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Legal scholars are urging Congress to appoint more judges to U.S. bankruptcy courts so they won’t be overwhelmed by large numbers of corporate failures stemming from the coronavirus pandemic, WSJ Pro Bankruptcy reported. Academics studying the economic crisis warned Senate Majority Leader Mitch McConnell (R-Ky.), House Speaker Nancy Pelosi (D-Calif.) and other top lawmakers on Thursday that negative economic indicators suggest there will be a surge in bankruptcies over the next 18 months. “We have every confidence in our existing bankruptcy judges, but we also fear that their courts may be overwhelmed by this flood of cases,” the academics said in a letter sent to congressional leaders. The letter was written by University of California, Hastings law professor Jared Ellias and signed by 34 other professors. In addition to bringing on more judges, the letter also urged Congress to increase budgets for current bankruptcy judges so that they can recall retired judges and hire more law clerks and other staff to handle a bigger caseload. Bolstering the U.S. bankruptcy system now would be a low-cost way for Congress to strengthen a key component of the nation’s economic infrastructure, the letter said, adding that more overhauls might be needed as the crisis continues. Read more. 

Click here to read the letter. 

The White House has begun informal talks with Republicans and Democrats in Congress about what to include in another round of coronavirus relief legislation, officials said yesterday, while predicting further U.S. jobs losses in the coming months, Reuters reported. Officials in President Donald Trump’s administration, including Treasury Secretary Steven Mnuchin and White House economic adviser Larry Kudlow, said they were holding discussions with lawmakers on issues including potential aid to states whose finances have been devastated by the pandemic. Another White House economic adviser, Kevin Hassett, said future legislation could include food aid to help Americans struggling with hunger amid widespread job losses that have ruined the finances of many people. It also could include broadband access for those who lack it, Hassett added. While Democrats, who control the House of Representatives, are moving to unveil new legislation as early as this week, the White House signaled it is in no hurry to pass another relief bill. Since early March, Congress has passed bills allocating $3 trillion to combat the pandemic, including taxpayer money for individuals and companies to blunt an economic impact that includes an unemployment rate to 14.7% in April after U.S. job losses unseen since the Great Depression of the 1930s. “We just want to make sure that before we jump back in and spend another few trillion of taxpayers’ money that we do it carefully,” Mnuchin said. “We’ve been very clear that we’re not going to do things just to bail out states that were poorly managed.” Hassett said that the U.S. unemployment rate could rise to somewhere “north of 20 percent” in May or June before the economy moves into what administration officials have said will be a robust recovery in late 2020.

The Trump administration is considering a wide range of tax-cut proposals for businesses and investors in the next coronavirus response bill as it tries to shift from government spending programs to support the economy toward measures that aim to reinvigorate growth, the New York Times reported. The list of ideas under discussion includes a reduction in the capital gains tax rate and measures that would allow companies to deduct the full costs of any investments they make now or in the future, according to administration officials and several outside experts who have discussed plans with the White House. Those proposals, which are still being debated and are not final, could accompany President Trump’s top two priorities for the next rescue package: the suspension of payroll taxes for workers and an expanded deduction for corporate spending on meals and entertainment. Trump and his aides are also planning to push lawmakers to approve legal liability limits for businesses that operate during the pandemic, a top priority of business lobbying groups in Washington, D.C., and Senate Majority Leader Mitch McConnell (R-Ky.). Read more. 

The Senate Judiciary Committee will hold a hearing on Tuesday at 2:30 p.m. titled "Examining Liability During the COVID-19 Pandemic." Click here for more information. 

A bipartisan group of lawmakers, including the chairmen of the tax-writing committees in the House and the Senate, asked the Internal Revenue Service yesterday to allow companies that continue paying the cost of health benefits for furloughed workers to remain eligible for a new tax credit, the New York Times reported. 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 IRS 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.” Lawmakers yesterday objected to that finding. In a letter to the IRS, Senate Finance Committee chair Charles E. Grassley (R-Iowa) along with the top Democrat on the committee, Senator Ron Wyden of Oregon, and Rep. Richard E. Neal (D-Mass.), House 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.”

Senate Democrats plan to press White House lawyer Brian Miller today about his ability to act independently of President Trump if he is confirmed as a new inspector general, setting up one of Congress’s first clashes about the government’s response to the coronavirus pandemic, the Washington Post reported. Miller, who is currently senior associate counsel of the Office of White House Counsel, played a role in defending Trump during the recent impeachment inquiry. Trump has nominated him to serve as Special Inspector General for Pandemic Recovery. This would place him in charge of overseeing a roughly $500 billion Treasury fund created as part of Congress’s $2 trillion CARES Act in late March. In a four paragraph opening statement to the Senate Banking Committee released yesterday, Miller promised to carry out his duties “with fairness and impartiality” and be independent and fair. After approving nearly $3 trillion to rescue the economy from the coronavirus pandemic, Congress has moved very slowly in formally scrutinizing how the money has been spent. The Trump administration has already said it is backstopping more than $500 billion in newly issued business loans. It has also begun issuing more than $200 billion in “economic impact” payments to households. There has been very little disclosure about how these programs are performing or whether any mistakes are being corrected. Lawmakers haven’t conducted any oversight hearings yet, largely because lawmakers have steered clear of the Capitol during the pandemic.