Day Two of Tax Conference Examines Individual Tax Reform, COVID Relief
January 15, 2021
Although it took place in a virtual setting this year, the D.C. Bar’s two-day Tax Legislative and Regulatory Update remained jam-packed with informative sessions on the latest developments in individual, partnership, corporate, and international tax code and reform.
In the January 13 breakout session “Individual Tax Reform in the 117th Congress,” panelists focused on a host of issues relating to recently introduced tax provisions, including those that occurred in response to the COVID-19 pandemic.
Shelley Leonard, legislation counsel for the Joint Committee on Taxation, discussed low- and moderate-income provisions as they pertain to recovery rebate credits, the child tax credit, and the earned income tax credit. She also detailed issues surrounding the recently implemented payroll tax deferral.
Implemented by the Internal Revenue Service (IRS) in August 2020, the payroll tax deferral is a temporary deferral of the withholding and payment of employees’ portion of Social Security taxes. Leonard pointed out that the deferral only applied to wages of $4,000 or less per month and was not a legislative change, meaning it did not defer the employee or employer liability for those taxes. She further noted that the deferral was not mandatory and that many employers elected not to implement it, with the exception of the federal government.
“I think this has become a significant federal workforce issue,” said Leonard. However, she also said that the Consolidated Appropriations Act extended the time over which payment must be made for those additional withholdings. Employees will now have until December 31, 2021, to repay the tax deferral as opposed to April 30, 2021.
Also speaking on individual tax reform was Alan Viard, resident scholar at the American Enterprise Institute. Viard presented several tax expenditures and related provisions with a focus on some of President-Elect Joe Biden’s current proposals. Particularly, Viard discussed possible changes to the implementation of the Tax Cuts and Jobs Act (TCJA), which made profound changes to the nature of itemized deductions.
“The standard deduction was nearly doubled in magnitude, and since taxpayers only itemize if they have itemized deductions larger than standard deductions, that necessarily meant there would be few taxpayers itemizing,” said Viard.
Viard also noted that where 30 percent of taxpayers itemized their deductions prior to implementation of the TCJA, only 10 percent of taxpayers now itemize their taxes. Viard expressed that some of Biden’s proposals are rather ambitious.
“He has handicapped himself, in my view, by this pledge to not raise taxes on anyone making less than $400,000,” said Viard. “Those kinds of restrictions are rarely useful.” Viard went on to further review the Biden tax plan, remarking that it incorporates a big change that will inevitably become bigger once the TCJA provisions expire.
Meanwhile, the January 14 panel “Compensation & Benefits Taxation: Health and Welfare Tax Reform” focused on pandemic-related legislation, advocacy, and guidance. Rhonda Migdail, legislation counsel with the Joint Committee on Taxation, discussed the Coronavirus Preparedness and Response Supplemental Appropriations Act, the first bill implemented to provide COVID-19 relief. Enacted on March 6, 2020, the bill covered some of the most urgent matters such as developing, manufacturing, and procuring vaccines and other medical supplies to fight the pandemic, as well as imposing cost-sharing provisions.
“Initially, [for a test to be approved] it had to be approved, cleared, or authorized by the Federal Food, Drug, and Cosmetic Act . . . which would cover the administration of those testing products,” said Migdail. However, the CARES Act, passed on March 25, made it clear that the Coronavirus Preparedness and Response Supplemental Appropriations Act was intended to be much broader, according to Migdail.
“It included any test, even if not approved, cleared, or authorized, as long as the developer requested or intended to request authorization from the Food and Drug Administration,” said Migdail. Thus, more tests were available for use and deemed appropriate unless the developer failed to request authorization from the FDA.
Kevin Knopf, senior technician reviewer at the IRS Office of Chief Counsel, discussed COVID testing and agency guidance surrounding it. Knopf reviewed Notice 2020-15, issued on March 11, 2020, on high-deductible health plans (HDHP) covering the cost of preventive care before a minimum deductible is satisfied.
“Generally, screening patients for a condition is defined as preventative health care, but testing to diagnose someone who is already experiencing symptoms is not preventative,” said Knopf. Nonetheless, last year states were requiring screenings to be covered by plans even if symptoms were present.
“To provide relief, Notice 2020-15 stated that all medical services related to testing and treatment of COVID-19 that are provided before the minimum deductible is satisfied will be disregarded for purposes of [HDHP] qualifications,” Knopf added.
The Tax Legislative and Regulatory Update, a popular annual event hosted by the D.C. Bar Taxation Community, was attended by approximately 400 practitioners and panelists.
If you missed attending the live conference, all sessions are now available for purchase. Please visit our On Demand Library and review the Taxation Community programs.
Tonée Jones, a 3L at the University of the District of Columbia David A. Clarke School of Law, is a Writer in Residence at the D.C. Bar. She works as a paralegal specialist at the U.S. Department of Justice’s Tax Division.
