Tag: Internal Revenue Service

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Will Trump’s Executive Directives Provide Relief?

President Trump, in announcing his executive measures on Saturday, said he was bypassing Congress to deliver emergency pandemic aid to needy Americans. But his directives are rife with so much complexity and legal murkiness that they’re unlikely, in most cases, to bring fast relief — if any.

Because Congress controls federal spending, at least some of Mr. Trump’s actions will almost certainly be challenged in court. They could also quickly become moot if congressional leaders reach an agreement and pass their own relief package. Speaker Nancy Pelosi of California on Sunday dismissed Mr. Trump’s actions as unconstitutional and said a compromise deal was still needed. Treasury Secretary Steven Mnuchin said he would be open to further talks with Democratic leaders: “Anytime they have a new proposal, I’m willing to listen.”

Mr. Trump’s executive steps on Saturday focused on four areas: extending supplemental unemployment benefits, suspending some payroll taxes, extending relief for student loan borrowers and offering eviction relief. Of the four, the student loan memorandum seems likely to be the least controversial and the easiest to carry out.

But his various executive actions did not include several forms of relief that have been part of recent negotiations, including lump-sum payments to citizens and additional relief for small businesses.

If all of Mr. Trump’s directives take effect, here’s how experts believe they could play out.

The expiration at the end of July of the extra $600 a week in federally paid unemployment benefits, supplementing whatever eligible Americans get from their state, created an urgent crisis for the estimated 30 million people relying on that cash.

Mr. Trump described his action as creating “an extra $400 per week in expanded benefits.” But policy analysts said the plan laid out in Mr. Trump’s memo was so complicated, and potentially costly, for states that people won’t get that money quickly, if at all.

“Nobody is going to see this money in August, and we’ll be lucky to see it in September,” said Andrew Stettner, a senior fellow at the Century Foundation, a public policy research group.

The plan is full of caveats. First: It actually translates to an additional $300, not $400, for recipients because the federal government would pay for only 75 percent of cost. States would have to kick in the other 25 percent, or $100 per recipient, per week.

States can use the benefits they’re already paying to meet that criteria, a White House official said. But some people currently get less than $100 a week from their states, and they would be left out entirely unless their state agreed to increase their payments. That means the hardest-hit recipients, with the least financial support, “wouldn’t get anything at all from this,” Mr. Stettner said.

There are two more major catches. A big one is that the federal money is likely to vanish quickly. Mr. Trump directed the Federal Emergency Management Agency to use up to $44 billion from its Disaster Relief Fund, which usually pays for emergency help after catastrophes like hurricanes and earthquakes, to cover the federal portion of the payments.

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Trump Sidesteps Congress on Coronavirus Relief Actions

President Trump signed four actions on coronavirus relief Saturday after Congress negotiations stalled. It’s unclear what authority he has to do so, and the orders are likely to be challenged in the courts.

“I am providing a payroll tax holiday to Americans earning less than $100,000 per year. In a few moments I will sign a directive instructing the Treasury Department to allow employers to defer payment of the employee portion of certain payroll taxes. Second, I’m signing an executive order directing the Department of Housing and Urban Development, H.H.S. and C.D.C., to make sure renters and homeowners can stay in their homes. I’m taking action to provide an additional, or an extra, $400 per week in expanded benefits. Earlier this year we slashed student loans’ interest rates to 0% and suspended student loan payments, and Congress extended that policy through Sept. 30. Today I’m extending this policy through the end of the year and will extend it further than that, most likely.” “Mr. President, though, this is expected to be tied up in the courts, so this relief is going to be delayed or blocked —” “Oh I don’t think so — I think this is going to go very rapidly through the courts. This will go very — if we get sued. Maybe we won’t get sued. If we get sued, it’s somebody that doesn’t want people to get money. OK? And that’s going to be a very popular thing.” [crosstalk] “… trying to go around Congress, are you trying to set a new precedent that the president can go around Congress and decide how many —” “You ever hear the word obstruction? They’ve obstructed. Congress has obstructed. The Democrats have obstructed people from getting desperately needed money. Go ahead, please. Right here.” [crosstalk] “No, no, you’re finished. Go ahead, please.” [crosstalk] [cheering] “You said that you passed Veterans Choice. It was passed in 2014 —” “OK, excuse me, go ahead please.” “But it was a false statement, sir.” “OK, thank you very much, everybody. Thank you very much.” [cheering]

President Trump signed four actions on coronavirus relief Saturday after Congress negotiations stalled. It’s unclear what authority he has to do so, and the orders are likely to be challenged in the courts.CreditCredit…Anna Moneymaker for The New York Times

Michele Evermore, a senior policy analyst for the National Employment Law Project, projected that at current claims’ rates, the $44 billion would run out in about five or six weeks. The Committee for a Responsible Federal Budget, a research organization, also estimated that the money would last just five weeks.

Also, state governors must opt in and request the aid and must agree to distribute it through their regular unemployment insurance system as a supplemental payment. That’s a heavy demand on state systems that are already “stressed to the point of breaking,” Ms. Evermore said.

A FEMA spokeswoman did not answer questions on Sunday about whether any states had contacted the agency to formally seek the federal aid. Gov. Andrew M. Cuomo of New York said that the president’s executive measures were on “shaky ground legally” and that asking states facing financial crises to increase their unemployment benefit payments is “just laughable.”

FEMA said the program would be applied retroactively to the week ending Aug. 1 and would last until Dec. 6 or until the authorized disaster funding is depleted, whichever comes first.

You would still owe your payroll taxes under the terms of the president’s memorandum, and so would your employer, if you have one. What might change would be when some of the taxes for the period from Sept. 1 to Dec. 31 are due.

If you are not self-employed, what usually happens is that your employer pays half of the 12.4 percent in Social Security payroll taxes that most people owe and then withholds the other half from your paycheck. For the four months that are now in question, the withholding of the employee share — 6.2 percent — would stop, which means you would see more money in your paycheck.

This would only be true, however, for people who earn under $4,000 every two-week pay period, according to the memorandum, or about $104,000 a year. Those who earn more than that would still be subject to withholding, up to the annual limit of $137,700. And because the cap is per individual and not per household, two-income families who are well into the higher income tax brackets might have at least one working adult qualify.

At some point soon, the Internal Revenue Service will presumably issue guidance saying when the money is due, under what the White House is calling a “deferral” of these taxes. But the order also states that the Treasury Department shall “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred.”

Such a measure would face long-shot odds. Meanwhile, pity the payroll processors who have to interpret the memorandum. Mike Trabold, director of compliance at Paychex, outlined a number of scenarios in an interview. Employers could decide to be conservative and continue to withhold on their employees’ behalf. Or employers could stop withholding the money starting Sept. 1, and let those workers deal with the consequences of potentially owing money later, assuming the taxes eventually come due.

Then, some employers might formally let some employees continue to withhold even if all the other workers are getting the extra money in their paychecks. Or an employer might try to do the reverse — say, give an enraged employee, perhaps one threatening to sue, the opportunity to take home the 6.2 percent extra, even if the company chooses to continue withholding on all other employees’ behalf.

Assuming the income cap is itself legal, Pete Isberg, vice president for government relations at another payroll specialist, ADP, said that employers would need some flexibility. After all, an employee might show up for a new job on Sept. 15 having already earned too much elsewhere to be under the income cap. Other employees have side income throughout the year. Still more of them may simply make adjustments via a W-4 withholding form on their own, no matter what sort of default withholding strategy their employer selects.

The self-employed face their own questions, since they pay both halves of the 12.4 percent. Minnie Lau, a certified public accountant in San Francisco, is keeping her advice simple for most people who do not urgently need the boost in pay. “I am still telling clients not to spend the money, if they’re thinking this will be forgiven,” she said. “Because it literally hasn’t been yet.”

Here, the White House memorandum aims to extend relief by three months.

Under the terms of the CARES Act, the Education Department and its loan servicers put all federal student loan borrowers into administrative forbearance. That means there are no payments due through Sept. 30 on federal loans that the government controls. Interest is not accruing either, though there was no outright loan cancellation associated with the relief. People can keep making principal payments if they choose to.

If the memorandum holds — and it’s not clear who would stand against providing relief to millions of people who borrowed to pay for higher education — the forbearance will last through Dec. 31. The Department of Education has not yet said how it might carry out the memorandum. It has an extensive FAQ page about how pandemic forbearance works (according to the prevailing CARES Act rules) on its website.

The president’s executive order on assistance to renters doesn’t offer much immediate hope for people on the brink of losing their housing.

Until its expiration during the last week of July, an eviction filing moratorium that the CARES Act put into place protected millions of Americans. They included people who lived in public housing, qualified for the Section 8 rental assistance program or rented from landlords with certain kinds of federally backed mortgages.

Now that the federal freeze has expired, those renters have no governmental protection unless state or local officials have put their own moratoriums in place. The order directs various federal agencies to consider what they can do with existing authority or budgets to help further, but immediate relief for desperate renters seems unlikely via this order.

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As Banks Stumble in Delivering Aid, Congress Weighs Other Options

When the federal government agreed to funnel $2.2 trillion in emergency aid to Americans devastated by the economic shutdown, the nation’s banks were given a central role.

There were three main prongs of relief for taxpayers and American businesses, all routed through the banks in various ways: stimulus checks, a $660 billion package for small businesses, and unemployment benefits. Confronted with an unprecedented crush of need as millions of Americans lost their livelihoods, the banks stumbled in ways big and small.

The small-business aid, the Paycheck Protection Program, had a chaotic introduction and ran dry within days. Some banks withheld stimulus cash from people with overdrawn accounts. And some banks’ debit cards, used to distribute unemployment benefits, didn’t work properly.

Several lawmakers have begun exploring ways to sidestep banks to deliver aid. Among the proposals, mainly from Democrats: using Internal Revenue Service records and payroll processing companies, as well as the Federal Reserve, to help distribute money more swiftly.

Democrats are also pushing for additional stimulus funds, but it’s not clear that more aid will win approval, especially with top Republicans urging restraint. Top Democrats in the House, who are working on their own coronavirus legislation, want to expand the existing programs, including a provision for lending exclusively through nonprofits or mission-focused lenders known as Community Development Financial Institutions, which lend to poor communities not served by banks.

Senator Doug Jones, Democrat of Alabama, is pushing a plan to give small businesses another round of help in paying employees by using the services of payroll processors, which already distribute wages for close to 40 percent of U.S. businesses. And companies that don’t use payroll processors could get payouts directly from the I.R.S.

“Another option makes it easier and takes a little pressure off the banks,” Mr. Jones said. “They’ve been overwhelmed.” He had urged fellow lawmakers to consider using payroll companies rather than banks when the first installment of the paycheck program was taking shape.

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Credit…Ting Shen for The New York Times

The Paycheck Protection Program was a highlight of the CARES Act, but its image suffered after several publicly traded companies exploited loopholes to gain access to funds — partly because of their close ties to big banks. Many of those companies, including the restaurant operator Ruth’s Chris Steak House, have since returned the money.

“We’re hoping that it’s really going to get better now that Ruth’s Chris isn’t supposed to be front and center,” said Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee. “But it’s still going through a set of banking channels,” he added. Instead, Mr. Wyden is proposing that businesses with under $1 million in gross receipts — what the business brings in before taking out costs — get reimbursed for a portion of payroll expenses directly from the I.R.S.

There is also growing support among Democrats for a plan put forward by Representative Pramila Jayapal, Democrat of Washington, that would have the federal government directly pay 100 percent of weekly wages for workers making up to $100,000 and their benefits. A narrower version proposed by Senator Josh Hawley, Republican of Missouri, would have the government provide for 80 percent of wages, up to the national median wage.

Some Democrats on the Senate Banking Committee want to see the Fed create accounts for every American, similar to how Social Security numbers are assigned. Any future aid could then be distributed through the central bank.

Although the architects of the CARES Act acknowledge the early missteps, particularly with the start of the paycheck program, some lawmakers say they would prefer to work within the confines of what they have already created.

“We need to look at the programs that are out there, and tweak them to get them to work better,” said Senator Rob Portman, Republican of Ohio. “I would hate to take it away from banks and try something else that we haven’t tried yet.”

Complicated rules and glitches in the tech platform operated by the Small Business Administration, which is running the paycheck program, contributed to its chaotic start. But the behavior of many banks added to the mayhem, especially since they had wide latitude to determine whom to lend to, and how much.

Connor Crosby runs Ignition Visuals, a video production company in Lowell, Mass. After painstakingly calculating how much he could receive as the sole proprietor, he asked Citizens Financial Group for $15,000 under the paycheck program. Citizens, however, gave him only $9,000, without explaining why it had reduced the amount. An S.B.A. employee told Mr. Crosby that it was his bank, not the government agency, that determined how much money to give him. After The New York Times asked Citizens about his case, Mr. Crosby got a call from a bank representative saying he would be receiving the remaining $6,000.

“Given the scale and complexity of the program and the very short time frame available to put it in place, it is not surprising that some errors may have been made in the early days of its execution,” said Peter Lucht, a Citizens spokesman. “We are committed to identifying and addressing such cases so that we can get these applicants the maximum possible loan amount.”

Another Citizens customer, Alexander Ball, was told on April 20 by a bank representative that he wouldn’t get stimulus money because he had overdrawn his account trying to pay bills after losing his piecemeal work as a delivery driver. A week later, in response to an inquiry by The Times, Mr. Lucht said the bank’s policy was to grant overdrawn customers access by temporarily crediting their accounts to zero out the overdrafts — but only if they called and asked. He said the representative’s response to Mr. Ball appeared to have been a mistake and suggested he try again to get the bank to release his funds. Mr. Ball eventually got the money on April 28.

Bank of America has also faced complaints that it gave small-business owners a fraction of what they asked for.

“We have funded more than 250,000 loans so far and continue to process applications,” Bill Halldin, a Bank of America spokesman, said in an email. “When a client has a concern about their loan amount, we review it.”

Jacob Leibenluft, a senior fellow at the Center for American Progress and a former economic adviser to President Barack Obama, said he could understand the motivation for enlisting banks to help distribute aid. But “there’s no question that any form of additional small business assistance needs to be both better targeted to businesses that are experiencing the greatest need and take that rationing or decision-making processes out of the banks.”

Many banks, including the country’s four largest lenders and several regional and community institutions, are now fighting lawsuits filed by groups of would-be customers claiming they were mistreated or even defrauded when they tried to apply for help.

Complaints have also piled up from out-of-work Americans against two banks responsible for distributing unemployment benefits in 23 states — U.S. Bank and Key Bank. Many states put unemployment money on debit cards, but those cards haven’t always worked as intended, prompting the outcry.

Last month, after complaints about nonfunctional cards issued by Key Bank, which is handling benefit distributions for New York, the state’s labor commissioner, Roberta Reardon, advised people to have their unemployment benefits deposited directly into their bank accounts instead.

A Key Bank spokeswoman, Kimberly Kowalski, said that the lender had issued benefit cards at 20 times its normal rate over the past two months, and that its call centers were taking 10 times the normal number of calls.

U.S. Bank has not had any systems outages affecting the distribution of unemployment benefits, but some states had experienced problems processing claims, a bank spokesman, David Palombi, said.

“The pandemic has created a situation that is unprecedented, and has presented significant challenges,” Mr. Palombi said.

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Where is My Stimulus Payment? Here’s What You Need to Check.

It’s been weeks since people started getting coronavirus relief payments. You’ve checked and rechecked your eligibility, just to be sure.

But still, no $1,200 stimulus payment has arrived in your bank account or mailbox. Perhaps $3,400 is riding on this for you, your spouse and your two children, for whom you’re supposed to get $500 each.

Tens of millions of people have already received their payments, but many others are still waiting or wondering. There are a lot of reasons you could be among them, even if the government has removed some of the hurdles it initially set up.

So what do you do if yours hasn’t arrived?

A couple of weeks ago, the I.R.S. introduced its “Get My Payment” tool to help people figure out when and how their money might be arriving. The unveiling didn’t go so well: Many users did not realize how picky the site was about, say, entering an address that precisely matched the one on their most recent tax return.

Also, there were lots of confusing messages indicating that there was no information available at all. Things have improved some since then, and the I.R.S. is updating the information once each day, usually in the middle of the night.

You may need information from recent tax returns at the ready to use the tool, and it doesn’t work for recipients of Supplemental Security Income and Veterans Affairs benefits.

People who don’t usually file a tax return should give the I.R.S. an assist.

If you haven’t had to file a return because your gross income did not exceed $12,200 ($24,400 for married couples), you still qualify for a payment. But if you’re not a recipient of S.S.I. or V.A. benefits, you should fill out a special form for non-filers.

The government is also crosschecking all the Social Security and V.A. databases and issuing payments to those recipients for whom it does have bank account or similar information, but that process can add time.

But May 5 is an important deadline: S.S.I. and V.A. beneficiaries who didn’t have to file a tax return in 2018 or 2019 and have children age 16 or under should register online with the I.R.S. non-filer tool to get the $500 per child payment more quickly.

One known quagmire: If you filed taxes in 2018 or 2019 with the help of a third-party company, you may have taken advantage of something called a refund anticipation loan. The company may have set you up with a temporary account to process the loan and give you access to that money.

The bank information the I.R.S. has for you may be for that account, which may be closed at this point. That means that when the I.R.S. tries to deposit the stimulus money there, the process will break down.

At that point, the I.R.S. is supposed to send a paper check to the address on the most recent tax return, or one on file with the U.S. Postal Service.

You should be able to track this whole messy process using the “Get My Payment” service, but it could take several more weeks to get your payment.

A lot of money is flowing right now, so people will indeed try to steal it. The I.R.S. knows this, so 15 days after it issues your payment, it is supposed to send confirmation letters to the most recent address it has on file for you.

That letter should explain exactly how the I.R.S. made the payment. If you haven’t received the money yet, that’s the time to worry about whether someone else took it. The letter will contain contact information for the I.R.S. if you need help.

For any number of reasons, the I.R.S. may not have up-to-date information — or any at all — about your address or bank account. For instance, plenty of people don’t trust the I.R.S. with their checking account information for direct deposits or payments. Instead, they pay tax bills with paper checks and collect refunds that way, too.

If you’re in that category but are willing to change your approach, you may be able to get your payment more quickly. If the government hasn’t already started the process of sending you a paper check, it may still be possible to enter your checking account information via the Get My Payment tool to get your money more quickly.

People with higher incomes might not get a payment. The $1,200 payment decreases until it stops altogether for a single person earning $99,000 or a married couple who have no dependent children, file their taxes jointly and earn $198,000. And if someone else claimed you as a dependent, you don’t get a check.

The agency got off to a pretty slow start in explaining how things would work, but it has now answered 38 questions in its F.A.Q. It’s also published a chart to help you figure out what, if any, additional information you may need to hand over to receive a payment or get one more quickly.

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Coronavirus Stimulus Package F.A.Q.: Checks, Unemployment, Layoffs and More

[Read our Coronavirus Relief Small Business F.A.Q.]

President Trump has signed a bipartisan $2 trillion economic relief plan to offer assistance to tens of millions of American households affected by the coronavirus pandemic. Its components include stimulus payments to individuals, expanded unemployment coverage, student loan changes, different retirement account rules and more.

Here are the answers to common questions about the relief package. We’ll update this article as we know more.

More information on getting assistance can be found at our Hub for Help.

How large will the payments be?

Most adults will get $1,200, although some will get less. For every qualifying child age 16 or under, the payment will be an additional $500.

How many payments will there be?

Just one. Future bills could order up additional payments, though.

Is there a place I can check to see where my stimulus payment is and when it is arriving?

Yes. Go to this page on the I.R.S. website.

How do I know if I will get the full amount?

It depends on your income. Single adults with Social Security numbers who have an adjusted gross income of $75,000 or less will get the full amount. Married couples with no children earning $150,000 or less will receive a total of $2,400. And taxpayers filing as head of household will get the full payment if they earned $112,500 or less.

Above those income figures, the payment decreases until it stops altogether for single people earning $99,000 or married people who have no children and earn $198,000. According to the Senate Finance Committee, a family with two children will no longer be eligible for any payments if its income surpassed $218,000.

You can’t get a payment if someone claims you as a dependent, even if you’re an adult. In any given family and in most instances, everyone must have a valid Social Security number in order to be eligible. There is an exception for members of the military.

You can find your adjusted gross income on Line 8b of the 2019 1040 federal tax return.

Do college students get anything?

Not if anyone claims them as a dependent on a tax return. Usually, students under the age of 24 are dependents in the eyes of the taxing authorities if a parent pays for at least half of their expenses.

What year’s income should I be looking at?

2019. If you haven’t prepared a tax return yet, you can use your 2018 return. If you haven’t filed that yet, you can use a 2019 Social Security statement showing your income to see what an employer reported to the I.R.S.

What if my recent income made me ineligible, but I anticipate being eligible because of a loss of income in 2020? Do I get a payment?

The plan does not help people in that circumstance now, but you may benefit once you file your 2020 taxes. That’s because the payment is technically an advance on a tax credit that is available for the entire year. So it will depend on how much you earn.

And there are many other provisions in the legislation. You may be able to file for unemployment or for one of the new loans for small business owners or sole proprietors.

Will I have to apply to receive a payment?

No. If the Internal Revenue Service already has your bank account information from your 2019 or 2018 return, it will transfer the money to you via direct deposit based on the recent income-tax figures it already has. The payments will also be automatic for people who receive Social Security retirement, survivor or disability benefits. Recipients of federally managed railroad retirement benefits will receive money automatically, too.

What if my direct deposit information has changed or I want to add it for the first time?

The I.R.S. has set up a page on its website to collect this information. If it doesn’t load because of high demand, keep trying — or attempt to access it at a time with lower demand, like late at night or early in the morning. The system is sensitive; if it doesn’t recognize your information, consider all of the different ways you could render your address and other data.

When will the payment arrive?

Payments have started showing up in bank accounts. Treasury Secretary Steven Mnuchin has said he expected most people to get their payments by April 17. Presumably those people using the new portals would not get money until a few weeks after they are first able to provide their information.

Many people receiving paper checks will have to wait longer because the federal government is producing and distributing them in batches.

What if I haven’t filed tax returns recently? Will that affect my ability to receive a payment?

It could.

On April 10, the I.R.S. posted a notice and instructions for people whose gross income did not exceed $12,200 ($24,400 for married couples) in 2019 and others who were not required to file federal income tax returns. In order to receive a payment, they must fill out a form that is linked from the notice. The form asks for checking account information; people who have no ability to receive a direct deposit will get a paper check in the mail instead.

As part of the announcement, the I.R.S. also said it was still working on ways to push payments automatically to certain people who do not normally file a return: those who receive Supplemental Security Income (S.S.I.) and those who receive veterans’ pension, survivor or disability payments. People in those categories can use the new form now to get payments faster if they wish.

The I.R.S. has been quick to reassure those people that they would not somehow end up owing tax just because they are filing tax returns now, in order to make it easier to receive this one-time payment.

If you’re worried about money that you already owe that you cannot pay, the I.R.S. recommends consulting a tax professional who can help you request an alternative payment plan or some other resolution. You may also be able to apply online without the help of a pro.

Will most people who are receiving Social Security retirement and disability payments each month also get a stimulus payment?

Yes.

Will eligible unemployed people get these stimulus payments?

Yes.

Will U.S. citizens living abroad get a payment?

Yes, as long as they meet the income requirements and have a Social Security number.

If my payment doesn’t come soon, how can I be sure that it wasn’t misdirected?

During the week of April 13, the I.R.S. intends to release an online tool that will allow you to track the status of your payment.

According to the relief law, you will get a paper notice in the mail no later than a few weeks after your payment has been disbursed. That notice will contain information about where the payment ended up and in what form it was made. If you couldn’t locate the payment at that point, it would be time to contact the I.R.S. using the information on the notice.

Do I have to pay income taxes on the amount of my payment?

No.

If my income tax refunds are currently being garnished because of a student loan default, will this payment be garnished as well?

No. In fact, the bill temporarily suspends nearly all efforts to garnish tax refunds to repay debts, including those to the I.R.S. itself. But this waiver may not apply to people who are behind on child support.

What about other garnishment orders that I may be subject to?

The National Consumer Law Center has published a guide for people who may be in this spot. The short version: “Consumers should consider withdrawing the funds in cash or transferring the funds electronically or through a debit card payment to pay for necessary goods or services” immediately after the payment arrives.

Who will be covered by the expanded program?

The plan wraps in far more workers than are usually eligible for unemployment benefits, including self-employed people and part-time workers.

The bottom line: Those who are unemployed, are partly unemployed or cannot work for a wide variety of coronavirus-related reasons will be more likely to receive benefits.

How much will I receive?

It depends on your state.

Benefits will be expanded in an attempt to replace the average worker’s paycheck, explained Andrew Stettner, a senior fellow at the Century Foundation, a public policy research group. The average worker earns about $1,000 a week, and unemployment benefits often replace roughly 40 to 45 percent of that. The expansion will pay an extra amount to fill the gap.

Eligible workers will get an extra $600 per week on top of their state benefit, until July 31. But some states are more generous than others. According to the Century Foundation, the maximum weekly benefit in Alabama is $275, but it’s $450 in California and $713 in New Jersey.

So let’s say a worker was making $1,100 per week in New York; she’d be eligible for the maximum state unemployment benefit of $504 per week. Under the new expansion, she gets an additional $600 of federal pandemic unemployment compensation, for a total of $1,104, essentially replacing her original paycheck.

States have the option of providing the entire amount in one payment, or sending the extra portion separately. But it must all be done on the same weekly basis.

Do I have to apply for the extra $600 separately?

No. Eligibility depends on whether you qualify for state or other federal unemployment benefits.

Will I get the full $600?

If you’re eligible for at least $1 of state-level or federal unemployment compensation, you get the full $600, according to the Labor Department.

Are gig workers, freelancers and independent contractors covered?

Yes, self-employed people are newly eligible for unemployment benefits for up to 39 weeks through the so-called pandemic unemployment assistance program, which will be administered through the states.

Benefit amounts will be calculated based on previous income, using a formula from the Disaster Unemployment Assistance program, according to a congressional aide. There will be a minimum benefit equal to one-half the state’s average weekly unemployment insurance amount. The national average is about $190 per week, the National Employment Law Project said.

Self-employed workers will also be eligible for the additional $600 weekly benefit provided by the federal government.

What if I’m a part-time worker who lost my job because of a coronavirus reason, but my state doesn’t cover part-time workers? Am I still eligible?

Yes. Part-time workers are eligible for benefits, but the benefit amount and how long benefits will last depend on your state. They are also eligible for the additional $600 weekly benefit.

What if I have Covid-19 or need to care for a family member who has it?

If you’ve received a diagnosis, are experiencing symptoms or are seeking a diagnosis — and you’re unemployed, partly unemployed or cannot work as a result — you will be covered. The same goes if you must care for a member of your family or household who has received a diagnosis.

What if my child’s school or day care shut down?

If you rely on a school, a day care or another facility to care for a child, elderly parent or another household member so that you can work — and that facility has been shut down because of coronavirus — you are eligible.

What if I’ve been advised by a health care provider to quarantine myself because of exposure to coronavirus? And what about broader orders to stay home?

People who must self-quarantine are covered. The legislation also says that individuals who are unable to get to work because of a quarantine imposed as a result of the outbreak are eligible.

I was about to start a new job and now can’t get there because of an outbreak.

You’re eligible for benefits. You will also be covered if you were immediately laid off from a new job and did not have a sufficient work history to qualify for benefits under normal circumstances.

I had to quit my job as a direct result of coronavirus. Would I be eligible to apply for benefits?

It depends. Let’s say your employer didn’t lay you off but you had to quit because of a quarantine recommended by a health care provider, or because your child’s day care closed and you’re the primary caregiver. Situations like that are covered.

But this provision wasn’t intended to cover people who quit (or want to quit) because they fear that continuing to work puts them at risk of contracting coronavirus, according to congressional aides.

My employer shut down my workplace because of coronavirus. Am I eligible?

Yes. If you are unemployed, partly unemployed or unable to work because your employer closed down, you’re covered under the bill.

The breadwinner of my household has died as a result of coronavirus. I relied on that person for income, and I’m not working. Is that covered?

Yes.

Whom does the bill leave out?

Workers who are able to work from home, and those receiving paid sick leave or paid family leave, are not covered. New entrants to the work force who cannot find jobs and undocumented workers are also ineligible.

How long will the payments last?

That depends on your state, but many people will get at least 39 weeks through a variety of programs that can kick in at different times. Some may get a year or more if their state’s programs are particularly generous.

To start, you’ll receive your state benefit. (Many states provide 26 weeks of payments, but some offer less. Others use a sliding scale tied to unemployment levels.) After that, a new 13-week federal benefit will kick in.

What happens next depends on several factors.

States can offer so-called extended benefits in times of high unemployment, and each state has its own formula. The number of weeks offered by each state varies, but it’s usually half the length of the standard benefit. Some offer more.

People who remain unemployed because of a coronavirus-related reason may be able to tap into an additional pandemic unemployment assistance program from the federal government that could augment your state-level benefits, up to a total of 39 weeks. (The 13-week federal benefit doesn’t count toward this total.)

The extra $600 payment will last for up to four months, covering weeks of unemployment ending July 31.

How long would the broader program last?

Expanded coverage would be available to workers who were newly eligible for unemployment benefits for weeks starting on Jan. 27, 2020, and through Dec. 31, 2020.

I’m already receiving unemployment benefits. Will I receive any help?

Yes. Even if you’re already receiving unemployment benefits for reasons unrelated to the coronavirus, your state-level benefits will still be extended by 13 weeks. You will also receive the extra $600 weekly benefit from the federal government.

My unemployment recently ran out — could I sign up again?

Yes. If you’ve exhausted your benefits, eligible workers can generally reapply. But how much you get and for how long depends on the state where you worked. Everyone gets at least another 13 weeks, along with the extra $600 payment through July 31.

Are any unemployment benefits retroactive?

Maybe. If you are newly eligible for benefits, you may be able to claim state-level benefits retroactively, back to Jan. 27. But it will ultimately be determined by your state, which will consider the date that you became unemployed and any extenuating circumstances that prevented you from filing earlier, according to a representative for the Department of Labor.

People who are already receiving unemployment will not get any retroactive benefits. If your benefits run out, you’ll be eligible for the added 13 weeks of state-level benefits (as long as you continue to meet the eligibility criteria).

The extra $600 payment being paid by the federal government is also not retroactive.

Will this income disqualify me from any other programs?

Maybe. The additional $600 benefit counts as income when determining eligibility for means-tested programs, except for Medicaid and the Children’s Health Insurance Program, known as CHIP.

How long will I need to wait for benefits?

States have been incentivized to waive the one-week waiting period, but it’s unclear how long it will take to process claims — especially with state offices so strained by a flood of applicants.

The arrival of the extra $600 depends on when your state signed an agreement with the Department of Labor. The week ending April 4 or 5 (depending how your state lays out its calendar) is the first week for which unemployed workers can claim the new federal benefit.

But that doesn’t necessarily mean benefits will flow right away. States that are unable to immediately pay the federal pandemic benefit after they sign agreements will pay them retroactively for the weeks you’re entitled to receive them.

Are benefits taxable?

Yes. Benefits are subject to federal income taxes and most state income taxes, according to the Department of Labor. The same goes for the $600. You should be able to elect to have taxes withheld.

Child support obligations can also be deducted from your benefits.

What happens if I worked in more than one state? Where do I file?

People should apply in the state they worked in last — and be prepared to submit documentation for all income earned in every other state as well, said Michele Evermore, a senior policy analyst for social insurance at the National Employment Law Project. But if you worked in one or more places simultaneously, then she suggested starting with the state you live in.

The federal government has already waived two months of payments and interest for many federal student loan borrowers. Is there a bigger break now with the new bill?

Yes. Until Sept. 30, there will be automatic payment suspensions for any student loan held by the federal government, and it’s retroactive to March 13. It is hard to contact many of the loan servicers right now, so check your account online in the coming weeks. Once you are logged in, look for the current amount due. There, you should be able to see if the servicer has reset its billing systems so that you are showing no payment due.

How do I know if my loan is eligible?

If you’ve borrowed money from the federal government — a so-called direct loan — in the past 10 years, you’re definitely eligible. According to the Institute for College Access & Success, 90 percent of loans (in dollar terms) will be eligible.

Older Federal Family Educational Loans (F.F.E.L.) that the U.S. Department of Education does not own are not eligible, nor are Perkins loans that your school owns (ask your financial aid office if you’re not sure), loans from state agencies, or loans from private lenders like Discover, Sallie Mae and Wells Fargo. The holders of all those kinds of loans may be offering their own assistance programs.

Within a few weeks, you are supposed to receive notice indicating what has happened with your federal loans. You can choose to keep paying down your principal if you want, and you should contact your loan servicer if that is the case. Then, after Aug. 1, you should get multiple notices letting you know about the cessation of the suspension period and that you may be eligible to enroll in an income-driven repayment plan.

I’m signed up for automatic payments. Will my servicer turn them off by itself during this period?

Yes, that is how it’s supposed to happen, according to information that the Education Department posted.

What happens if I’ve already made a payment since March 13?

You can ask your loan servicer to refund it to you. But keep in mind that it is taking time for servicers to interpret Education Department guidance so they can change their websites and update their customer service representatives.

Will my loan servicer charge me interest during the six-month period?

The bill says that interest “shall not accrue” on the loan during the suspension period.

After repeated questions, the Education Department said any unpaid interest from before the period began will not be added to your loan’s principal — a process known as capitalization — because of the six-month suspension.

In short: No one is supposed to have a larger balance after the suspension than before because of the bill and the relief it offers.

At the end of the suspension, keep a close eye on what your loan servicer does (or does not do) to put you back into your previous repayment mode. Servicer errors are common.

Will the six-month suspension cost me money, since I’m trying to qualify for the public service loan forgiveness program by making 120 monthly payments?

No. The legislation says that your payment count will still go up by one payment each month during the six-month suspension, even though you will not actually be making any payments. This is true for all forgiveness or loan-rehabilitation programs.

Is wage garnishment that resulted from being behind on my loan payments suspended during this six-month period?

Yes. So is the seizure of tax refunds, the reduction of any other federal benefit payments and other involuntary collection efforts.

Are there changes to the rules if my employer repays some of my student loans?

Yes. Some employers do this as an employee benefit. Between the date the bill is signed and the end of 2020, they can offer up to $5,250 of assistance without that money counting as part of the employee’s income. If the employer pays tuition for classes an employee is taking, that money will also count toward the $5,250.

Which retirement account rules are suspended?

For the calendar year 2020, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses. If you don’t need the money now, you can let the investments sit and hope that they recover.

This change would not affect old-fashioned pensions.

What if I have to take money out of my I.R.A. or workplace retirement plan early?

You can withdraw up to $100,000 this year without the usual 10 percent penalty, as long as it’s because of the outbreak.

You will also be able to spread out any income taxes that you owe over three years from the date you took the distribution. And if you want, you could put the money back into the account before those three years are up, even though the rules may normally keep you from making a contribution that large.

This exception applies only to coronavirus-related withdrawals. You qualify if you tested positive, a spouse or dependent did or you experienced a variety of other negative economic consequences related to the pandemic. Employers can allow workers to self-certify that they are qualified to pull money from a workplace retirement account.

Can I still borrow from my 401(k) or other workplace retirement plan?

Yes, and you can take out twice the usual amount. For 180 days after the bill passes, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. Usually you can’t take out more than half your balance, but that rule is suspended.

If you already have a loan and were supposed to finish repaying it before Dec. 31, you get an extra year.

I want to help people who are suffering from the pandemic. Does the bill do anything about charitable donations?

Yes. The bill makes a new deduction available — and not just for 2020 — for up to $300 in annual charitable contributions. It’s available only to people who don’t itemize their deductions, and you calculate this new one by subtracting the amount you give from your gross income.

To qualify, you have to give cash to a qualified charity and not to a donor-advised fund, which is a charitable account that affluent people often use to bunch contributions in a particular year in order to maximize deductions. If you’ve already given money since Jan. 1, that contribution counts toward the $300 cap.

I am lucky to have substantial wealth, and I want to give more to charity than I usually do. Have the limits on charitable deductions changed?

Yes, they have. As part of the bill, donors can deduct 100 percent of their gift against their 2020 adjusted gross income. If you have $1 million of income, you can give $1 million to a public charity and deduct the full amount in 2020.

The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your private foundation, the old deduction rules apply. And while the organizations that manage donor-advised funds are public charities, you do not get the higher deduction for donating cash to your donor-advised fund.

If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it next year, as has always been the case.

How does the aid for small businesses and nonprofits work?

Good news here, as you may be eligible for forgivable loans. Our colleague Emily Flitter covered the details in a separate article. Aides to Senator Marco Rubio, Republican of Florida, also wrote a one-page summary of those provisions.

Will there be damage to my credit report if I take advantage of any virus-related payment relief, including the student loan suspension?

No. There is not supposed to be, at least.

The bill states that during the period beginning on Jan. 31 and continuing 120 days after the end of the national emergency declaration, lenders and others should mark your credit file as current, even if you take advantage of payment modifications.

If you had black marks in your file before the virus hit, those will remain unless you fix the issues during the emergency period.

Credit reporting agencies can make errors. Be sure to check your credit report a few times each year, especially if you accept any help from any financial institution or biller this year.

What if I find black marks anyway?

File a dispute with the credit bureau, but it may take a while to fix them. The Consumer Financial Protection Bureau has told credit bureaus and others that during the pandemic they can take longer than the usual 30 to 45 days to meet the dispute-response deadline, as long as they are making “good faith” efforts.

Is there any relief for renters in the bill?

Yes. The bill puts a temporary, nationwide eviction moratorium in place for any renters whose landlords have mortgages backed or owned by Fannie Mae, Freddie Mac and other federal entities. About 70 percent of all mortgages fall into this category. If you want to figure out whether your landlord has such a mortgage, try plugging the address in to the National Housing Preservation Database.

In addition, the bill stipulates that landlords cannot charge any fees or penalties for nonpayment of rent. The eviction suspension applies only to nonpayment; damaging your place is still grounds for action. This moratorium will last for 120 days after the bill passes.

Does this bill change any rules for health savings accounts and health care flexible spending accounts?

Yes. After at least 15 years of lobbying and debate, menstrual products are now eligible for reimbursement.

Did the legislation make it illegal for any internet provider to cut off service to an individual or small business that can’t pay its bills?

No.

Did the legislation make it illegal for utility providers to cut off service?

No.

Paul Sullivan contributed reporting.

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How Big Companies Won New Tax Breaks From the Trump Administration

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

Thanks in part to the chaotic manner in which the bill was rushed through Congress — a situation that gave the Treasury Department extra latitude to interpret a law that was, by all accounts, sloppily written — the corporate lobbying campaign was a resounding success.

Image
Credit…Jon Elswick/Associated Press

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“Treasury is gutting the new law,” said Bret Wells, a tax law professor at the University of Houston. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”

It is the latest example of the benefits of the Republican tax package flowing disproportionately to the richest of the rich. Even a tax break that was supposed to aid poor communities — an initiative called “opportunity zones” — is being used in part to finance high-end developments in affluent neighborhoods, at times benefiting those with ties to the Trump administration.

Of course, companies didn’t get everything they wanted, and Brian Morgenstern, a Treasury spokesman, defended the department’s handling of the tax rules. “No particular taxpayer or group had any undue influence at any time in the process,” he said.

Ever since the birth of the modern federal income tax in 1913, companies have been concocting ways to avoid it.

In the late 1990s, American companies accelerated their efforts to claim that trillions of dollars of profits they earned in high-tax places like the United States, Japan or Germany were actually earned in low- or no-tax places like Luxembourg, Bermuda or Ireland.

Google, Apple, Cisco, Pfizer, Merck, Coca-Cola, Facebook and many others have deployed elaborate techniques that let the companies pay taxes at far less than the 35 percent corporate tax rate in the United States that existed before the 2017 changes. Their playful nicknames — like Double Irish and Dutch Sandwich — made them sound benign.

The Obama administration and lawmakers from both parties have tried to combat this profit shifting, but their efforts mostly stalled.

When President Trump and congressional Republicans assembled an enormous tax-cut package in 2017, they pitched it in part as a grand bargain: Companies would get the deep tax cuts that they had spent years clamoring for, but the law would also represent a long-overdue effort to fight corporate tax avoidance and the shipment of jobs overseas.

“The situation where companies are actually encouraged to move overseas and keep their profits overseas makes no sense,” Senator Rob Portman, an Ohio Republican, said on the Senate floor in November 2017.

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders. Sweeping tax cuts could give Republicans a jolt of much-needed momentum heading into the 2018 midterm elections.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority. But to qualify for that parliamentary green light, the net cost of the bill — after accounting for different tax cuts and tax increases — had to be less than $1.5 trillion over 10 years.

The bill’s cuts totaled $5.5 trillion. The corporate income tax rate shrank to 21 percent from 35 percent, and companies also won a tax break on the trillions in profits brought home from offshore.

To close the gap between the $5.5 trillion in cuts and the maximum price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

BEAT stands for the base erosion and anti-abuse tax. It was aimed largely at foreign companies with major operations in the United States, some of which had for years minimized their United States tax bills by shifting money between American subsidiaries and their foreign parent companies.

Instead of paying taxes in the United States, companies send the profits to countries with lower tax rates.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.

To reduce the benefit companies reaped by claiming that their profits were earned in tax havens, the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

The Joint Committee on Taxation, the congressional panel that estimates the impacts of tax changes, predicted that the BEAT and GILTI would bring in $262 billion over a decade — roughly enough to fund the Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.

Sitting in the Oval Office on Dec. 22, 2017, Mr. Trump signed the tax cuts into law. It was — and remains — the president’s most significant legislative achievement.

From the start, the new taxes were pocked with loopholes.

In the BEAT, for example, Senate Republicans hoped to avoid a revolt by large companies. They wrote the law so that any payments an American company made to a foreign affiliate for something that went into a product — as opposed to, say, interest payments on loans — were excluded from the tax.

Let’s say an American pharmaceutical company sells pills in the United States. The pills are manufactured by a subsidiary in Ireland, and the American parent pays the Irish unit for the pills before they are sold to the public. Those payments mean that the company’s profits in the United States, where taxes are relatively high, go down; profits in tax-friendly Ireland go up.

Because such payments to Ireland wouldn’t be taxed, some companies that had been the most aggressive at shifting profits into offshore havens were spared the full brunt of the BEAT.

Other companies, like General Electric, were surprised to be hit by the new tax, thinking it applied only to foreign multinationals, according to Pat Brown, who had been G.E.’s top tax expert.

Mr. Brown, now the head of international tax policy at the accounting and consulting firm PwC, said on a podcast this year that the Trump administration should bridge the gap between expectations about the tax law and how it was playing out in reality. He lobbied the Treasury on behalf of G.E.

“The question,” he said, “is how creative and how expansive is Treasury and the I.R.S. able to be.”

Almost immediately after Mr. Trump signed the bill, companies and their lobbyists — including G.E.’s Mr. Brown — began a full-court pressure campaign to try to shield themselves from the BEAT and GILTI.

The Treasury Department had to figure out how to carry out the hastily written law, which lacked crucial details.

Chip Harter was the Treasury official in charge of writing the rules for the BEAT and GILTI. He had spent decades at PwC and the law firm Baker McKenzie, counseling companies on the same sorts of tax-avoidance arrangements that the new law was supposed to discourage.

Starting in January 2018, he and his colleagues found themselves in nonstop meetings — roughly 10 a week at times — with lobbyists for companies and industry groups.

The Organization for International Investment — a powerful trade group for foreign multinationals like the Swiss food company Nestlé and the Dutch chemical maker LyondellBasell — objected to a Treasury proposal that would have prevented companies from using a complex currency-accounting maneuver to avoid the BEAT.

The group’s lobbyists were from PwC and Baker McKenzie, Mr. Harter’s former firms, according to public lobbying disclosures. One of them, Pam Olson, was the top Treasury tax official in the George W. Bush administration. (Mr. Morgenstern, the Treasury spokesman, said Mr. Harter didn’t meet with PwC while the rules were being written.)

This month, the Treasury issued the final version of some of the BEAT regulations. The Organization for International Investment got what it wanted.

One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.

American regulators require international banks to ensure that their United States divisions are financially equipped to absorb big losses in a crisis. To meet those requirements, foreign banks lend the money to their American outposts. Those loans accrue interest. Under the BEAT, the interest that the American units paid to their European parents would often be taxed.

“Foreign banks should not be penalized by the U.S. tax laws for complying” with regulations, said Briget Polichene, chief executive of the Institute of International Bankers, whose members include many of the world’s largest banks.

Banks flooded the Treasury Department with lobbyists and letters.

Late last year, Mr. Harter went to Treasury Secretary Steven Mnuchin and told him about the plan to give the banks a break. Mr. Mnuchin — a longtime banking executive before joining the Trump administration — signed off on the new exemptions, according to a person familiar with the matter.

A few months later, the tax-policy office handed another victory to the foreign banks, ruling that an even wider range of bank payments would be exempted.

Among the lobbyists who successfully pushed the banks’ case in private meetings with senior Treasury officials was Erika Nijenhuis of the law firm Cleary Gottlieb. Her client was the Institute of International Bankers.

In September 2019, Ms. Nijenhuis took off her lobbying hat and joined the Treasury’s Office of Tax Policy, which was still writing the rules governing the tax law.

Some tax experts said that the Treasury had no legal authority to exempt the bank payments from the BEAT; only Congress had that power. The Trump administration created the exception “out of whole cloth,” said Mr. Wells, the University of Houston professor.

Even inside the Treasury, the ruling was controversial. Some officials told Mr. Harter — the senior official in charge of the international rules — that the department lacked the power, according to people familiar with the discussions. Mr. Harter dismissed the objections.

Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce by up to $50 billion the revenue raised by the BEAT.

Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

He also said the Treasury decided that changing the rules for foreign banks was appropriate.

“We were responsive to job creators,” he said.

The lobbying surrounding the GILTI was equally intense — and, once again, large companies won valuable concessions.

Back in 2017, Republicans said the GILTI was meant to prevent companies from avoiding American taxes by moving their intellectual property overseas.

In the pharmaceutical and tech industries in particular, profits are often tied to patents. Companies had sold the rights to their patents to subsidiaries in offshore tax havens. The companies then imposed steep licensing fees on their American units. The sleight-of-hand transactions reduced profits in the United States and left them in places like Bermuda and the British Virgin Islands.

But after the law was enacted, large multinationals in industries like consumer products discovered that the GILTI tax applied to them, too. That threatened to cut into their windfalls from the corporate tax rate’s falling to 21 percent from 35 percent.

Lobbyists for Procter & Gamble and other companies turned to lawmakers for help. They asked members of the Senate Finance Committee to tell Treasury officials that they hadn’t intended the GILTI to affect their industries. It was a simple but powerful strategy: Because the Treasury was required to consider congressional intent when writing the tax rules, such explanations could sway the outcome.

Several senators then met with Mr. Mnuchin to discuss the rules.

One lobbyist, Michael Caballero, had been a senior Treasury official in the Obama administration. His clients included Credit Suisse and the industrial conglomerate United Technologies. He met repeatedly with Treasury and White House officials and pushed them to modify the rules so that big companies hit by the GILTI wouldn’t lose certain tax deductions.

In essence, the “high-tax exception” that Mr. Caballero was proposing would allow companies to deduct expenses that they incurred in their overseas operations from their American profits — lowering their United States tax bills.

Other companies jumped on the bandwagon. News Corporation, Liberty Mutual, Anheuser-Busch, Comcast and P.&G. wrote letters or dispatched lobbyists to argue for the high-tax exception.

After months of meetings with lobbyists, the Treasury announced in June 2019 that it was creating a version of the exception that the companies had sought.

Two years after the tax cuts became law, their impact is becoming clear.

Companies continue to shift hundreds of billions of dollars to overseas tax havens, ensuring that huge sums of corporate profits remain out of reach of the United States government.

The Internal Revenue Service is collecting tens of billions of dollars less in corporate taxes than Congress projected, inflating the tax law’s 13-figure price tag.

This month, the Organization for Economic Cooperation and Development calculated that the United States in 2018 experienced the largest drop in tax revenue of any of the group’s 36 member countries. The United States also had by far the largest budget deficit of any of those countries.

In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts. Big companies have spent this fall trying to win more.

In September, Chris D. Trunck, the vice president for tax at Owens Corning, the maker of insulation and roofing materials, wrote to the I.R.S. He pushed the Treasury to tinker with the GILTI rules in a way that would preserve hundreds of millions of dollars of tax benefits that Owens Corning had accumulated from settling claims that it poisoned employees and others with asbestos.

The same month, the underwear manufacturer Hanes sent its own letter to Mr. Mnuchin. The letter, from Bryant Purvis, Hanes’s vice president of global tax, urged Mr. Mnuchin to broaden the high-tax exception so that more companies could take advantage of it.

Otherwise, Mr. Purvis warned, “the GILTI regime will become an impediment to U.S. companies and their ability to not only compete globally as a general matter, but also their ability to remain U.S.-headquartered if they are to maintain the overall fiscal health of their business.”

The implied threat was clear: If the Treasury didn’t further chip away at the new tax, companies like Hanes, based in Winston-Salem, N.C., might have no choice but to move their headquarters overseas.

Source:

NYT > Business > Economy

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How Big Companies Won New Tax Breaks From the Trump Administration

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

Thanks in part to the chaotic manner in which the bill was rushed through Congress — a situation that gave the Treasury Department extra latitude to interpret a law that was, by all accounts, sloppily written — the corporate lobbying campaign was a resounding success.

Image
Credit…Jon Elswick/Associated Press

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“Treasury is gutting the new law,” said Bret Wells, a tax law professor at the University of Houston. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”

It is the latest example of the benefits of the Republican tax package flowing disproportionately to the richest of the rich. Even a tax break that was supposed to aid poor communities — an initiative called “opportunity zones” — is being used in part to finance high-end developments in affluent neighborhoods, at times benefiting those with ties to the Trump administration.

Of course, companies didn’t get everything they wanted, and Brian Morgenstern, a Treasury spokesman, defended the department’s handling of the tax rules. “No particular taxpayer or group had any undue influence at any time in the process,” he said.

Ever since the birth of the modern federal income tax in 1913, companies have been concocting ways to avoid it.

In the late 1990s, American companies accelerated their efforts to claim that trillions of dollars of profits they earned in high-tax places like the United States, Japan or Germany were actually earned in low- or no-tax places like Luxembourg, Bermuda or Ireland.

Google, Apple, Cisco, Pfizer, Merck, Coca-Cola, Facebook and many others have deployed elaborate techniques that let the companies pay taxes at far less than the 35 percent corporate tax rate in the United States that existed before the 2017 changes. Their playful nicknames — like Double Irish and Dutch Sandwich — made them sound benign.

The Obama administration and lawmakers from both parties have tried to combat this profit shifting, but their efforts mostly stalled.

When President Trump and congressional Republicans assembled an enormous tax-cut package in 2017, they pitched it in part as a grand bargain: Companies would get the deep tax cuts that they had spent years clamoring for, but the law would also represent a long-overdue effort to fight corporate tax avoidance and the shipment of jobs overseas.

“The situation where companies are actually encouraged to move overseas and keep their profits overseas makes no sense,” Senator Rob Portman, an Ohio Republican, said on the Senate floor in November 2017.

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders. Sweeping tax cuts could give Republicans a jolt of much-needed momentum heading into the 2018 midterm elections.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority. But to qualify for that parliamentary green light, the net cost of the bill — after accounting for different tax cuts and tax increases — had to be less than $1.5 trillion over 10 years.

The bill’s cuts totaled $5.5 trillion. The corporate income tax rate shrank to 21 percent from 35 percent, and companies also won a tax break on the trillions in profits brought home from offshore.

To close the gap between the $5.5 trillion in cuts and the maximum price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

BEAT stands for the base erosion and anti-abuse tax. It was aimed largely at foreign companies with major operations in the United States, some of which had for years minimized their United States tax bills by shifting money between American subsidiaries and their foreign parent companies.

Instead of paying taxes in the United States, companies send the profits to countries with lower tax rates.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.

To reduce the benefit companies reaped by claiming that their profits were earned in tax havens, the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

The Joint Committee on Taxation, the congressional panel that estimates the impacts of tax changes, predicted that the BEAT and GILTI would bring in $262 billion over a decade — roughly enough to fund the Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.

Sitting in the Oval Office on Dec. 22, 2017, Mr. Trump signed the tax cuts into law. It was — and remains — the president’s most significant legislative achievement.

From the start, the new taxes were pocked with loopholes.

In the BEAT, for example, Senate Republicans hoped to avoid a revolt by large companies. They wrote the law so that any payments an American company made to a foreign affiliate for something that went into a product — as opposed to, say, interest payments on loans — were excluded from the tax.

Let’s say an American pharmaceutical company sells pills in the United States. The pills are manufactured by a subsidiary in Ireland, and the American parent pays the Irish unit for the pills before they are sold to the public. Those payments mean that the company’s profits in the United States, where taxes are relatively high, go down; profits in tax-friendly Ireland go up.

Because such payments to Ireland wouldn’t be taxed, some companies that had been the most aggressive at shifting profits into offshore havens were spared the full brunt of the BEAT.

Other companies, like General Electric, were surprised to be hit by the new tax, thinking it applied only to foreign multinationals, according to Pat Brown, who had been G.E.’s top tax expert.

Mr. Brown, now the head of international tax policy at the accounting and consulting firm PwC, said on a podcast this year that the Trump administration should bridge the gap between expectations about the tax law and how it was playing out in reality. He lobbied the Treasury on behalf of G.E.

“The question,” he said, “is how creative and how expansive is Treasury and the I.R.S. able to be.”

Almost immediately after Mr. Trump signed the bill, companies and their lobbyists — including G.E.’s Mr. Brown — began a full-court pressure campaign to try to shield themselves from the BEAT and GILTI.

The Treasury Department had to figure out how to carry out the hastily written law, which lacked crucial details.

Chip Harter was the Treasury official in charge of writing the rules for the BEAT and GILTI. He had spent decades at PwC and the law firm Baker McKenzie, counseling companies on the same sorts of tax-avoidance arrangements that the new law was supposed to discourage.

Starting in January 2018, he and his colleagues found themselves in nonstop meetings — roughly 10 a week at times — with lobbyists for companies and industry groups.

The Organization for International Investment — a powerful trade group for foreign multinationals like the Swiss food company Nestlé and the Dutch chemical maker LyondellBasell — objected to a Treasury proposal that would have prevented companies from using a complex currency-accounting maneuver to avoid the BEAT.

The group’s lobbyists were from PwC and Baker McKenzie, Mr. Harter’s former firms, according to public lobbying disclosures. One of them, Pam Olson, was the top Treasury tax official in the George W. Bush administration. (Mr. Morgenstern, the Treasury spokesman, said Mr. Harter didn’t meet with PwC while the rules were being written.)

This month, the Treasury issued the final version of some of the BEAT regulations. The Organization for International Investment got what it wanted.

One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.

American regulators require international banks to ensure that their United States divisions are financially equipped to absorb big losses in a crisis. To meet those requirements, foreign banks lend the money to their American outposts. Those loans accrue interest. Under the BEAT, the interest that the American units paid to their European parents would often be taxed.

“Foreign banks should not be penalized by the U.S. tax laws for complying” with regulations, said Briget Polichene, chief executive of the Institute of International Bankers, whose members include many of the world’s largest banks.

Banks flooded the Treasury Department with lobbyists and letters.

Late last year, Mr. Harter went to Treasury Secretary Steven Mnuchin and told him about the plan to give the banks a break. Mr. Mnuchin — a longtime banking executive before joining the Trump administration — signed off on the new exemptions, according to a person familiar with the matter.

A few months later, the tax-policy office handed another victory to the foreign banks, ruling that an even wider range of bank payments would be exempted.

Among the lobbyists who successfully pushed the banks’ case in private meetings with senior Treasury officials was Erika Nijenhuis of the law firm Cleary Gottlieb. Her client was the Institute of International Bankers.

In September 2019, Ms. Nijenhuis took off her lobbying hat and joined the Treasury’s Office of Tax Policy, which was still writing the rules governing the tax law.

Some tax experts said that the Treasury had no legal authority to exempt the bank payments from the BEAT; only Congress had that power. The Trump administration created the exception “out of whole cloth,” said Mr. Wells, the University of Houston professor.

Even inside the Treasury, the ruling was controversial. Some officials told Mr. Harter — the senior official in charge of the international rules — that the department lacked the power, according to people familiar with the discussions. Mr. Harter dismissed the objections.

Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce by up to $50 billion the revenue raised by the BEAT.

Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

He also said the Treasury decided that changing the rules for foreign banks was appropriate.

“We were responsive to job creators,” he said.

The lobbying surrounding the GILTI was equally intense — and, once again, large companies won valuable concessions.

Back in 2017, Republicans said the GILTI was meant to prevent companies from avoiding American taxes by moving their intellectual property overseas.

In the pharmaceutical and tech industries in particular, profits are often tied to patents. Companies had sold the rights to their patents to subsidiaries in offshore tax havens. The companies then imposed steep licensing fees on their American units. The sleight-of-hand transactions reduced profits in the United States and left them in places like Bermuda and the British Virgin Islands.

But after the law was enacted, large multinationals in industries like consumer products discovered that the GILTI tax applied to them, too. That threatened to cut into their windfalls from the corporate tax rate’s falling to 21 percent from 35 percent.

Lobbyists for Procter & Gamble and other companies turned to lawmakers for help. They asked members of the Senate Finance Committee to tell Treasury officials that they hadn’t intended the GILTI to affect their industries. It was a simple but powerful strategy: Because the Treasury was required to consider congressional intent when writing the tax rules, such explanations could sway the outcome.

Several senators then met with Mr. Mnuchin to discuss the rules.

One lobbyist, Michael Caballero, had been a senior Treasury official in the Obama administration. His clients included Credit Suisse and the industrial conglomerate United Technologies. He met repeatedly with Treasury and White House officials and pushed them to modify the rules so that big companies hit by the GILTI wouldn’t lose certain tax deductions.

In essence, the “high-tax exception” that Mr. Caballero was proposing would allow companies to deduct expenses that they incurred in their overseas operations from their American profits — lowering their United States tax bills.

Other companies jumped on the bandwagon. News Corporation, Liberty Mutual, Anheuser-Busch, Comcast and P.&G. wrote letters or dispatched lobbyists to argue for the high-tax exception.

After months of meetings with lobbyists, the Treasury announced in June 2019 that it was creating a version of the exception that the companies had sought.

Two years after the tax cuts became law, their impact is becoming clear.

Companies continue to shift hundreds of billions of dollars to overseas tax havens, ensuring that huge sums of corporate profits remain out of reach of the United States government.

The Internal Revenue Service is collecting tens of billions of dollars less in corporate taxes than Congress projected, inflating the tax law’s 13-figure price tag.

This month, the Organization for Economic Cooperation and Development calculated that the United States in 2018 experienced the largest drop in tax revenue of any of the group’s 36 member countries. The United States also had by far the largest budget deficit of any of those countries.

In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts. Big companies have spent this fall trying to win more.

In September, Chris D. Trunck, the vice president for tax at Owens Corning, the maker of insulation and roofing materials, wrote to the I.R.S. He pushed the Treasury to tinker with the GILTI rules in a way that would preserve hundreds of millions of dollars of tax benefits that Owens Corning had accumulated from settling claims that it poisoned employees and others with asbestos.

The same month, the underwear manufacturer Hanes sent its own letter to Mr. Mnuchin. The letter, from Bryant Purvis, Hanes’s vice president of global tax, urged Mr. Mnuchin to broaden the high-tax exception so that more companies could take advantage of it.

Otherwise, Mr. Purvis warned, “the GILTI regime will become an impediment to U.S. companies and their ability to not only compete globally as a general matter, but also their ability to remain U.S.-headquartered if they are to maintain the overall fiscal health of their business.”

The implied threat was clear: If the Treasury didn’t further chip away at the new tax, companies like Hanes, based in Winston-Salem, N.C., might have no choice but to move their headquarters overseas.

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