2022. The amount of the
payments advanced in 2021 would be estimated based
on 2020 income tax data, or if unavailable, 2019 income
tax data. The advanced child credit payments would
reduce the child credit received with a 2021 return. In
cases where a taxpayer receives more in advanced
payments than they are eligible for (whether due to
changes in income, or changes in the number of eligible
children who live with the taxpayer between 2021 and
the year that provides data on which the advanced
credit is based [2020 or 2019]), taxpayers would
generally need to repay total aggregate advanced
payments, although repayment obligations would be
reduced for taxpayers depending on their 2021 income.
Specifically, taxpayers with income below $40,000 for
single filers, $50,000 for head of household filers, and
$60,000 for joint filers would not need to repay up to
$2,000 per qualifying child in advanced credit
overpayments (the $2,000 amount is referred to as the
“safe harbor amount”). Since the maximum amount of
the credit that can be advanced would be less than
$2,000 per child, these taxpayers would effectively be
exempt from repaying any overpayments of the
advanced credit.b Taxpayers with income above these
thresholds but below $80,000 for single filers, $100,000
for head of household filers, and $120,000 for married
joint filers would gradually have the safe harbor amount
reduced to $0 per qualifying child. Hence, taxpayers
with income over $80,000 for single filers, $100,000 for
head of household filers, and $120,000 for married joint
filers in 2021 would need to repay the entire amount of
the overpayment.
The bill would create an online portal to allow
taxpayers the options to opt out of receiving advanced
payments and to provide information regarding changes
in income, marital status, and number of qualifying
children in order to modify the advanced credit
amounts.
Advanced payments would not be subject to offset
prior to when the payment is issued for certain past-
due debts owed by the recipient. However, the amount
the taxpayer claims as a credit on their 2021 tax
returns would generally be subject to offset.
Advanced payments would generally not be available to
eligible residents of U.S. territories.
Congressional Research Service 5
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
Application of the Would effectively expand child credit eligibility to For background, see
Child Tax Credit in residents of U.S. territories permanently. For “mirror CRS Report R44651, Tax
Possessions code” territories, the Treasury would make payments Policy and U.S. Territories:
equal to the territory’s costs of the child tax credit. For Overview and Issues for
American Samoa (a non-mirror code territory), the Congress, by Sean Lowry.
Treasury would make payments equal to the territory’s
costs of the child tax credit as if it were a mirror code
territory. In contrast, eligible residents of Puerto Rico
(also a non-mirror code territory) would file for the
credit directly with the IRS.
Part 3—Earned Income Tax Credit
Strengthening the For 2021, would temporarily expand both eligibility for For background, see
Earned Income Tax and the amount of the earned income tax credit (EITC) CRS Report R43805, The
Credit for Individuals for taxpayers without qualifying children by modifying Earned Income Tax Credit
with no Qualifying the eligibility age and credit formula. (EITC): How It Works and
Children Regarding eligibility age, would expand eligibility for the Who Receives It, by
EITC for individuals with no qualifying children— Margot L. Crandall-
sometimes referred to as the “childless EITC”—by Hollick, Gene Falk, and
eliminating the maximum eligibility age limit (currently, Conor F. Boyle.
otherwise-eligible workers aged 65 or older are
ineligible for the credit) and by reducing the minimum
eligibility age from 25 to 19. In other words, this change
would allow eligible taxpayers ages 19 to 24 to claim
the childless EITC, except for students (whose
minimum eligibility age would be 24). Qualified foster
youth and homeless youth aged 18-24 would be
allowed to claim the credit even if they were students.c
Regarding the credit amount, would temporarily
increase the childless EITC by increasing the earned
income amount (the minimum income necessary to
receive the maximum credit amount) and phaseout
threshold amount (the maximum income level at which
taxpayers receive the maximum credit amount before it
begins to phase out) to $9,820 and $11,610,
respectively, while also doubling the phase-in and
phaseout rates from 7.65% to 15.3%. The maximum
childless EITC would increase from $543 to $1,502 in
2021.
Taxpayer Eligible for Would permanently allow taxpayers who currently
Childless Earned cannot claim the childless EITC because all of their
Income Credit in Case qualifying children do not have SSNs to be eligible to
of Qualifying Children claim the childless EITC.
Who Fail to Meet
Certain Identification
Requirements
Credit Allowed in Would permanently allow married taxpayers who file
Case of Certain their tax returns as married filing separately to claim
Separated Spouses the EITC if they live with a child for whom they can
claim the EITC for more than half the year and either
(1) do not have the same principal place of abode as
their spouse for the last six months of the year, or (2)
have a decree, instrument, or agreement (i.e., other
than a divorce decree) and do not live with their
spouse at the end of the year.
Congressional Research Service 6
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
Modification of Would permanently modify the disqualified investment
Disqualified income test. Under current law, taxpayers with
Investment Income investment income over a certain threshold—$3,650 in
Test 2020 and 2021—are ineligible for the EITC. Disqualified
investment income is defined as interest income
(including tax-exempt interest), dividends, net rent, net
capital gains, and net passive income. It also includes
royalties from sources other than the filer’s ordinary
business activities. This provision would permanently
raise this amount to $10,000 and annually adjust for
inflation beginning in 2022.
Application of Earned Would permanently provide authority to make
Income Tax Credit in payments to Puerto Rico, American Samoa, and mirror-
Possession of the code territories for amounts they pay out in the EITC.
United States For Puerto Rico and American Samoa, such payments
would be contingent upon increasing the amount of
their EITC or enacting an EITC, respectively.
Temporary Special For the purposes of calculating their EITC on their
Rule for Determining 2021 income tax return, would allow taxpayers to
Earned Income for substitute their 2019 earned income for their 2021
Purposes of Earned earned income if their earned income at the end of
Income Tax Credit 2021 was less than their 2019 earned income.
Part 4—Dependent Care Assistance
Refundability and For 2021, would temporarily expand the child and For background, see
Enhancement of Child dependent care credit by making the credit refundable CRS Report R44993,
and Dependent Care and making it larger for most workers. The CDCTC Child and Dependent Care
Tax Credit credit amount is a product of the amount of qualifying Tax Benefits: How They
expenses (which is subject to a cap) and the credit rate. Work and Who Receives
The bill would increase the cap on qualifying expenses Them, by Margot L.
from $3,000 for one child and $6,000 for two or more Crandall-Hollick.
children to $8,000 and $16,000, respectively. The bill
would also increase the credit rate for workers with
$185,000 or less of income (the credit would remain
the same as under current law for those with income
over $185,000 up to $400,000 [i.e., 20%], and be
reduced from current law for those with over
$400,000 of income). Specifically, for those with less
than $125,000 of income, the credit rate would
increase to 50% (from 35%) of expenses. This 50%
credit rate would gradually phase down to 20% until
taxpayers had $185,000 of income. For those with
more than $185,000 of income up to $400,000, the
credit rate would then remain at 20%, gradually falling
to zero when income exceeds $440,000. As a result,
those with income over $440,000 would not be eligible
for the credit.
By making the credit refundable, the bill would
effectively expand eligibility to lower-income taxpayers.
Under current law, the CDCTC is a nonrefundable
credit, meaning the value of the credit cannot exceed a
taxpayer’s income tax liability. As a result, those with
little or no income tax liability, including many low-
income taxpayers, receive little or no benefit from the
current credit.
Congressional Research Service 7
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
In combination, these changes would increase the
maximum amount of the CDCTC from $2,100 to
$8,000, based on expenses and income.
Increase in Exclusion For 2021, would temporarily increase the maximum
for Employer- amount of qualifying child care expenses that eligible
Provided Dependent taxpayers could exclude from their income from
Care Assistance $5,000 to $10,500.
Part 5—Credits for Paid Sick and Family Leave
Extension of Credits Would extend the Families First Coronavirus Response For more information, see
Act (FFCRA; P.L. 116-127) payroll tax credits for paid CRS In Focus IF11739,
sick and paid family leave, including sick and family leave Payroll Tax Credit for
tax credits for self-employed individuals, from March COVID-19 Sick and Family
31, 2021, through September 30, 2021. Leave, by Molly F.
Sherlock.
Increase in Limitations The tax credit for family leave wages is limited to $200 For more information, see
on Credits for Paid per day, and $10,000 total per employee (50 days for CRS In Focus IF11739,
Family Leave self-employed individuals). This provision would Payroll Tax Credit for
increase this limit on the tax credit for paid family leave COVID-19 Sick and Family
wages, allowing the credit on up to $12,000 in paid Leave, by Molly F.
family leave wages (60 days for self-employed Sherlock.
individuals).
Expansion of Leave to Would expand the definition of qualifying paid family For more information, see
Which Paid Family leave to allow family leave payroll tax credits to be CRS In Focus IF11739,
Leave Credits Applies claimed for all qualifying uses of paid sick time, including Payroll Tax Credit for
for leave provided if the employee is subject to a COVID-19 Sick and Family
quarantine or isolation order due to COVID-19 or is Leave, by Molly F.
caring for someone in a similar situation. Sherlock.
Paid Leave Credits Would expand the paid sick and paid family leave For more information, see
Allowed for Leave for credits to allow credits for leave taken to obtain CRS In Focus IF11739,
COVID Vaccination immunization related to COVID-19 or recover from Payroll Tax Credit for
any injury, disability, illness, or condition related to COVID-19 Sick and Family
COVID-19 immunization. Leave, by Molly F.
Sherlock.
Application of Would add a nondiscrimination rule to the paid leave For more information, see
Nondiscrimination payroll tax credits, providing employers could not claim CRS In Focus IF11739,
Rules the credits if paid leave provided to employees Payroll Tax Credit for
discriminates in favor of highly compensated employees COVID-19 Sick and Family
or full-time employees, or discriminates on the basis of Leave, by Molly F.
employment tenure with the employer. Sherlock.
Reset of Limitation on FFCRA paid sick leave is limited to 10 days per For more information, see
Paid Sick Leave employee. This provision would reset the 10-day limit, CRS In Focus IF11739,
starting April 1, 2021, for employers claiming the credit Payroll Tax Credit for
for paid sick leave provided to their employees. The COVID-19 Sick and Family
10-day limit would also be modified to reset for self- Leave, by Molly F.
employed individuals. Sherlock.
Congressional Research Service 8
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
Credits Allowed The paid sick and paid family leave tax credits are For more information, see
Against Employer currently claimed against the Old-Age, Survivors and CRS In Focus IF11739,
Hospital Insurance Disability Insurance (OASDI) tax, or the equivalent Payroll Tax Credit for
Tax amount of the Railroad Retirement Tax Act (RRTA) COVID-19 Sick and Family
tax. This provision would restructure the paid sick and Leave, by Molly F.
family leave payroll tax credits to be claimed against the Sherlock.
employer’s share of the hospital insurance (HI) payroll
tax, after March 31, 2021. The employer’s share is
1.45% of wages paid to employees. This credit would
not affect amounts transferred to the Federal Hospital
Insurance Trust Fund.
Application of Credits Government employers, including state and local For more information, see
to Certain government employers, are not allowed to claim paid CRS In Focus IF11739,
Government leave payroll tax credits. This provision would provide Payroll Tax Credit for
Employers that 501(c)(1) organizations and 501(a) organizations COVID-19 Sick and Family
could claim the tax credits, making certain state and Leave, by Molly F.
local governments, as well as 501(c)(1) federal Sherlock.
government instrumentalities, tax-credit eligible.
Gross Up of Credit in Provision provides that paid sick and paid family leave For more information, see
Lieu of Exclusion from payroll tax credits can be increased by the employer’s CRS In Focus IF11739,
Tax share of OASDI and HI payroll taxes (and equivalent Payroll Tax Credit for
RRTA tax) for the paid leave wages. Denial of double COVID-19 Sick and Family
benefit applies, and gross income of the employer is Leave, by Molly F.
increased by the amount of the credit provided by this Sherlock.
section.
Effective Date The provisions related to payroll tax credits for leave For more information, see
provided by employers apply to leave taken after March CRS In Focus IF11739,
31, 2021. For self-employed individuals, the changes are Payroll Tax Credit for
retroactive, and apply after December 31, 2020. COVID-19 Sick and Family
Leave, by Molly F.
Sherlock.
Part 6—Employee Retention Credit
Extension of Through June 30, 2021, the employee retention and For more information, see
Employee Retention rehiring tax credit is 70% of qualified wages. The CRS In Focus IF11721,
Credit refundable payroll credit can be computed on up to The Employee Retention
$10,000 in qualified wages paid to an eligible employee and Employee Retention
per calendar quarter. Thus, the maximum credit and Rehiring Tax Credits,
amount for 2021 is $14,000 (70% of up to $20,000 in by Molly F. Sherlock.
qualified wages paid over the first two quarters).
This provision would extend the employee retention
credit through December 31, 2021. The credit would
be restructured to be claimed against the employer’s
share of the hospital insurance (HI) payroll tax (as
opposed to the OSADI and equivalent amount of
RRTA tax).
Part 7—Premium Tax Credit
Improving For 2021 and 2022, would temporarily expand eligibility For background, see
Affordability by for and the amount of the premium tax credit (PTC) by CRS Report R44425,
Expanding Premium modifying the income eligibility criteria and credit Health Insurance Premium
Assistance for formula. Tax Credits and Cost-
Consumers Regarding income, would temporarily expand eligibility Sharing Subsidies, by
by eliminating the current-law phaseout for households Bernadette Fernandez.
Congressional Research Service 9
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
with annual incomes above 400% of the federal poverty
level (FPL).
Regarding the formula, would temporarily increase the
credit amount by reducing the percentage of annual
income that eligible households would be required to
contribute toward the premium. The temporary
percentages would range from 0.0% to 8.5% of
household income, with higher-income groups subject
to the larger percentages, as specified.
Temporary For 2020, would temporarily provide tax relief to
Modification of individuals who would be subject to the current-law
Limitations on requirement to pay back PTC amounts that were
Reconciliation of Tax provided in excess. Would temporarily suspend the
Credits for Coverage recapture of excess credit amounts under the current
Under a Qualified tax reconciliation process.
Health Plan with
Advance Payments of
Such Credit
Application of For 2021, would temporarily expand eligibility for and For background, see
Premium Tax Credit the amount of the PTC for certain individuals who CRS Report R45478,
in Case of Individuals receive unemployment compensation (UC). Would Unemployment Insurance:
Receiving temporarily deem individuals who receive UC for any Legislative Issues in the
Unemployment week in calendar year 2021 to have met the PTC 116th Congress, by Julie
Compensation During income eligibility criteria. Would temporarily disregard M. Whittaker and
2021 any household income above 133% FPL. Katelin P. Isaacs.
Part 8—Miscellaneous Provisions
Repeal of Election to U.S. firms are eligible for foreign tax credits up to the For background, see
Allocation Interest, amount of U.S. tax paid on foreign-source income. To CRS Report
Etc. on Worldwide impose this limit, U.S. and foreign-source income must RL34494, The Foreign
Basis be determined. Certain deductions are allocated Tax Credit’s Interest
between U.S. and foreign sources, including interest. Allocation Rules, by
Until 2021, firms allocated interest excluding that paid Jane G. Gravelle and
by foreign firms (called “waters edge” allocation). Donald J. Marples.
Under current law, beginning in 2021, firms can elect to
include interest paid by related foreign firms. This
treatment is called worldwide allocation. It is beneficial
for some firms because some of the interest paid for
foreign firms is allocated to U.S. sources, increasing
foreign-source income, increasing the limit on the
foreign tax credit and, thus, increasing foreign tax
credits that reduce tax liability. A provision was
adopted in 2004 to move to worldwide allocation, but
it has been delayed by other legislation and is scheduled
to begin in 2021. This provision would repeal the
election to move to worldwide allocation.
Tax Treatment of Under normal tax rules, a forgiven debt is generally For background, see
Targeted Economic treated as taxable income to the borrower. Prior CRS Insight IN11378,
Injury Disaster Loan legislation has allowed forgiven loans for certain IRS Guidance Says No
Advances programs (such as those provided by the Paycheck Deduction Is Allowed
Protection Program, or PPP, and certain other small for Business Expenses
business loans) to be excluded from income. Following Paid with Forgiven PPP
an IRS ruling that associated expenses would not be Loans, by Sean Lowry
deductible, legislation specified that associated expenses and Jane G. Gravelle.
would be deductible. This provision would extend this
Congressional Research Service 10
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Section Title Description CRS Resources
treatment (exclusion from income and deduction of CRS Report R46284,
expenses) to additional Economic Injury Disaster Loan COVID-19 Relief
(EIDL) advances on loans that are not required to be Assistance to Small
repaid. Businesses: Issues and
Policy Options, by
Robert Jay Dilger,
Bruce R. Lindsay, and
Sean Lowry.
CRS Insight IN11370,
SBA EIDL and
Emergency EIDL Grants
for COVID-19, by
Bruce R. Lindsay.
Tax Treatment of Under normal tax rules, a forgiven debt is treated as For background, see
Restaurant taxable income to the borrower. Prior legislation has CRS Insight IN11378, IRS
Revitalization Grants allowed forgiven loans for certain programs (such as Guidance Says No
those provided by the Paycheck Protection Program, or Deduction Is Allowed for
PPP, and certain other small business loans) to be Business Expenses Paid
excluded from income. Following an IRS ruling that with Forgiven PPP Loans,
associated expenses would not be deductible, by Sean Lowry and Jane
legislation specified that associated expenses would be G. Gravelle.
deductible. This provision would extend this treatment
(exclusion from income and deduction of expenses) to CRS Report R46284,
additional grants made from the new Restaurant COVID-19 Relief
Revitalization Fund. Assistance to Small
Businesses: Issues and
Policy Options, by Robert
Jay Dilger, Bruce R.
Lindsay, and Sean Lowry.
Source: Legislative proposals to comply with the reconciliation directive included in Section 2001 of the
Concurrent Resolution on the Budget for Fiscal Year 2021, S.Con.Res. 5. Subtitle G. Budget Reconciliation
Legislative Recommendations Relating to Promoting Economic Security.
a. For example, if a married couple had three children under 6 years old, the maximum credit they would be
eligible for would be $10,800 ($3,600x3) if they had income under $150,000. For taxpayers with income
over $150,000, the additional $4,800 of the credit ($1,600x3) would be reduced at a rate of 5%. At
$246,000 of income, the credit would be $6,000 ($2,000 x 3), the current-law amount. The credit would
remain at this amount until the taxpayer’s income reached the current-law thresholds of $400,000. At that
point, the credit would phase out under the provisions of current law (5% phaseout rate).
b. The legislative text indicates that taxpayers will not need to repay $2,000 per child in advanced credit
overpayments. Because the maximum amount of the child credit that can be received in advance is half the
total credit amount, the maximum in aggregate payments per child is $1,500 per older child and $1,800 per
young child. Because these amounts are less than the $2,000 safe harbor amount, taxpayers with income
below these thresholds will effectively not be required to repay any overpayments of the advanced credit .
c. The legislation includes as part of the definition of a student someone carrying half or more of the normal
full-time workload for their program of study, as defined under IRC §25A(b)(3).
Congressional Research Service 11
Table 2. Estimated Cost of Subtitle G Revenue Provisions of the Budget Reconciliation Legislative Recommendations
Fiscal Years; Millions of Dollars
Provision 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2021-2031
Part 1—2021 Recovery Rebates to Individuals
Recovery Rebates to Individuals 404,937 17,400 - - - - - - - - - 422,337
Part 2—Child Tax Credit
Child Tax Credit: Improvements for 25,826 79,248 710 721 725 721 307 311 316 320 323 109,528
2021 and Application of the Child
Tax Credit in Possessions
Part 3—Earned Income Tax Credit
Strengthening the Earned Income 521 11,361 - - - - - - - - - 11,882
Tax Credit for Individuals with no
Qualifying Children
Taxpayer Eligible for Childless (i) 12 2 1 1 1 2 2 2 2 2 26
Earned Income Credit in Case of
Qualifying Children Who Fail to
Meet Certain Identification
Requirements
Credit Allowed in Case of Certain 1 20 21 22 23 25 25 27 28 30 31 252
Separated Spouses
Modification of Disqualified 102 652 198 200 225 229 238 233 231 240 251 2,798
Investment Income Test
Application of Earned Income Tax - 738 746 764 781 798 814 831 849 867 858 8,074
Credit in Possession of the United
States
Temporary Special Rule for - 3,185 - - - - - - - - - 3,185
Determining Earned Income for
Purposes of Earned Income Tax
Credit
Total of Earned Income Tax Credit 624 15,968 967 987 1,030 1,053 1,079 1,093 1,110 1,1390 1,169 26,217
CRS-12
Provision 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2021-2031
Part 4—Dependent Care Assistance
Refundability and Enhancement of 2,127 5,837 - - - - - - - - - 7,964
Child and Dependent Care Tax
Credit
Increase in Exclusion for Employer- 78 39 - - - - - - - - - 117
Provided Dependent Care
Assistance
Total of Dependent Care Assistance 2,205 5,876 - - - - - - - - - 8,081
Part 5—Credits for Paid Sick and Family Leave
Extension and Modification of 4,054 1,154 - - - - - - - - - 5,208
Credits for Paid Sick and Family
Leave
Part 6—Employee Retention Credit
Extension and Modification of the 2,791 5,993 - - - - - - - - - 8,784
Employee Retention Credit
Part 7—Premium Tax Credit
Improving Affordability by Expanding 4,137 22,234 7,964 536 -23 - - - - - - 34,847
Premium Assistance for Consumers
Temporary Modification of 4,696 1,565 - - - - - - - - - 6,261
Limitations on Reconciliation of Tax
Credits for Coverage Under a
Qualified Health Plan with Advance
Payments of Such Credit
Application of Premium Tax Credit 2,624 1,660 232 - - - - - - - - 4,516
in Case of Individuals Receiving
Unemployment Compensation
During 2021
Total of the Premium Tax Credit 11,457 25,459 8,196 536 -23 - - - - - - 45,624
CRS-13
Provision 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2021-2031
Part 8—Miscellaneous Provisions
Repeal of Election to Allocation -335 -1,277 -2,023 -2,284 -2,383 -2,334 -2,358 -2,385 -2,343 -2,283 -2,327 -22,331
Interest, Etc. on Worldwide Basis
Tax Treatment of Targeted EIDL Estimate Not
Advances Availablea
Tax Treatment of Restaurant Estimate Not
Revitalization Grants Availablea
Total of Miscellaneous Provisions -335 -1,277 -2,023 -2,284 -2,383 -2,334 -2,358 -2,385 -2,343 -2,283 -2,327 -22,331
Source: Joint Committee on Taxation, Estimated Budgetary Effects Of The Revenue Provisions Of The Chairman’s Amendment In The Nature Of A Substitute To The Budget
Reconciliation Legislative Recommendations, Scheduled For Markup By The House Committee On Ways And Means On February 10, 2021, JCX-9-21, February 9, 2021, at
https://www.jct.gov/publications/2021/jcx-9-21/.
Notes: A negative number indicates the provision is estimated to result in a revenue gain. An (i) indicates a cost of less than $500,000.
a. The Joint Committee on Taxation (JCT) revenue estimate indicates that the cost estimate for this provision will be provided by the Congressional Budget Office. At
the time of publication, this estimate was not yet publicly available.
CRS-14
Tax Provisions for COVID-19 Relief: Subtitle G – Promoting Economic Security
Author Information
Molly F. Sherlock Jane G. Gravelle
Specialist in Public Finance Senior Specialist in Economic Policy
Margot L. Crandall-Hollick
Acting Section Research Manager
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
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