Stimulus bill has special deals for industries
Restaurants and retailers will get a tweak to federal tax law they have been seeking for more than a year that could save them $15 billion. Community banks are being granted their long-held wish of being freed to reduce the amount of capital they have to hold in reserve.
And for-profit colleges will be able to keep federal loan money from students who drop out because of the coronavirus.
Tucked into the largest bail
out in U.S. history —a $2 trillion federal stimulus package worked on by congressional leaders and the White House on Wednesday to reduce the economic devastation of the coronavirus outbreak — are a range of provisions that stand to benefit specific industries and interest groups.
Even the fine print in a near-final, 883-page version of the bill has fine print. Democrats proudly announced that they had won agreement on language to block President Donald Trump, other government officials and their families from receiving assistance from a $500 billion fund to be administered by the Treasury Department.
But it turns out that the provision might not preclude funds from going to companies owned by the family of Trump’s son-inlaw and White House adviser, Jared Kushner, while Trump’s companies would not be barred from benefiting from other elements of the bill intended to help broad swaths of U.S. business.
For example, certain hotel owners, even those employing thousands of people, will be eligible for small-business loans, a provision that could potentially benefit Trump’s company to help to continue to pay wages for his employees. The Trump Organization also could benefit from the $15 billion change to the tax code won by restaurants and retailers.
The legislation, which could be passed by the Senate and the House and signed into law by Trump within the next day, is intended primarily to put money in the hands of many households and prop up especially hard-hit industries such as airlines.
But its sheer size and the rushed way it was put together made it an irresistible target for lobbyists, who launched a frenzied effort to insert into the mustpass legislation provisions their clients wanted, some of which had a timely rationale and others of which mostly were unconnected to the coronavirus crisis.
This lobbying push was unlike any other, as social distancing measures intended to limit the spread of the virus among lawmakers and their staffs left the Capitol eerily quiet. Lobbyists instead pressed their causes to staff members and lawmakers over the phone, or via email.
“We went to McConnell’s people, we went to Schumer’s people, and Pelosi’s and McCarthy’s people — we pinged them all,” said Rachelle B. Bernstein, a lobbyist and tax counsel at the National Retail Federation, which pressed successfully for the $15-billion-a-year change in federal tax law.
While some industries and companies are benefiting from provisions tailored for them, others appear certain to get a piece of the pie through more general components of the bill, from the $454 billion general purpose fund for businesses and state and local governments to the $50 billion earmarked for airlines and $8 billion for air cargo carriers.
The deal specifically sets aside $17 billion for “businesses critical to maintaining national security” — a category seen as intended at least partly for Boeing, the troubled aircraft manufacturer and Pentagon contractor, whose name appears nowhere in the bill.
“We’ll be helping Boeing,” Trump said Tuesday evening. “We’ll be helping the airlines, the cruise lines.”
As with any complex piece of legislation, this one will create winners and losers.
Despite the effort by Democrats to limit access by top federal officials and members of Congress to the bailout funds, the law would still leave room for Trump to benefit. At least two of the provisions, intended to help the hotel and restaurant industries, could provide financial help to the Trump Organization.
A spokesman for the Trump Organization did not respond to a request for comment. Trump declined to respond to a question this week about whether his family business intended to take advantage of any of the tax breaks or other benefits included in the legislation.
“I don’t know,” Trump said at a news conference Sunday. “I just don’t know what the government assistance would be for what I have. I have hotels.”
Many of these special-interest provisions would be impossible for a casual reader of the legislation to identify. For example, on Page 15 of the bill, there is a section with the title “Business Concerns With More Than 1 Physical Location.” It says this change in federal law will apply to companies that fit “a North American Industry Classification System code beginning with 72” — a reference that turns out to mean the hotel and restaurant industry.
The provision says that if a company owns multiple hotels, even if the overall hotel or restaurant chain has more than 500 employees — the limit to qualify for treatment as a small business — it will still be able to take advantage of the small-business benefits offered in the rescue package.
That means loans from the federal government worth up to 2½ times the firm’s monthly payroll that will not have to be repaid if the company uses them to keep paying employees during any coronavirus shutdowns.
Representatives from the American Hotel & Lodging Association reached out to Republicans and Democrats to push them to insert the language, arguing that it would allow the federal assistance to cover an additional 33,000 hotels, with a total of about 1 million employees.
The large corporations that own the big brands — such as Marriott or Hilton — would not be eligible. But any individual hotel, including from one of these brands, that has fewer than 500 employees would be. Many hotels are owned by franchisees.
The tweak to the tax code sought by the nation’s retailers and grocers could mean $15 billion a year of tax savings for hotels, restaurants, supermarkets and other retailers. Groups representing those industries separately intervened with Trump and leaders on Capitol Hill to push lawmakers to include it in the final package.
The provision could benefit Trump’s companies, among many others, by allowing them immediately to write off money spent on renovations at hotels or restaurants, instead of having to take the deduction over 37 years.
Industry lobbyists have been pushing for the change for more than a year. They have called it a technical correction to the 2017 tax legislation that Trump signed into law. The provision is simply called “Technical Amendments Regarding Qualified Improvement Property.”
Meanwhile, the provision inserted by Democrats to block the families of government officials from receiving certain assistance might not exempt the companies owned by the family of Kushner.
While the provision expressly bars such funds from going to companies controlled by “the spouse, child, son-in-law or daughter-in-law” of the president and other officials, in order for the prohibition to kick in, the person in question would have to “directly or indirectly” own or control 20% or more of a company. Kushner rarely owns that much in his family firm’s various real estate projects.