What to Know in Washington: 2017 Tax Law on Table in Aid Bill

Some of the most contested pieces of the 2017 tax overhaul are being revisited as the White House and Congress begin to discuss another round of economic stimulus, including restoring the break for entertaining business clients and lifting the cap on state and local deductions.

Speaker Nancy Pelosi (D-Calif.) said the next coronavirus response bill should suspend the $10,000 cap on deductions for state and local taxes. President Donald Trump wants to restore a tax break for corporate client outings, dinners, sporting games, concerts and cruises, which were limited under the tax overhaul.

“Congress must pass the old, and very strongly proven, deductibility by businesses on restaurants and entertainment,” Trump said in a tweet yesterday. “This will bring restaurants, and everything related, back – and stronger than ever. Move quickly, they will all be saved.”

Changes will not be easy.

The deduction cap for state and local taxes was a large cost-saving measure in the $1.5 trillion tax-cut plan enacted in 2017, and reversing that would benefit people largely in states run by Democrats. Republicans have already called the idea a “non-starter” and accuse Democrats of using the virus crisis to repeal the most politically contested portion of the tax law.

Restoring the deduction for corporate entertainment costs could benefit Trump’s own companies and wouldn’t help venues that are shut down for a prolonged period of time. The 2017 tax law eliminated writeoffs for entertainment expenses while leaving intact a 50% deduction for client meals. The president has said he wants to make that tax break more generous.

“I think it will open up the restaurant business,” he remarked at a White House briefing last night.

Veena Murthy, a principal at accounting firm Crowe LLP, said Congress would have to roll back decades of tax-code adjustments to make meals and entertainment costs fully deductible. “And I don’t think that’s going to happen,” she said.

Discussion about a new round of economic stimulus is in the early stages, and Pelosi said yesterday the House might take up a bill soon after its scheduled return to Washington April 20. Read more from Laura Davison.

What to Watch Today

Infrastructure and potential coronavirus legislation may be discussed during press conferences this morning from both Republican and Democrat House leaders:

The White House Coronavirus Task Foce will hold today’s briefing at 5 p.m.

The Senate will meet in a pro forma session at 10 a.m.

Economic Effects & Industry Pains

Jobless Claims Outlook: Last week’s historic surge in U.S. jobless claims is likely one for the ages, after jumping nearly 1,400% from the prior period. But today’s government report will be no less dire, and may serve as a more timely barometer than tomorrow’s monthly payrolls figures, Sophie Caronello reports. Filings for unemployment benefits are expected to total 3.7 million in the week ended March 28, compared with 3.28 million previously, according to the median forecast in a Bloomberg survey of economists.

Small Business Worries About Survival: The lobbying blitz over the record stimulus package that Trump signed last week is forcing small businesses to confront a harsh reality in Washington: They can’t match the muscle that big corporations wield on Capitol Hill. Small-business advocates say they are on the losing end of the $2 trillion coronavirus-rescue program, even as Trump touts it as the means by which the federal government will keep small business alive in the face of mass shutdowns.

The reality, they say, is far different. By one estimate, small businesses may need more than $1 trillion to replace lost revenue over the next three months. Yet the main pool of money allocated by Congress for hundreds of thousands of restaurants, hardware stores, theaters, dry cleaners, clothing stores, beauty salons and the like is just $349 billion in the form of forgivable loans over two months — as much as $10 million each, and only if certain conditions are met. Read more from David McLaughlin and Ben Brody.

Good Luck Policing the Relief, TARP Vets Say: The stimulus law includes a $500 billion Treasury Department fund to bail out airlines and other large corporations harmed by the coronavirus pandemic. The job of policing it won’t be easy. Lawmakers agreed that the job will be split between a special inspector general and a congressional accountability committee—identical to the setup that oversaw the controversial $700 billion bank bailout in the 2008 financial crisis, the Troubled Asset Relief Program, or TARP. Those involved in the last bailout say that the effectiveness of this five-member panel will depend on whom congressional leaders choose for it, how they get along, and how willing the Trump administration is to comply with their requests for information, since they’ll lack the power to compel it. Veterans of the TARP oversight committee express serious doubt, Joshua Green reports.

Meanwhile, federal agencies are increasingly sending incorrect benefit payments to Americans, a federal government watchdog said as the Internal Revenue Service prepares to send over $292 billion in payments to households as part of the relief response. Federal agencies sent about $175 billion in improper payments in fiscal 2019, a roughly $24 billion boost from the previous year, the Government Accountability Office said in a report. Improper payments include those that were sent to the wrong person, should not have been made, or were issued in incorrect amounts. Read more from Laura Davison.

The Treasury Department is expected to hire PJT Partners, Moelis & Co. and Perella Weinberg Partners for advice on how to dole out tens of billions of dollars to the airline industry from the $2 trillion stimulus package, the Wall Street Journal reports, citing unidentified people familiar with the matter.

Trump to Meet with Oil Execs: Oil company executives reeling from a massive drop in prices are set to meet with Trump tomorrow as the administration seeks ways to help the beleaguered industry. Executives from companies such as Exxon Mobil, Chevron, Occidental Petroleum and Continental Resources are expected to attend, according to people familiar with the meeting who asked not to be named to discuss non-public matters. In a joint letter, industry groups urged Trump not to restrict crude imports. Read more from Ari Natter, Jennifer A. Dlouhy and Kevin Crowley.

The Trump administration’s approach to correcting the oil market’s historic meltdown is starting to look like a case of good cop-bad cop. While Trump remains optimistic that Saudi Arabia and Russia will work out a deal to stabilize the oil market, his Energy Department took to scolding the Middle Eastern kingdom for defying U.S. calls to curb its output. “Boosting production during this time of an unprecedented loss in global demand is frustrating, and does not represent the kind of deliberative planning we would like to see from partners,” the agency said in a statement. Stephen Cunningham has more.

HUD Issues Mortgage Relief: The Department of Housing and Urban Development yesterday announced a tailored set of mortgage payment relief options for single family homeowners with FHA-insured mortgages who are experiencing financial trouble due to the coronavirus pandemic. Read more from Kim Chipman.

Treatment, Testing & Equipment

Trump Considers Hazard Pay for Health Workers: Trump said his administration is considering ways to compensate health-care workers with supplemental hazard pay as they grapple with the coronavirus outbreak. “It’s something we’re discussing in terms of bonus or bonus pay,” Trump said last night during a White House briefing. “They’re like warriors, they’re like soldiers,” he said of doctors, nurses and other health-care workers dealing with the pandemic.

The administration has previously signaled it would pursue hazard pay for health workers as part of a phase four emergency plan with Congress. The call for additional pay has come amid reports that many hospital employees are caring for coronavirus patients without adequate protective gear, like masks. Read more from Mario Parker and Josh Wingrove.

Trump Seeks Help From Walmart on Surgical Gowns: Walmart will help the federal government procure surgical gowns to stem the shortage of personal protective equipment, after Trump placed a call directly to CEO Doug McMillon. The world’s largest retailer will delve into its sprawling global supply chain to identify a company to make an undisclosed number of gowns, a Walmart spokesman said by phone yesterday. Walmart does not sell surgical gowns in its stores, but some of its existing suppliers could have the capability to provide them. The order came in the wake of Vice President Mike Pence’s visit to a Walmart distribution center in Virginia. Read more from Matthew Boyle.

Reopening Obamacare Amid Virus: Trump is falling under criticism for balking at taking full advantage of the Affordable Care Act as the number of coronavirus cases in the U.S. tops 200,000. The Trump administration signaled late Tuesday it won’t reopen Obamacare exchanges to let uninsured Americans purchase health coverage during the pandemic. Several congressional Democrats warned yesterday that such a decision could leave millions of Americans without health insurance and in need of health services. Critics say that could be Trump’s goal, aligned with his efforts to repeal the ACA, Alex Ruoff and Lydia Wheeler report. Trump at yesterday’s White House briefing said he recognized the issue and was looking into the matter.

Trump Weighs Restricting Flights: Trump said his administration is weighing whether to halt flights from some of the cities hardest hit by the pandemic, like New York and Miami, but is wary of further harming the airline industry. “We’re certainly looking at it but once you do that you really are clamping down on an industry that is desperately needed,” Trump said yesterday. He did not specify what scale of restrictions he was considering, or which cities would be affected. Read more from Mario Parker and Josh Wingrove.

Antibody Test Challenge Posed to Universities: Universities have been called by the White House coronavirus coordinator to develop tests quickly that could screen an entire health system for Covid-19 antibodies. State Department immunologiest Dr. Deborah L. Birx at yesterday’s White House coronavirus briefing challenged researchers to develop tests by Friday used to detect antibodies and antigens in the blood. The tests would then be given to front line health-care workers who could have the peace of mind of knowing if they had unknowingly been infected and had developed immunity to the virus, she said. Read more from Jeannie Baumann.

DOD Seeking 100,000 Body Bags: The Pentagon is seeking to provide as many as 100,000 military-style body bags for potential civilian use as the government warns that deaths could soar in the coming weeks from the pandemic. FEMA is requesting 100,000 body bags, known as Human Remains Pouches, through an interagency group that directed it to the Defense Department. The Pentagon is exploring purchasing more bags and will draw some initially from a stockpile of 50,000 that it maintains, according to two people familiar with the matter. Tony Capaccio has more.

Coast Guard Warns Cruise Ships to Prepare: Cruise ships should be ready to care for passengers and crew with Covid-19 and other flulike symptoms at sea, the U.S. Coast Guard has advised in a memo dated March 29, saying medical evacuations are contributing to strained health-care resources in the Southeast.The Coast Guard isn’t saying it will refuse evacuations or not let ships dock. The advisory applies to cruise ships flying foreign flags — virtually the entire industry. Three Carnival vessels, including two with sick passengers, are traveling toward Fort Lauderdale, Florida and are due to arrive in days. Read more from Jonathan Levin.

China Rejects Claim It Hid Numbers: China rejected the American intelligence community’s conclusion that Beijing concealed the extent of the coronavirus epidemic, and accused the U.S. of seeking to shift the blame for its own handling of the outbreak. Foreign Ministry spokeswoman Hua Chunying today defended as “open and transparent” China’s response to the virus first identified in December in the central Chinese city of Wuhan. She was responding to a Bloomberg News report that the U.S. intelligence community concluded in a classified report to the White House that Beijing under-reported both total cases and deaths from the disease.

“Some U.S. officials just want to shift the blame,” Hua told a regular briefing in Beijing. “Actually we don’t want to fall into an argument with them, but faced with such repeated moral slander by them, I feel compelled to take some time and clarify the truth again.” Read more.

Politics & Elections

Senate Race Outlooks Adjusted:Sabato’s Crystal Ball shifted its Arizona Senate rating to Leans Democratic, from Toss-up, giving likely Democratic nominee Mark Kelly the edge over appointed Republican incumbent Sen. Martha McSally (R-Ariz.). “Surely some Republicans will think we’re being too bullish on Democratic Senate odds in Arizona, just like some believe we’re too bullish on Democrats in Colorado, another GOP Senate state we rate as Leans Democratic,” analyst Kyle Kondik writes. “But we would just rather be the Democrats in both states at this point in time; that of course can change.”

Sen. Susan Collins’ (R) race in Maine was moved to Toss-up. “We’ve resisted this change for a while, but it’s become apparent to us that Collins is in for a very close race, even if she may retain a lead at this precise moment.” Derek Wallbank has more.

Wisconsin Governor Pushes for Mail-In Voting:  Wisconsin Governor Tony Evers asked a federal judge yesterday to direct the state to hold its primary through mail-in voting, but did not ask for the April 7 vote to be postponed, as many states have done. On Monday, the state’s Republican-controlled legislature rejected a proposal from Evers, a Democrat, to ensure that Wisconsin’s 3.3 million registered voters receive absentee ballots and to delay the absentee ballot deadline, which is currently April 2. The Wisconsin Democratic Party, along with nearly a dozen other Democratic advocacy groups, have filed lawsuits calling for a primarily mail-in voting election. Read more from Emma Kinery.

What Else to Know

Pressure on Maduro, Drug Cartels: Trump said he’s deploying more U.S. Navy vessels and Air Force planes in the Caribbean area to ramp up pressure on drug cartels in a move that’s also meant to put added strain on Venezuelan President Nicolas Maduro’s regime. Trump said cartels in Latin America and the Caribbean are seeking to capitalize on the pandemic in the U.S. and that efforts need to be redoubled to stop them. Read more from Josh Wingrove.

Education Rules for Online Colleges: Rules for faculty and student interactions in online college programs would be tweaked to reflect current online lessons in proposed regulations that Education Secretary Betsy DeVos released yesterday. DeVos posted the new distance education rules nearly a year after a negotiated rulemaking process in which the Education Department appointed industry and consumer representatives to negotiate new rules for online education and U.S. college accreditors. She argued the new rule was even more timely because of the rapid shift toward online teaching driven by the pandemic. Read more from Andrew Kreighbaum.

FTC Sues to Unwind Altria From Juul: The Federal Trade Commission moved to reverse Altria’s troubled $12.8 billion deal to take a stake in vaping company Juul Labs, saying the companies are competitors who shouldn’t be in business together. The FTC said Altria and Juul have monitored one another’s e-cigarette prices closely and “raced to innovate.” Altria, which makes Marlboro cigarettes, also leveraged its ownership of leading brands across the tobacco industry to secure favorable shelf space at retailers across the U.S., the complaint alleges. Read more from Angelica LaVito and Sara Forden.

Putin Sends Coronavirus Aid to U.S.: A Russian military plane brought much-needed medical equipment to the U.S. yesterday after President Vladimir Putin offered Trump help for the U.S. battle with the coronavirus. The U.S. State Department said the delivery was part of a purchase of medical equipment—including ventilators—agreed to during a March 30 phone call between Putin and Trump. The supplies were handed over to New York City, the department said. Read more from Jake Rudnitsky.

To contact the reporters on this story: Zachary Sherwood in Washington at zsherwood@bgov.com; Brandon Lee in Washington at blee@bgov.com

To contact the editors responsible for this story: Giuseppe Macri at gmacri@bgov.com; Loren Duggan at lduggan@bgov.com; Michaela Ross at mross@bgov.com