The U.S. Internal Revenue Service moved on Tuesday to ease the tax burdens of private equity portfolio companies and heavily indebted industries. Under new rules, the IRS loosened a 2017 restriction that had capped tax deductions for debt interest payments at 30% of earnings before interest, taxes, depreciation and amortization, or EBITDA. The announcement reflects a temporary bump in the cap to 50% through year-end, as enacted by Congress in its March stimulus bill.Prior to President Donald Trump’s 2017 tax-code overhaul, interest expenses were generally fully deductible. With the new arrangement, laid out in 575 pages, the Treasury also no longer applies a limit on some transactions that don’t officially take the form of a loan, but potentially could be used to skirt the deduction cap. Included in that classification are debt-issuance costs, commitment fees and some hedging gains and losses.
The program will provide $50M in grants for small businesses that have been most severely impacted by the COVID-19 pandemic. Eligible small businesses will be able to apply for grants of up to $15,000. Grants will be calculated based on whether the business is in a severely impacted industry, the number of full-time employees, and the degree of revenue loss.
Detailed eligibility requirements, Frequently Asked Questions, a grant estimator calculator, and a list of required documents needed for applying can be found on www.commerceri.com. If you have any questions or require assistance completing the application, please call the Rhode Island Commerce Hotline at (401) 521-HELP.
The next round of stimulus got underway yesterday, with Senate Republicans releasing their proposal and Democrats meeting with White House officials, reports The Washington Post (subscription). Some highlights of the new proposal:
Five-year COVID-19-related liability protections for businesses, health care providers and schools.
$100 billion or more for the Paycheck Protection Program, which benefits small businesses.
Another round of $1,200 checks for Americans and financial support for schools. A reduction in emergency employment benefits from $600 to $200 per week, until states can set up their own unemployment programs to pay 70% of income. (A reminder: the current benefits run out very soon.)
- Payroll tax cut: “The administration is eyeing structuring the payroll tax cut in the legislation as a deferral rather than an outright cut, which would keep down the technical cost of the overall bill, according to the person briefed on the package, who spoke on condition of anonymity to discuss private deliberations. Such a deferral could require Americans to pay back the tax cut at a later date, but lawmakers could later decide to waive the repayment entirely.
- Liability protection: “The emerging GOP legislation will also contain liability protections for businesses, health-care providers and others, which McConnell has repeatedly described as a red line for him.”
The NAM has prioritized securing liability protections for manufacturers subject to baseless COVID-19-related lawsuits. Our plan and advocacy campaign has set the stage for congressional action, and Senate Majority Leader Mitch McConnell (R-KY) addressed it on the Senate floor today as he spoke about upcoming COVID-19 legislation, saying:
“The American people will not see their historic recovery efforts gobbled up by trial lawyers who are itching to follow this pandemic with a second epidemic of frivolous lawsuits. . . .Gross negligence will still be actionable, but we’re creating a safe harbor for institutions that make a good-faith effort to follow the guidelines available to them.”
Sen. John Cornyn (R-TX) and Senate Majority Leader Mitch McConnell (R-KY) introduced the SAFE TO WORK Act yesterday. It’s part of Senate Republicans’ larger proposed COVID-19 relief package and mirrors the NAM’s “Pandemic Liability Policy Recommendations.” It would protect businesses from lawsuits that seek to take advantage of the confusion and evolving landscape of federal, state and local health and safety guidance on COVID-19.
Manufacturing production rebounded for the second straight month, rising by 3.8% and 7.2% in May and June, respectively. In June, all 19 major manufacturing sectors had increases in production, as the industry attempts to recover from steep declines since February. Yet, it will take a while for output to get back to prerecession levels. On a year-over-year basis, manufacturing production has declined 11.2%, with durable and nondurable goods output down 14.3% and 7.4%, respectively. Manufacturing capacity utilization registered 60.0% in April, the lowest rate in the data’s history, which dates to January 1948, and it increased to 62.3% in May and 66.9% in June. It registered 75.2% in February