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Virus Tax Breaks Could Boost Walmart, Vodka Distillers, Students

March 26, 2020, 4:27 AM

Large retailers like Walmart Inc. and Target Corp., as well as student loan borrowers, are on a long list of potential winners from tax breaks included in a $2 trillion coronavirus relief bill approved by the Senate.

The stimulus package would provide swift tax relief for companies struggling to pay employees and operating costs. It also includes a tax break that could benefit distillers like Tito’s Handmade Vodka that are now making hand sanitizer, according to the legislation.

Lawmakers also took the opportunity to fix an error in the 2017 Republican tax law that helps restaurants and retailers. And the bill includes direct payments to individuals -- people earning up to $99,000 could get a one-time check in the mail for as much as $1,200 -- and those with student loans wouldn’t have to pay any taxes on any employer repayment assistance they receive.

The bill, which is scheduled for a Friday vote in the House , would provide tax credits, deductions and deferred payments for a wide swath of taxpayers, ranging from large multinational corporations to some low-income earners. The tax benefits are estimated to total more than $500 billion over a decade with more than half of that money going to individuals, according to a Senate Finance Committee Republican aide.

Plummeting Sales

The Joint Committee on Taxation, a nonpartisan tax scorekeeper, has not yet released an estimate of the cost of all these tax breaks.

The bill provides a tax credit for companies that retain employees if they’ve been required to close during the epidemic or seen a significant drop-off in business as people self-isolate to avoid spreading the virus. Companies could delay paying employer-side payroll taxes they owe for up to three years. Businesses could defer half of the payments to 2021 and the remainder to 2022.

Restaurants and retailers, two sectors that have already seen sales plummet as governments limit business operations and consumers stay home, would specifically benefit from a more generous deduction for renovating their stores. Retailers and restaurants -- including Target, Best Buy Co. and KFC-owner Yum! Brands Inc. -- have been lobbying for the change for more than two years.

An error in the 2017 tax law had required them to spread those costs over many years and Republicans since then have been trying to get Democrats to sign off on making that correction.

“We were supportive of that when it got added,” said Austen Jensen, senior vice president for government affairs for the Retail Industry Leaders Association, which represents Walmart and Target. “It’s going to help out restaurants, small businesses” and “our members.”

Hand Sanitizer

Distillers -- including Pernod Ricard SA, which makes Absolut vodka and Jameson Irish whiskey, and Austin, Texas-based Tito’s -- that are using their facilities to produce hand sanitizer during the crisis could also qualify for a provision in the bill that eliminates the federal excise taxes they would normally owe. The Distilled Spirits Council pushed for the change. Neither company responded to a request for comment.

Hospitals, public buildings and retailers have faced large shortages of hand sanitizer as public health officials urge people to wash their hands or use a disinfecting gel more frequently. The widespread need for hand sanitizer has spurred many brewers and distillers, from local operations to Budweiser beer producer Anheuser-Busch InBEv SA, to start producing the sanitizing gel. Anheuser-Busch declined to comment on the record about whether the company would get the tax break.

The bill would also allow companies to use some losses to offset income they earned in previous years, giving them access to tax refunds to alleviate cash-flow problems. Companies that are due alternative minimum tax credits can get those more quickly. The legislation also allows companies to temporarily deduct more interest on the loans they owe.

There are some new tax breaks for individuals as well. People who have been diagnosed with the virus, have a family member who has fallen ill or has faced hardship because of the related economic slowdown can take up to $100,000 from their retirement account without paying penalties.

The legislation would also permit retirees with individual retirement accounts to temporarily not take mandatory distributions, so they wouldn’t have to pay income tax on that money. As an added benefit, those savers wouldn’t be required to withdraw that money when the stock market

Tax breaks for donating to charity in 2020 would also be more generous. Taxpayers who don’t itemize and aren’t typically eligible to write-off charitable gifts, can deduct up to $300 in donations of their 2020 taxes. The bill would also encourage big individual donors and corporations to give more by lifting some limits on how big of a tax break they can take for those contributions.

(Updates with Senate approval starting in the first paragraph)

--With assistance from Naomi Nix.

To contact the reporter on this story:
Laura Davison in Washington at

To contact the editors responsible for this story:
Joe Sobczyk at

Anna Edgerton, John Harney

© 2020 Bloomberg L.P. All rights reserved. Used with permission.