Don’t Exclude Elderly and Disabled Dependents from Covid-19 Aid (UPDATED 3/26/2020)
[NOTE: This explainer has been updated to reflect Senate passage of the CARES Act.]
What’s the issue? Covid-19 poses a particularly serious health risk to elderly and immunocompromised individuals. Many of the most vulnerable individuals rely largely on relatives and Social Security benefits for financial support. Covid-19 imposes a range of new burdens on these individuals and their families. Some of these families have moved relatives from assisted living facilities to home living arrangements; many face additional caregiving obligations because of reduced access to outside caregivers during social distancing; and many are incurring new costs associated with food and pharmaceutical delivery.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed by the Senate Wednesday would provide most U.S. households with a “recovery rebate” of $1,200 per adult and $500 per child. However, the CARES Act would provide zero dollars for U.S. adults who earn less than $4300 per year in non-Social Security income and rely on a relative for more than half of their financial support. Despite hundreds of billions of dollars in aid to airlines and other businesses, elderly and disabled-adult dependents get nothing.
Who exactly is affected? The issue affects individuals who fall within the tax code’s definition of “dependent” but not the code’s definition of a “qualifying child.” Non-child dependents include individuals who are age 17 or older, earn less than $4,300 in non-Social Security income, and rely on a relative for more than half of their financial support (including — but not limited to — older parents living with adult children, adult children who are out of work while caring for their older parents, disabled adults living with family members, and some high school juniors, seniors, and college students). The issue also affects individuals who earn less than $4,300 in non-Social Security income and rely on a non-relative for more than half of their financial support, provided that the individual lives with the non-relative. At least 12 million adults are “dependents” under the tax code, including at least 3.4 million older individuals dependent upon their adult children.
Why didn’t Senators want rebates to go to elderly and disabled dependents? Unclear. No senator articulated a cogent rationale for excluding many members of the segment of the population most vulnerable to covid-19 from receiving covid-19-inspired relief. Cost does not appear to be a decisive factor: the cost of extending rebates to adult dependents is less than 1 percent of the total amount that would be distributed under the CARES Act.
How can this be fixed? Easy. The proposed section 6428(d)(2) on page 146 of the CARES Act should be stricken and replaced with “(2) any individual who is a qualifying child of another taxpayer (within the meaning of section 24(c)) for a taxable year beginning in the calendar year in which the individual’s taxable year begins.” This language would ensure that a parent and child cannot double-claim a rebate, but without excluding elderly and disabled dependents.
Can the House pass the bill and fix this later? Theoretically yes, though fixing it now could mean that everyone entitled to a rebate gets their check sooner. The current text means that the IRS will have to invest time and resources in determining which adults are “dependents” and holding back their payments.
