On July 27, 2020, Senate Republicans introduced a series of bills and proposals that have been collectively referred to as the “Health, Economic Assistance, Liability Protection and Schools Act” (the “HEALS Act”).^[1] The HEALS Act would enhance and expand certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (H.R. 748), and provide additional forms of relief, including certain tax credits for employers. This blog summarizes the most important tax proposals in the HEALS Act and compares them with the Health and Economic Recovery Omnibus Emergency Solutions Act (the “HEROES Act”)^[2] that was introduced by House Democrats on May 12, 2020, and the Jumpstarting Our Business’ Success Credit Act (the “JOBS Credit Act”) that was introduced by a bipartisan group of House representatives on May 8, 2020.^[3]

Changes to the Employee Retention Credit

The CARES Act provides an eligible employer with a refundable payroll tax credit equal to 50% of certain “qualified wages” (including certain health plan expenses) paid to its employees beginning March 13, 2020 through December 31, 2020 if the employer is engaged in a trade or business in 2020 and the wages are paid (i) while operation of that trade or business is fully or partially suspended due to a governmental order related to COVID-19 (the “suspension test”) or (ii) during the period beginning in the first quarter in which gross receipts for that trade or business are less than 50% of gross receipts for the same calendar quarter of 2019 and ending at the end of the first subsequent quarter in which gross receipts are more than 80% for the same calendar quarter of 2019 (the “gross receipts test”). The employee retention credit can be used to offset all federal payroll taxes, including federal withholding tax, and the employer’s and employee’s share of social security tax and Medicare, but not the federal unemployment tax (“FUTA”).

The HEALS Act proposes several changes to the employee retention credit. These changes would generally be effective for calendar quarters beginning after June 30, 2020.^[4]  This chart summarizes the changes; they are explained below.

Credit increased to 65% of qualified wages and cap on credit increased to $30,000.  The CARES Act provides for a refundable tax credit of 50% of qualified wages, capped at $5,000/employee (50% of up to $10,000 of qualified wages for all calendar quarters).  The HEALS Act would increase the credit from 50% to 65% of qualified wages and the cap from $5,000 for all calendar quarters to $10,000 for each calendar quarter and $30,000 for the calendar year.^[5]

These changes are less generous to employers than the HEROES Act, which would increase the credit from 50% to 80% of qualified wages and increase the cap from $5,000 to $12,000 for each calendar quarter for up to three calendar quarters (i.e., a maximum of $36,000 for the calendar year).^[6]

PPP borrowers may receive credit. The CARES Act denies the employee retention credit to any employer that receives a loan under the Small Business Administration’s (“SBA’s”) Paycheck Protection Program (the “PPP”). The HEALS Act and the HEROES Act would each permit an employer that receives a PPP loan to receive the employee retention tax credit.^[7]  However, under the HEALS Act and the HEROES Act, an employer would be required either to exclude qualified wages from “payroll costs” for purposes of determining its loan forgiveness under the PPP, or to exclude qualified wages for purposes of calculating the employee retention tax credit, in which case the wages may be included as “payroll costs” for purposes of determining its loan forgiveness under the PPP.^[8]

Large employer threshold. For an employer with more than 100 full-time employees, the CARES Act imposes an additional restriction: the employee retention credit is available only with respect to wages paid to an employee who is not providing services due to (i) the employer’s trade or business being fully or partially suspended due to a governmental order related to COVID-19 or (ii) the employer experiencing a significant decline in gross receipts. The HEALS Act would increase the threshold for this rule to 500 full-time employees (so that employers with between 101 and 500 full-time employees would no longer be subject to this restriction).^[9]

The HEROES Act is more generous than the HEALS Act because it would apply this rule only to an employer with more than 1,500 full-time employees and gross receipts of more than $41.5 million in calendar year 2019 (a “large employer”).^[10]

Helpful change to the gross receipts test. Under the gross receipts test of the CARES Act, an employer with an essential business that was not fully or partially suspended due to a governmental order related to COVID-19 qualifies for the employee retention credit for the period beginning with the first calendar quarter for which gross receipts for the employer’s trade or business are less than 50% of gross receipts for the same calendar quarter of 2019 and ending at the end of the first subsequent quarter in which gross receipts are more than 80% for the same calendar quarter of 2019. The HEALS Act would permit an employer to qualify for the period beginning in a calendar quarter in which the employer’s gross receipts are less than 75% (instead of 50%) of gross receipts for the same calendar quarter of 2019 and ending at the end of the first subsequent quarter in which gross receipts are more than 80% for the same calendar quarter of 2019.^[11] The HEALS Act would also permit an employer that does not qualify under this test for the calendar quarter ending on June 30, 2020 to elect to apply the test using the calendar quarter ending March 31, 2020 (and the same calendar quarter in 2019).^[12]

The HEROES Act would require an even lower reduction in gross receipts to qualify for the employee retention credit, but would also reduce the credit. Under the HEROES Act, an employer could qualify for the period beginning in a calendar quarter in which the employer’s gross receipts are less than 90% (instead of 50%) of gross receipts for the same calendar quarter of 2019 and ending at the end of the first subsequent quarter in which gross receipts are more than 90% (instead of 80%) for the same calendar quarter of 2019 (the “90% gross receipts test”).^[13] However, under the HEROES Act, if an employer (i) is eligible under the 90% gross receipts test, but not under the current gross receipts test (i.e., the employer’s gross receipts in a calendar quarter are less than 90%, but not less than 50%, of its gross receipts in same calendar quarter in 2019) and (ii) does not otherwise satisfy the suspension test, the employer’s credit would be reduced by an amount equal to the full credit multiplied by the ratio of the “excess gross receipts percentage point amount” to 40%.^[14]  The HEALS Act is more generous than the HEROES Act in this respect because it does not reduce the employer’s tax credit if the employer’s gross receipt reduction for a 2020 calendar quarter is between 75% and 50% of the equivalent quarter in 2019.

The JOBS Credit Act is similar to the HEROES Act, except that an employer could qualify for the period beginning in a calendar quarter in which the employer’s gross receipts are less than 80% (instead of 90%) of gross receipts for the same calendar quarter of 2019 and ending at the end of the first subsequent quarter in which gross receipts are more than 80% (instead of 90%) for the same calendar quarter of 2019.^[15]

Tax-exempt organizations and governmental entities. Both the HEALS Act and the HEROES Act would provide that, for purposes of the employee retention credit, the term “gross receipts” of a section 501(c) tax-exempt organization means the gross amount the organization receives during its annual accounting period from all sources without subtracting any costs or expenses.^[16]

Under the CARES Act, federal, state or local government (and their agencies) are not eligible for the credit. The HEALS Act would not change this, but the HEROES Act would permit state and local governments (and their agencies), Indian tribal governments (and their agencies) and federal credit unions to receive the employee retention credit if they are engaged in a trade or business and meet the suspension test.^[17]

Health plan expenses. Both the HEALS Act and the HEROES Act would include health plan expenses in the definition of qualified wages for purposes of the employee retention credit, including in cases where an employer furloughs employees but continues to provide health benefits to them.^[18]

Work Opportunity Tax Credit

The HEALS Act would provide employers with a new (elective) work opportunity tax credit for qualified 2020 COVID-19 unemployment recipients.^[19] A qualified 2020 COVID-19 unemployment recipient is an individual who is certified by the designated local agency^[20] (i.e., the relevant state unemployment security agency) as having received (or been approved to receive) unemployment compensation under state or federal law for the week of or immediately preceding the hiring date and who begins work after the date of enactment and before 2021.^[21] An employer that hires qualified 2020 COVID-19 unemployment recipients is eligible for a tax credit equal to 50% of the qualified first year wages, subject to a maximum tax credit per employee of up to $5,000 (i.e., 50% of $10,000 of qualified first-year wages).^[22]

The HEROES Act does not include this additional tax credit.

Safe and Healthy Workplace Tax Credit

Under the HEALS Act, employers would be eligible for a refundable payroll tax credit equal to 50% of the employer’s (i) costs of testing for COVID-19, personal protective equipment (“PPE”), and cleaning supplies (“qualified protection expenses”), (ii) costs of modifying workspaces to protect employees and customers from exposure to COVID-19 (“qualified workplace reconfiguration expenses”), and costs of installing contactless payment systems and other technology to track employee interactions with customers (“qualified workplace technology expenses”; collectively “qualified expenses”).^[23] For purposes of determining the tax credit, an employer’s qualified expenses would be capped in each quarter at an amount equal to $1,000 for each of the first 500 employees, plus $750 for each employee between 500 and 1000, plus $500 for each employee that exceeds 1,000.^[24] The credit can be used to offset all federal payroll taxes, including federal withholding tax, and the employer’s and employee’s share of social security tax and Medicare, but not the FUTA.^[25] All persons treated as a single employer under section 52(a) or (b) or section 414(m) or (o)^[26] are treated as one employer for all purposes of the credit, including for purposes of determining whether the employer exceeds the 100 full-time employee threshold.^[27]

The HEROES Act does not include this additional tax credit.

Investment Tax Credit for PPE Manufacturing

Under the HEALS Act, certain PPE manufacturers would be awarded a refundable tax credit equal to 30% of qualified investment with respect to any qualifying medical PPE manufacturing project.^[28] Qualified investment is the basis of eligible property (i.e., any depreciable property that is necessary for the production of tangible personal property, other tangible property (excluding building and structural components) used as an integral part of the manufacturing facility) placed in service or continued in service during the taxable year that is part of a qualifying medical PPE manufacturing project.^[29] A qualifying medical PPE manufacturing project is a project which re-equips, expands, establishes, or continues existing medical PPE production of (i) any item in the Strategic National Stockpile, or (ii) any other textile products for medical applications as defined by the Treasury and the Health and Human Services.^[30] PPE manufacturers would apply to receive this credit.^[31]

For PPE manufacturers that receive the credit, intangible property used in connection within the production of PPE could be transferred by a controlled foreign corporation (“CFC”)^[32] to a domestic corporation that is a United States shareholder^[33] of the CFC without triggering taxable gain.^[34] The intangible property must be used in a qualifying PPE manufacturing project to be eligible for tax deferral.^[35] Qualifying intangible property includes patents, inventions, formulas, processes, designs, patterns, or know-how that relate to the PPE or equipment used to manufacture the PPE. Any built-in gain in the intangible property would be preserved so that taxable gain is realized if the taxpayer later sells or transfers the property.^[36]

The HEROES Act does not include this additional tax credit.

Tax Deduction for Business Meals

Taxpayers are generally permitted to deduct up to 50% of certain business-related meal expenses.^[37] The HEALS Act would temporarily expand this deduction to cover the full cost of the expenses for food or beverages if the food or beverages are (i) provided by a restaurant and (ii) paid or incurred after the date of enactment and before 2021.^[38]

The HEROES Act does not expand the deduction for business-related meal expenses.

PPP Loans Available for Certain 501(c)(6) Organizations (But Not Professional Football Leagues)

The HEALS Act extends the availability of PPP loans to (i) 501(c)(6) organizations^[39] with 300 or fewer employees so long as (A) the organizations do not receive more than 10% of their receipts from lobbying, (B) the lobbying activities of the organizations do not comprise more than 10% of the total activities of the organizations, and (C) the organizations are not a professional football league or have the purpose of promoting or participating in a political campaign or other activity, and (ii) destination marketing organizations with 300 or fewer employees so long as the organizations satisfy the requirements in (i)(A) and (B) above and are a 501(c) organization or quasi-governmental entity or political subdivision of a state or local government.^[40]

The HEROES Act does not extend the availability of PPP loans to 501(c)(6) organizations.

Limitation on Taxation of Compensation by Multiple States

Under the HEALS Act, for calendar years 2020 through 2024, employees who perform employment duties in more than one state generally would be subject to income tax on their compensation only in their state of residence and any states in which they are present and performing employment duties for more than 30 days during the calendar year.^[41]

In addition, under the HEALS Act, for the period (referred to as the “covered period”) beginning on the date an employee began working at a location other than the employee’s “primary work location” (i.e., the address of the employer where the employee is regularly assigned to work) due to COVID-19 to the date when the employee returns to his or her primary work location (or, if earlier, when 90% of the employer’s permanent workforce returns to work, or December 31, 2020), any wages earned by an employee would be deemed to be earned at the primary work location of the employee, regardless of contrary state law.^[42]  In addition, if an employer would not be taxable by a state but for the fact that its employees living in that state are working remotely due to COVID-19 during the covered period, under the HEALS Act, that state could not impose any registration, taxation, or other related requirements on the employer during the covered period.^[43]  Thus, if an employee normally works in an employer’s office in New York, but works remotely in Connecticut due to COVID-19 for the remainder of 2020 and the employer’s New York office does not reopen, under the HEALS Act, the wages would be deemed to be earned in New York and Connecticut could not require the employer to withhold Connecticut state taxes.  Likewise, if that employer would not be subject to tax by Connecticut but for the fact that the employee was working remotely in Connecticut, then Connecticut could not impose tax on the employer during the covered period.

The HEROES Act does not limit state taxation.

Proposals under the HEROES Act that are not included in the HEALS Act

The following is a list of major tax provisions in the HEROES Act that are not included in the HEALS Act.

• The HEROES Act would eliminate the $10,000 cap on the itemized deduction for state and local taxes for taxable years beginning in 2020 and 2021.^[44] The HEALS Act would not make this change.

• Under the CARES Act, any cancellation of debt income under the PPP is tax-free (e., excluded from income), and does not result in a loss of tax attributes. However, the CARES Act did not specify whether a borrower under the PPP may deduct expenses that relate to the forgiven amount (i.e., the eight weeks of wages, employee benefits, interest, rent, and utilities that determined the forgiven amount). The IRS held that these expenses are not deductible.^[45] The HEROES Act would reverse this rule and permit taxpayers whose PPP loans are forgiven to deduct their expenses relating to the PPP loan.^[46]The HEALS Act does not contain such a provision.  However, the Small Business Expense Protection Act, introduced by Sen. Chuck Grassley (R. Iowa) and Sen. Ron Wyden (D. Ore.), the Chair and Ranking Member of the Senate Finance Committee, on May 6, 2020 would allow those deductions.

• The CARES Act allowed a corporation’s losses from 2018, 2019, and 2020 to be carried back for five years.^[47] This provision temporarily reversed changes made by the Tax Cuts and Jobs Act.  The HEROES Act would permit a corporation’s losses from 2019 and 2020 only to be carried back to taxable years beginning on or after January 1, 2018, instead of for five years, but only if (i) the corporation is not denied deductions in those years under sections 162(m) and 280G for excessive executive compensation, or (ii) the corporation’s total distributions to shareholders (including redemptions) made in taxable years ending after 2017 do not exceed the sum of (x) the fair market value of the corporation’s stock (as of the issue date of the stock) that is issued in taxable years ending after 2017 in exchange for money or property other than the corporation’s stock, and (y) 5% of the fair market value of the corporation’s stock as of the last day of the applicable taxable year (a “specified corporation”).^[48] A corporation that is denied deductions under sections 162(m) and 280G, or that is a specified corporation, in 2019 or 2020 would not be permitted to carry back losses in those years at all.  The HEALS Act does not contain this provision.

• The CARES Act retroactively suspended the excess business loss provision of section 461(l)(1) (which disallows business losses in excess of $250,000 for a single taxpayer and $500,000 for a married couple filing jointly) for 2018 through 2020. The HEROES Act would lift this suspension and restore the limitation for these years.^[49] The HEALS Act would not.

• In addition to the loans available under the PPP, the CARES Act expands the SBA’s Economic Injury Disaster Loan (“EIDL”) program through December 31, 2020 to help small businesses cover payroll and operating expenses that could have been paid had the COVID-19 pandemic not occurred. The CARES Act provides that while a business’ application for an EIDL is pending, the business may receive an advance on the loan of up to $10,000. This advance is not required to be repaid even if the business is ultimately denied an EIDL. The HEROES Act provides that these advances are excluded from the gross income of the business and permits a business to deduct the expenses paid with an EIDL advance.^[50] The HEALS Act does not contain this provision.

• The HEROES Act proposes a number of changes to enhance and expand the paid leave tax credits available under the Families First Coronavirus Response Act (the “FFCRA”) (H.R. 6201), but the HEALS Act would not make any changes to these credits.^[51]

• The HEROES Act would provide employers with additional payroll tax credits. Employers would be eligible for a refundable payroll tax credit equal to 30% of certain COVID-19 related employee benefits expenses (of up to $5,000/employee each calendar quarter) that are reimbursed or paid for the benefit of an employee after March 12, 2020 and before January 1, 2021 and incurred as a result of a federally declared disaster related to the COVID-19 pandemic.^[52] This credit is intended to offset expenses incurred by employees in covering their reasonable and necessary personal, family, living or funeral costs that arise from the COVID-19 disaster, unlike the Safe and Healthy Workplace Tax Credit discussed above, which is intended offset costs incurred in taking actions to prevent the spread of COVID-19 in workplaces.^[53] Under the HEROES Act, employers would also be eligible to receive an expanded employee retention credit equal to 50% of certain non-compensatory “qualified fixed expenses” paid or incurred in each calendar quarter so long as the employers are not “large employers” (e., employers with more than 1,500 full-time employees that have gross receipts of more than $41.5 million in calendar year 2019).^[54]

_{[1] The HEROES Act legislation is composed of eight bills: (i) American Workers, Families and Employers Assistance Act (“AWFEA Act”), introduced by Sen. Chuck Grassley (R-IA), Chairman of the Senate Finance Committee; (ii) Continuing Small Business Recovery and Paycheck Protection Program Act, introduced by Sen. Marco Rubio (R-FL) Chairman of the Senate Committee on Small Business and Entrepreneurship and Sen. Susan Collins (R-ME), a senior member of the Senate Committee on Appropriations and Committee on Health, Education, Labor, and Pensions; (iii) Supporting America’s Restaurant Workers Act, introduced by Tim Scott (R-SC); (iv) Restoring Critical Supply Chains and Security Act (the “Supply Chains Act”), introduced by Sen. Lindsey Graham (R-SC); (v) Safe to Work Act, introduced by Sen. John Cornyn (R-TX); (vi) Coronavirus Response Additional Supplemental Appropriations Act, introduced Sen. Richard Shelby (R-AL); (vii) Safely Back to School and Back to Work Act, introduced by Sen. Lamar Alexander (R-TN); and (viii) Time to Rescue United States Trusts Act, introduced by Sen. Mitt Romney (R-UT).}

_{[2] For a more detailed discussion of the HEROES Act, please see our prior blog post here.}

_{[3] The sponsors were Reps. Stephanie Murphy (D-FL), Suzan DelBene (D-WA), John Katco (R-NY), Brian Fitzpatrick (R-PA), and Chris Pappas (D-NH).  Reps. Murphy and DelBene sit on the House Ways and Means Committee.}

_{[4] Section 211(i)(1) of the AWFEA Act.}

_{[5] Section 211(a)-(b) of the AWFEA Act.}

_{[6] Section 20211(a)-(b) of the HEROES Act.}

_{[7] Section 211(f) of the AWFEA Act.}

_{[8] Id.  Section 90005 of the HEROES Act.}

_{[9] Section 211(e)(1) of the AWFEA Act. For an employer that exceeds the 100-employee threshold, the CARES Act provides that qualified wages with respect to an employee may not exceed the amount that the employee would have been paid for working an equivalent duration during the 30 days immediately preceding such period. The HEALS Act would eliminate this limitation. Section 211(e)(2) of the AWFEA Act.}

_{[10] Section 20211(c) of the HEROES Act.}

_{[11] Section 211(c)(1) of the AWFEA Act.}

_{[12] Section 211(c)(2) of the AWFEA Act.}

_{[13] Section 20211(d)(1) of the HEROES Act.}

_{[14] Section 20211(d)(2) of the HEROES Act. The excess gross receipts percentage point amount is equal to the excess of (i) the lowest of the “gross percentage point amounts” with respect to any calendar quarter during the period ending with such calendar quarter and beginning with the first calendar quarter during the period when the employer meets the 90% gross receipts test, over (ii) 50%. The gross receipts percentage point amount is equal to the gross receipts in a calendar quarter divided by the gross receipts in the same calendar quarter in 2019 (expressed as a percentage point).}

_{[15] Section 2(d)(1) of the JOBS Credit Act.}

_{[16] Section 211(d) of the AWFEA Act; Treas. Reg. section 1.6033-2(g)(4); see also section 20211(d)(3) of the HEROES Act. Under both the HEALS Act and the HEROES Act, this rule would take effect as if included in the CARES Act.}

_{[17] Section 20211(g) of the HEROES Act. The 90% gross receipts test would not apply to these governmental entities.}

_{[18] Section 211(e)(3) of the AWFEA Act; Section 20211(f) of the HEROES Act. The HEALS Act rule would take effect as if included in the CARES Act.}

_{[19] Section 212(a) of the AWFEA Act. The work opportunity credit under section 5 is elective. See section 51(j).}

_{[20] A designated local agency is a state unemployment security agency established in accordance with the Wagner-Peyser Act (29 U.S.C. 49-49n) that has jurisdiction over the individual that is sought to be certified. Treas. Reg. section 1.51-1(d)(11).}

_{[21] Section 212(b). Qualified 2020 COVID-19 unemployment recipients would be added as a new “targeted group” to section 51(d).}

_{[22] Section 212(c) of the AWFEA Act.}

_{[23] Section 213(a), (c)-(e) of the AWFEA Act.}

_{[24] Section 213(b) of the AWFEA Act.}

_{[25] Section 213(f)(1) of the AWFEA Act.}

_{[26] All section references herein are to the Internal Revenue Code of 1986, as amended, or the Treasury regulations promulgated thereunder, unless otherwise specified.}

_{[27] Section 213(h) of the AWFEA Act. This rule is identical to the aggregation rule for purposes of the employee retention credit. Please see our discussion of this rule in our prior blog post here.}

_{[28] Section 103(a) of the Supply Chains Act. The credit is modeled after the credit for qualifying advanced energy projects under section 48C.}

_[29] Id.

_[30] Id.

_{[31] Within 90 days after enactment, the Treasury in consultation with the Health and Human Services would establish the qualifying medical PPE manufacturing project program, and manufacturers would be required to submit an application to Treasury to participate in the program within one year of its establishment. If accepted, the applicants would need to submit evidence to the Treasury that they have satisfied the program’s requirements and would need to place a project in service within two years of acceptance. Id.}

_{[32] A “controlled foreign corporation” is a non-U.S. corporation more than 50% of the total combined voting power or the total value of the stock of which is owned by one or more United States shareholders. Section 957(a).}

_{[33] A United States shareholder of a CFC generally means any U.S. person that is a 10% or more owner of the voting power or value of the CFC. Section 951(b).}

_{[34] Section 104 of the Supply Chains Act.}

_[35] Id.

_[36] Id.

_{[37] Section 274(n) of the Internal Revenue Code of 1986, as amended (the “Code”). All section references herein are to the Code or the Treasury regulations promulgated thereunder, unless otherwise specified.}

_{[38] Section 2 of the Supporting America’s Restaurant Workers Act.}

_{[39] 501(c)(6) organizations include business leagues, chambers of commerce, real-estate boards, boards of trade, and certain professional sports leagues and associations, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.}

_{[40] Section 113 of the Continuing Small Business Recovery and Paycheck Protection Program.}

_{[41] Section 403(a) of the AWFEA Act. With respect to the calendar year 2020, 30 days is increased to 90 days for any employee who performs employment duties in any state other than the employee’s state of residence during the year as a result of COVID-19. Section 403(a)(6) of the AWFEA Act.}

_{[42] Section 403(b) of the AWFEA Act.}

_{[43] Section 403(b)(2) of the AWFEA Act. An employer may elect to treat the wages as earned at the location in which the duties were remotely performed if the employer maintains a system that tracks where the employee performs duties on a daily basis. Id.}

_{[44] Section 20261 of the HEROES Act.}

_{[45] Notice 2020-32.}

_{[46] Section 20235 of the HEROES Act.}

_{[47] A REIT is not permitted to carry back losses under the CARES Act.}

_{[48] Section 20302(b) of the HEROES Act. For purposes of this rule, distributions are disregarded with respect to certain nonconvertible, nonvoting stock that is limited and preferred as to dividends and does not participate in corporate growth to any significant extent and has redemption and liquidation rights which do not exceed the issue price of such stock (except for a reasonable redemption or liquidation premium). See section 1504(a)(4).}

_{[49] Section 20301 of the HEROES Act.}

_{[50] Sections 20233(b) and 20235 of the HEROES Act. Tax basis is also unaffected by the exclusion from gross income.}

_{[51] For a more detail discussion of the paid leave tax credits available under FFCRA, please see our prior blog post here.}

_{[52] Section 20204 of the HEROES Act. The credit would increase to 50% in the case of qualified expenses paid with respect to an “essential employee”. Section 20204(c)-(d) of the HEROES Act.}

_{[53] The payments by employers to employees to reimburse the employees for these expenses are intended to be excluded from the employees’ gross income by reason of being qualified disaster relief payments under section 139(b)(1). Section 20204(c) of the HEROES Act.}

_{[54] Section 20212 of the HEROES Act. Qualified fixed expenses generally include mortgage obligations, rent, and utilities incurred in the ordinary course of an employer’s trade or business. The eligibility requirements for this credit would be similar to those of the employee retention credit under the HEROES Act, and like the employee retention credit, there would be a phase-out of the credit for an employer that experiences a reduction in gross receipts of less than 50%, but otherwise qualifies for the credit. Section 20212(c) of the HEROES Act.}