WASHINGTON — A bipartisan group of lawmakers, including the chairmen of the tax-writing committees in the House and the Senate, asked the Internal Revenue Service on Monday to allow companies that continue paying the cost of health benefits for furloughed workers to remain eligible for a new tax credit.
At issue is a tax credit for retaining employees, which essentially reimburses companies for as much as half the wages they continue to pay workers who are furloughed amid the coronavirus pandemic. The credit, which is meant to encourage companies to keep paying employees amid virus-induced shutdowns, was included in an economic rescue package that passed Congress with bipartisan support and was signed into law by President Trump in March.
The lawmakers’ concern stems from guidance that I.R.S. officials issued governing which companies are eligible for the credit’s benefits, and to what degree. That guidance allows companies to qualify if they reduce employees’ hours — and thus, their pay — amid the pandemic, but do not lay them off entirely.
But it rules out benefits for companies that stop paying wages to their workers but continue to pay the cost of their health benefits. If a company “is not paying wages to its employees for time that the employees are not providing services,” the guidance states, “it may not treat any portion of the health plan expenses as qualified wages.”
On Monday, lawmakers objected to that finding. In a letter to the I.R.S., Senator Charles E. Grassley, Republican of Iowa and the Finance Committee chairman, along with the top Democrat on the committee, Senator Ron Wyden of Oregon, and Representative Richard E. Neal, Democrat of Massachusetts and the Ways and Means Committee chairman, said that finding runs counter to the clear intent that members of Congress had expressed in crafting the law.
“The economic contraction caused by the pandemic has resulted in over 30 million unemployment claims, making incentives that retain the connection to employment and employee benefits critical,” the lawmakers wrote. “After the passage of the CARES Act, we reiterated this intent in subsequent communications with Treasury.”
“We are, therefore, disappointed with the recent determination that an employer that is no longer paying regular wages but continues to provide full health benefits would not be able to treat any portion of those health benefits as qualifying wages eligible for the retention credit,” the lawmakers wrote, adding, “We urge you to reconsider this determination in light of congressional intent and the importance of providing access to affordable health care during the ongoing health crisis.”
Lawmakers and interest groups have previously taken issue with other interpretations by the Trump administration of their efforts to aid businesses and individuals during the crisis, including limits it has placed on government forgiveness of loans to small businesses that are also meant to encourage companies to keep workers on their payrolls.