Introduction The federal individual income tax is structured so that the poor owe little or no income tax (although they may pay other federal taxes, like payroll taxes as well as state and local taxes). In addition, the federal income tax increases the disposable income of many poor families via refundable tax credits. These tax creditsâprimarily the earned income tax credit (EITC) and the refundable portion of the child tax credit, called the additional child tax credit (ACTC)âincrease the disposable income of many low-income taxpayers who work and have children, and have been shown to reduce poverty. P.L. 115-97 , commonly referred to as the Tax Cuts and Jobs Act (TCJA), made numerous temporary changes to the federal income tax system, including many that affect individuals and families. Preliminary analyses of the TCJA found that the law provides larger benefits to higher-income individuals and families. This report's analyses find that overall the law had a relatively small impact on poverty compared to the pre-TCJA federal individual income tax. Recent tax legislation considered in the 116 th Congressâincluding the Economic Mobility Act of 2019 ( H.R. 3300 ) ordered reported by the House Ways and Means Committee on June 20, 2019âwould target additional tax benefits to lower-income families. H.R. 3300 would temporarily increase the amount of the EITC for "childless" workers, allow all eligible taxpayers to receive the full amount of the ACTC, irrespective of a taxpayer's earned income, and make the child and dependent care tax credit refundable. To provide context for the consideration of new tax legislation, this report examines the relationship between the federal individual income tax and poverty. Given some policymakers' continued interest in using the tax system to reduce poverty and boost the incomes of low-income working families with children, understanding the impact of the income tax in reducing povertyâpre- and post-TCJAâmay help inform future policy debates and legislative proposals. This report is structured to first provide a brief overview of the major federal income tax provisions that affect lower-income individuals and families, including a comparison of how these provisions changed under the TCJA. The report then provides an analysis of how the pre-TCJA federal income tax affected poverty, followed by a comparison of how the post-TCJA federal income tax affected poverty. The report concludes with some observations on the benefits and limitations of the federal income tax system and refundable tax credits in reducing poverty. Key Concepts, Conventions, and Terms Used in this Report Several major concepts, conventions, and terms used throughout this report are briefly described below. The information in this report provides some insights into how the federal income tax affects families' poverty status, specifically the immediate, short-term impact of the TCJA on poverty. The report does not estimate how the impacts of the TCJA will change over time or how people may change their behavior (e.g., choices between working and not working) in response to the TCJA. The family is the unit of analysis. While federal income tax provisions affect taxpayers, the impact of these provisions is analyzed in terms of families. A taxpayer is generally composed of all individuals listed on a federal income tax return (IRS Form 1040) and includes an individual, his or her spouse (if married), and any dependents. Descriptions of the tax system pre- and post- TCJA will generally refer to how these changes applied to taxpayers (i.e., the below section titled, " How Major Federal Income Tax Provisions Apply to the Poor "). In contrast, poverty analysis is done at the family level since families can share many resources and expenses. Hence, in this report analyses of the impact of the income tax , pre- and post-TCJA, are generally done at the family level . In this report, a family is composed of people living together related by blood or marriage (the family), cohabiting partners, and foster children. In some cases, like multigenerational families, a family is composed of multiple taxpayers. In these cases, tax liabilities and/or benefits for all taxpayers are aggregated to determine the impact of the income tax on the family's resources. If a family is determined to be poor, all members of that family are counted as poor. The Supplemental Poverty Measure (SPM) is used to measure the poverty impact of the federal income tax. This report examines the impact of the pre- and post-TCJA federal income tax on poverty, using the federal government's Supplemental Poverty Measure (SPM). Unlike the official poverty measure, the SPM was developed in part to help assess the effects of tax and government benefit policies on the economic well-being of low-income individuals. For more information on the SPM, see Appendix A and CRS Report R45031, The Supplemental Poverty Measure: Its Core Concepts, Development, and Use . The impact s of the federal income tax (pre- and post-TCJA) are estimated using the TRIM3 model and are modeled as if they were in effect in 2016. To estimate the impact of the federal income tax on povertyâin both the pre- and post-TCJA casesâincome taxes owed (or the net benefit from refundable credits received) are subtracted from (or added to) the family's other resources, which are then assessed against an SPM poverty threshold. Other taxes that a family may payâincluding payroll and excise taxesâare unchanged in these analyses. All poverty estimates in this report are calculated using a computer simulation model called the Transfer Income Model, version 3 (TRIM3). TRIM3 uses data from the 2017 Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS), representing income received and tax liabilities or benefits accrued during calendar year 2016. As such, the poverty estimates under the old and new income tax systems are estimated as if they were in effect in 2016 . Hence, for ease of reading, the estimates in this report are described in the past tense. Details on this methodology, including how the TCJA was modeled in TRIM3, can be found in Appendix A . How Major Federal Income Tax Provisions Apply to the Poor The federal income tax can increase or decrease a taxpayer's disposable income, which may affect a family's poverty status. Broadly, when a taxpayer receives refundable tax credits greater than the income taxes they owe, they have a negative tax liability , and an increase in disposable income, all else being equal. Conversely, if a taxpayer owes federal income tax, they have a positive tax liability , and reduced disposable income, all else being equal. (If a taxpayer has zero tax liability , their disposable income is unchanged by the income tax.) Unless otherwise mentioned, the term tax liability will refer to federal income tax liability in this report. In order to understand how the individual income tax can affect tax liabilities, it can be helpful to broadly understand how income taxes are calculated, and in particular, how major components of the income tax affect poor taxpayers. Importantly, the description below summarizes only the major aspects of the federal income tax calculation that are particularly relevant for poor families. For a more detailed overview of the federal income tax calculation, see CRS Report R45145, Overview of the Federal Tax System in 2018 ; and CRS Infographic IG10014, The U.S. Individual Income Tax System, 2019 . For a more detailed description of the tax provisions summarized below, how they affect income tax liability, and how they were modified by the TCJA, see CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law . The TCJA substantially modified the federal tax code, including changing many provisions that affect individuals. Most of these changes are temporary, and are scheduled to expire ("sunset") at the end of 2025. The major changes made by the TCJA that are likely to affect many low-income taxpayers are highlighted below. Calculating Income Tax Liability The first step for taxpayers in calculating their income tax liability is to add up their income from various sources to calculate their gross income. Exclusion of Public Assistance The income tax code excludes certain types of income received by lower-income individuals from gross income. For example, public assistance payments (cash assistance from the Supplemental Security Income program or the Temporary Assistance for Needy Families [TANF] Block Grant) and the value of certain noncash benefits (food benefits from the Supplemental Nutrition Assistance Program [SNAP] or the subsidy value of housing benefits) are excluded from gross income under the income tax system, and hence are not taxable. The TCJA did not make any changes to the exclusion of public assistance. The taxpayer then subtracts from gross income various deductions and exemptions to calculate the amount of income that is taxableâtheir taxable income . Most low-income taxpayers will subtract from their gross income the standard deduction (and before 2018, personal exemptions) to calculate their taxable income. The Standard Deduction and Personal Exemptions The standard deduction is a fixed dollar amount all taxpayers may deduct from their income, with the amount varying by the taxpayer's tax filing status. In 2018, before enactment of the TCJA, the standard deduction would have ranged from $6,500 to $13,000, depending on the taxpayer's filing status. The TCJA almost doubled the standard deduction. The personal exemption is a per-person subtraction from gross income for the taxpayer and, if applicable, his or her spouse and dependents. Before enactment of the TCJA, the personal exemption would have equaled $4,150 per person in 2018. The TCJA effectively eliminated the personal exemption (reduced the amount to $0). When combined, the personal exemptions and the standard deduction represent an amount of income that is not subject to income taxation. As a result of these provisions, many low-income taxpayers have little or no taxable income and hence have little or no income tax liability. (Taxable income cannot be reduced below zero.) After taxpayers have calculated their taxable income, they then apply marginal tax rates to calculate their tax liability before credits. Marginal Tax Rates A marginal tax rate is the tax incurred on each additional dollar of taxable income. Marginal tax rates in the individual income tax code are graduated, meaning the rate increases over successive ranges of taxable income. Many low-income taxpayers who do have taxable income pay taxes at the lowest marginal rate of 10%. The ranges of taxable income and their associated rate are often referred to as tax brackets . Taxpayers determine their tax liability before credits by applying marginal tax rates to their taxable income. Then taxpayers can subtract tax credits to determine their final tax liability. The 10% tax bracket (the lowest tax bracket) was unchanged by the TCJA. In general, marginal tax rates above the 10% rate were reduced under the TCJA. See Table C-2 . Refundable Tax Credits Tax credits reduce the amount a taxpayer owes dollar-for-dollar the value of the credit. Credits can be nonrefundable or refundable. Nonrefundable credits cannot exceed tax liability, and therefore can only reduce tax liability to zero. In other words, "the maximum value of a nonrefundable credit is capped at a taxpayer's tax liability." For example, if a taxpayer owes $1,000 in income taxes and is eligible to receive $4,000 in nonrefundable tax credits, the taxpayer will receive only $1,000 in nonrefundable tax credits, reducing their income tax liability to zero. By contrast, refundable credits are not limited by how much a taxpayer owes in income taxes, meaning those with little to no tax liability, including may poor taxpayers, can receive the full value of the credit. A refundable tax credit provides a net benefit to a taxpayer (i.e., after-tax income is greater than before-tax income) when the amount of the credit is greater than the taxpayer's income tax liability. For example, if a taxpayer owes $1,000 in income taxes but receives $4,000 in refundable tax credits, the taxpayer has a net benefit (and negative tax liability) of $3,000. The two major refundable tax credits claimed by low-income working taxpayers are the EITC and the additional child tax credit (the ACTC, which is the refundable portion of the child tax credit). The amount of the EITC is based on a taxpayer's earned income, marital status, and number of qualifying children. In 2018, before the TCJA, the maximum amount of the credit would have ranged from $520 to $6,444, depending on the number of qualifying children. The TCJA did not alter the EITC itself, though it did change the rules for adjusting it for inflation, which resulted in a slightly smaller EITC under the TCJA than under prior law (a difference of $1 to $13 in 2018, depending on the number of qualifying children claimed by a taxpayer). Before the TCJA the child tax credit equaled a maximum $1,000 per child, and up to the full amount ($1,000 per child) could be received as the ACTC. The ACTC was calculated as 15% of earned income over $3,000, not to exceed $1,000 per child. The TCJA increased the maximum child tax credit from $1,000 to $2,000 per child and increased the maximum amount of credit that could be claimed as the ACTC from $1,000 to $1,400 per child. The formula for calculating the ACTC was also modestly changed. Post-TCJA, the ACTC formula now equals 15% of earned income above $2,500, not to exceed $1,400 per child. While many low-income taxpayers did receive a larger benefit as a result of these changes, the poorest taxpayers received a more modest increase of up to $75 (see Figure C-1 and Figure C-2 ). Impact of the TCJA on a Taxpayer's Tax Liability The ultimate impact of the TCJA on a particular taxpayer's tax liability depends on how the taxpayer's individual circumstances interact with all of these provisions, not just one of them. For example, as a result of all the changes made by the TCJA, a taxpayer may have greater taxable income, but that income may be subject to lower marginal tax rates, and the taxpayer may also be eligible for a larger child credit. Hence, even though on average the TCJA lowered tax liabilities, individual taxpayers' tax liabilities may have been unchanged, increased, or decreased as a result of the law. The Pre-TCJA Income Tax and Poverty Under the pre-TCJA income tax, many poor families did not owe federal income taxes, and a significant proportion received a net benefit from refundable credits. As previously discussed, the combination of personal exemptions and the standard deductionâsubtracted from gross income to determine income subject to the taxâgenerally reduced most poor families' taxable income to zero. Additionally, some poor families with little or no income tax liabilityâparticularly those with children and earned incomeâreceived refundable tax credits that resulted in their after-tax income being greater than their before-tax income. (CRS estimates that before the income tax was subtracted from [or added to, in the case of negative tax liabilities] a family's resources, there were approximately 21.4 million familiesâequaling an estimated 46.5 million individualsâin poverty. For more information, see Appendix B .) Poor Families with Positive, Negative, and Zero Tax Liabilities Under the Pre-TCJA Income Tax Figure 1 illustrates the estimated share of families who owed income taxes (positive tax liability), owed no income taxes (zero tax liability), or owed no income taxes and received a net benefit from refundable tax credits (negative tax liability) by family poverty status. Under the pre-TCJA income tax, the majority of nonpoor families (75.7%) owed income taxes. In contrast, the majority of poor families (62.7%) owed no income taxes, and approximately a quarter (24.3%) owed no income taxes and received a net benefit from refundable tax credits. Figure 2 shows the estimated share of poor families with positive, zero, and negative tax liabilities by the presence of children or aged family members. Nearly 6 in 10 poor families with children (57.5%) had a negative tax liability under the pre-TCJA income tax. In comparison, nearly 2 in 10 poor families without children or aged adults (19.5%) had a negative tax liability. The Impact of Pre-TCJA Income Tax on Poverty Rates Comparing poverty rates before and after a policy change is one way to assess a policy's impact on poverty. To calculate poverty rates under the pre-TCJA income tax, a family's poverty status must be determined before and after tax. A family's before-tax poverty status is based on the family's available financial resources before federal income tax liabilities are subtracted from (or added to, in the case of negative tax liabilities) their disposable income. In contrast, a family's after-tax poverty status is based on the family's financial resources after the federal income tax is subtracted from (or added to, in the case of negative tax liabilities) disposable income. If the income tax boosts income sufficiently to push a poor family above the poverty threshold, they are then counted as nonpoor as a result of the pre-TCJA income tax. As previously discussed, if a family is determined to be poor, all members of that family are counted as poor. Poverty rates are then calculated based on the number of individuals who are poor before and after the pre-TCJA income tax is applied. Figure 3 shows the effect of the pre-TCJA income tax system on the poverty rates of individuals based on the types of families in which individuals lived. Overall, the pre-TCJA income tax reduced poverty: the before-tax poverty rate was 14.5%, while the after-tax poverty rate was 12.5%, a net reduction of two percentage points. Figure 3 also indicates that the poverty reduction impact of the income tax was concentrated among individuals who lived in families with children. Specifically, the pre-TCJA income tax reduced child poverty by nearly 30% (from 17.5% in poverty to 12.3% in poverty) and reduced poverty among nonaged (i.e., nonelderly) adults in families with children by a quarter (from 14.5% in poverty to 10.8% in poverty). In contrast, the post-tax poverty rate for nonaged adults in families with no children was higher than the pre-tax poverty rate for this group (the poverty rate for individuals in this group rose from 12.8% to 13.1%). Further examination of the impact of the pre-TCJA income tax on poverty rates indicates that all of the antipoverty effect of the federal income tax went to those individuals who lived in families with workers. As illustrated in Table 1 , CRS estimates that among the subset of families who had no workers, poverty rates, including the poverty rates of children and nonaged adults who lived with children, were unchanged by the pre-TCJA income tax. In contrast, among those who lived with a worker, poverty fell by over 20% (from 10.8% in poverty to 8.3% in poverty), with larger reductions for children and nonaged adults who lived in families with children. In other words, the poverty reduction of the pre-TCJA income tax was concentrated among individuals who lived with workers and children. The Impact of Pre-TCJA Income Tax on the Poverty Gap The poverty gap is another metric that can be used to understand poverty and to examine the impact of a policy on poverty. The poverty gap is the difference between the poverty threshold (an amount of money below which a family is counted as poor) and a family's disposable income. (The poverty gap for a nonpoor family is $0.) Unlike the poverty rate, which is based on whether a family is below the poverty threshold, the poverty gap provides a way of examining the degree to which a family is below that threshold. For example, assume there are two poor families who have the same poverty threshold of $25,000. The first family has $20,000 of disposable income, hence their poverty gap is $5,000. The second family has $10,000 of disposable incomeâthey are poorer than the first familyâand their poverty gap is $15,000. Hence the larger the poverty gap, the poorer the family. For this analysis, poverty gaps are summed together across all poor families to determine the aggregate poverty gap. The aggregate poverty gap is calculated both before and after taxes (or refundable credits) are subtracted (or added) to disposable income as calculated under the pre-TCJA income tax. Changes to the aggregate poverty gap from the pre-TCJA income tax measure the degree to which the federal income tax reduced financial hardship among poor families. Table 2 provides estimates of the aggregate poverty gap before and after the pre-TCJA income tax. The aggregate poverty gap before the pre-TCJA income tax was $150.8 billion. The poverty gap after the pre-TCJA income tax was $138.1 billion. Thus, the pre-TCJA income tax reduced the aggregate poverty gap by $12.7 billion, all of which went to families with children and at least one worker. For families without children (i.e., families with aged adults and families without children or aged adults), the aggregate poverty gap increased slightly as a result of the pre-TCJA income tax. The Post-TCJA Income Tax and Poverty Under the post-TCJA income taxâsimilar to the pre-TCJA income taxâmany poor families did not owe federal income taxes (i.e., had zero tax liability), and a significant proportion owed no income tax and received a net benefit from refundable credits (i.e., had a negative tax liability). The impact of the post-TCJA income tax system on poverty rates and the poverty gap suggests the TCJA provided relatively small benefits to poor families. (CRS estimates that before the income tax was subtracted from [or added to, in the case of negative tax liabilities] a family's resources, there were approximately 21.4 million familiesâequaling 46.5 million individualsâin poverty. For more information, see Appendix B .) Poor Families with Positive, Negative, and Zero Tax Liabilities Under the Post-TCJA Income Tax As illustrated in Figure 4 , CRS analysis indicates that the shares of poor and nonpoor families with positive, negative, and zero income tax liabilities were similar pre- and post-TCJA. For both poor and nonpoor families, there is a relatively small decrease (less than 2 percentage points) in the number of families with a positive tax liability. For both poor and nonpoor families, there is a relatively small increase in the share of families with zero tax liability. The share of poor families with a negative tax liability is effectively unchanged, while the share of nonpoor families with a negative tax liability increased by a relatively small amount. Figure 5 compares the estimated share of poor families with positive, zero, and negative income tax liabilities under the pre-TCJA and post-TCJA income tax by family type. This analysis indicates that across all poor family types, the share of poor families that owed taxes (i.e., had positive tax liability) modestly fell as a result of the TCJA. Among poor families with children, CRS analysis indicates that share of these families who did not owe income taxes (i.e., had zero tax liability) increased as a result of the TCJA. In contrast, the share of poor families with children who received an increase in their disposable income from refundable tax credits (i.e., had a negative income tax liability) fell as a result of the TCJA. The Impact of the Post-TCJA Income Tax on Poverty Rates Figure 6 compares estimated after-tax poverty rates between the pre- and post-TCJA income tax. The difference in these poverty rates reflects the impact of the TCJA on poverty. These estimates indicate that the TCJA had a relatively small effect on poverty rates. CRS estimates that the TCJA reduced overall poverty by 1.6% (from 12.5% in poverty under the pre-TCJA income tax to 12.3% in poverty under the post-TCJA income tax). The impact of these changes was concentrated among individuals who lived in families with children. Specifically, the TCJA reduced poverty among children and nonaged adults living in families with children by about 2.4% and 1.9%, respectively (from 12.3% to 12.0% in poverty among children and from 10.8% to 10.6% in poverty among nonaged adults living in families with children). As with the pre-TCJA income tax, the impact of the post-TCJA income tax on poverty rates was concentrated among those who lived in a family with workers. As illustrated in Table 3 , CRS estimates that among the subset of families who had no workers, the poverty rates of children and nonaged adults who lived with children were unchanged by the post-TCJA income tax. In contrast, among those who lived with a worker, poverty fell by nearly 25% (from 10.8% in poverty to 8.1% in poverty), with larger reductions for children and nonaged adults who lived in families with children. As with the pre-TCJA income tax, these estimates suggest that virtually all of the benefits of post-TCJA income tax go to individuals who live with workers and children. The Impact of the Post-TCJA Income Tax on the Poverty Gap The post-TCJA income tax reduced the aggregate poverty gap from $150.8 billion to $136.9 billion. The pre-TCJA income tax reduced the aggregate poverty gap to $138.1 billion. Hence, CRS estimates that the changes made by the TCJA reduced the aggregate poverty gap by an additional $1.2 billion compared to the pre-TCJA income tax. Table 4 breaks down this $1.2 billion reduction by family type and indicates that the majority of the additional reduction in the poverty gapâapproximately $800 million of the $1.2 billionâoccurred among families with children. Almost all of that $800 million went to families with children and workers. A Comparison of the Impact of the Post-TCJA Income Tax and Selected Low-Income Assistance Programs on Poverty Rates and the Poverty Gap A comparison of estimated antipoverty effects of the post-TCJA income tax and other low-income assistance programs indicates that while the income tax substantially reduced the poverty rate , it had more limited effects on the aggregate poverty gap . Figure 7 shows the estimated percentage-point reduction in the poverty rate attributable to the post-TCJA income tax and several low-income assistance programs: the Supplemental Nutrition Assistance Program (SNAP); Supplemental Security Income (SSI); assisted housing programs (Section 8 vouchers and public housing); and Temporary Assistance for Needy Families (TANF) block grant cash assistance. Only SNAP resulted in a comparable reduction in the overall poverty rate compared to the post-TCJA income tax. Estimates of the reduction in the aggregate poverty gap from the post-TCJA income tax compared to selected low-income assistance programs highlight some of the limitations of the income tax in helping the poorest families. As illustrated in Figure 8 , three of the four low-income assistance programs reduced the poverty gap by greater amounts than the income tax. This may occur for several reasons. First, these nontax programs tend to aid the very poor, and even though their benefits are not large enough to lift a family above the poverty threshold, they do provide significant financial assistance. Second, the majority of the income tax's antipoverty provisionsâincluding the EITC and the ACTCâare available only to families with earned income. Poor families who receive the EITC and the ACTC tend to be "less poor" than other families who receive SNAP, SSI, and housing assistance. Conclusion The income tax provides significant monetary benefits to many low-income families. These benefits reduce the overall poverty rate. The analysis in this report suggests, however, that the income tax is less effective, in comparison to many needs-tested programs, in helping the poorest families move out of poverty, as measured by its impact in reducing the aggregate poverty gap. Overall, the impact of the income tax on poverty was marginally changed by the TCJA. Specifically CRS estimates that before taxes, the poverty rate was 14.5%. After the pre-TCJA income tax, the poverty rate fell to 12.5%, while after the post-TCJA income tax it fell to 12.3%. CRS estimates that before taxes, the aggregate poverty gap was $150.8 billion. After the pre-TCJA income tax it fell to $138.1 billion, while after the post-TCJA income tax it fell to $136.9 billion. These benefits went almost exclusively to individuals who lived in families with workers and children. This analysis highlights both the importance of the tax system in reducing poverty, and also some of its limitations. As discussed in this report, the main mechanism by which the income tax reduces poverty is through refundable tax credits, primarily the EITC and the refundable portion of the child tax credit, the ACTC. These credits are available only to families who include a worker (and who generally have children) since their value is based in part on a taxpayer's earned income. Hence these credits provide little if any benefit to those who do not or cannot work, and who are more likely to be poor. There are other limitations to using refundable tax credits to reduce poverty that are not discussed in this report. Notably, the EITC and child tax credit are received once a year as part of a taxpayer's refund after they file their federal income tax return, and are not paid out on a more periodic basis (i.e., monthly) to help families meet their basic needs. Addressing this limitation, the National Academy of Sciences, in its most recent report on reducing child poverty, proposed converting the child tax credit into a monthly child allowance. However, the Internal Revenue Service (IRS) may be ill-equipped to accurately and efficiently pay out tax benefits like the EITC and the child tax credit on a more periodic basis. Even on an annual basis, as they are currently paid out, these credits can be difficult for the IRS to administer and for taxpayers to comply with. The complexity of these tax credits is often cited as the main factor driving their high rate of erroneous claims. Despite these limitations, and the limitations highlighted in this report, the income tax remains a popular (and near-universal) mechanism to provide aid to the working poor, especially those with children. Recent legislative proposals, including the Economic Mobility Act of 2019 ( H.R. 3300 ), would expand refundable tax credits, increasing the size of the EITC for workers without custodial children (the "childless EITC"), and increasing the ACTC to $2,000 ($3,000 for young children) for all low-income taxpayers irrespective of earned income. The stated purpose of this legislation is to help working families with children. And yet, by eliminating the phase-in for the ACTC, H.R. 3300 (and the American Family Act of 2019; S. 690 / H.R. 1560 ) also represents a shift in the target population of refundable tax credits, expanding eligibility to poor families with children that do not include a worker. Similarly, the proposed increase in the EITC for taxpayers without custodial children also reflects a shift from providing benefits only to workers with children (although childless EITC recipients may live in families with other children and/or have noncustodial children who do not live with them). Insofar as eligibility and the amount of refundable tax credits are expanded, the antipoverty effects of the income tax may increase. Appendix A. Methodology and Data Sources To examine how the federal individual income tax affects poverty, this report uses estimates from the Transfer Income Model, version 3 (TRIM3) and data from the Census Bureau's Annual Social and Economic Supplement (ASEC) to the Current Population Survey. TRIM3 is a static microsimulation model that estimates federal and state taxes and certain benefit transfer programs. TRIM3 is primarily funded by the U.S. Department of Health and Human Services and maintained by the Urban Institute. The measure of poverty used is the Census Bureau's Supplemental Poverty Measure (SPM). The Annual Social and Economic (ASEC) Supplement to the Current Population Survey The ASEC is a household survey of the noninstitutionalized population conducted by the Census Bureau in March of each year. There are approximately 94,000 households in the ASEC. The ASEC includes questions related to household members' demographic characteristics and family living arrangement at the time of the survey, and work experience and income in the prior year. This report's estimates are based on the 2017 ASEC, which captures information on work experience and income in the prior yearâ2016. The ASEC is used by the U.S. Census Bureau to estimate both the official poverty measure and SPM poverty in its reports. The sample of the ASEC is large enough to make reliable estimates for the nation as a whole and, sometimes, for some of the larger states. However, the sample is not large enough to make state-level estimates for all states. Estimates discussed in this report were weighted from the sample information to make the ASEC representative of the population of U.S. households. Since the estimates in this report come from a sample, they are subject to sampling error. Additionally, the information on the ASEC is based on respondents' answers to the survey questions, and nonresponse or incorrect responses can result in nonsampling error. The ASEC itself does not ask survey respondents about taxes paid or refundable credits received in the prior year. That informationâimportant for determining a family's or an individual's SPM poverty statusâmust be estimated. This report uses estimates from the TRIM microsimulation model for these estimates. The Census Bureau uses a different microsimulation model in its reports on SPM poverty. The TRIM3 Microsimulation Model Microsimulation models of tax and transfer programs are composed of computer code that mimics the rules of the tax code and benefit programs. The models determine whether an individual, family, or other unit is eligible to be subject to a tax or eligible for a benefit and then estimates the amount of the tax (or benefit). TRIM assumes that all taxpayers fully comply with the requirements and rules of the tax code. Federal Income Tax Module for 2016 TRIM3 applies policy rules in effect during the year to the population for that year. The estimates in this report use information from the TRIM3 federal income tax module for 2016. The 2016 federal income tax module makes "baseline estimates" of the tax code as it existed for 2016. The model uses data from the ASEC's information on family structure at the time of the survey to place individuals into federal tax filing units (e.g., taxpayer and, for those married filing jointly, the spouse). It also identifies "extended" tax filing units, which include dependents, and identifies "qualifying children" for the purpose of the EITC and the child tax credit. TRIM3 creates tax units not only for tax filers, but also for all potential filers. The model then uses information on the earnings and other income sources reported on the ASEC for 2016 to determine a tax filing unit's federal income tax liability. Additionally, expense and income items not available on the ASEC but required to compute federal income taxes were obtained through a statistical match with the IRS Statistics of Income Public Use File, which is based on a sample of tax returns. TRIM3 estimates of the elderly and disabled tax credit and the child and dependent care tax credit are aligned to target amounts based on IRS data. In terms of estimating federal income taxes, there are a number of caveats and limitations of the TRIM3 estimates. These limitations are not idiosyncratic to TRIM3 estimates. They generally result from limitations on the underlying ASEC data and are also present in estimates from the Census Bureau. These limitations include the following: Estimates are not reliable for very - high - income taxpayers . The estimates of federal income tax liability are not likely to be reliable for very-high-income taxpayers because the ASEC oversamples lower-income populations, rather than higher-income populations. Thus, TRIM3/ASEC estimates are most often used in reports (such as this report) that focus on lower-income populations. Amounts of refundable tax credits tend to be underestimated . The estimates from TRIM3 (as well as the Census Bureau's microsimulation model) underestimate refundable tax credits. For example, the TRIM3 estimate of the EITC for 2016 (pre-TCJA) was $39.2 billion. The total amount of the EITC claimed in 2016 according to the IRS was $66.7 billion. This discrepancy has long been known by researchers, but has yet to be fully explained. Potential reasons for the discrepancy include the information on the ASEC family structure perhaps not adequately representing that used for filing tax returns; the underreporting of certain forms of earnings (such as self-employment earnings); and the high rates of error made by taxpayers claiming the EITC. A Revised Federal Income Tax Module for Estimating Rules under the TCJA The Urban Institute, in partnership with the Congressional Research Service (CRS), modified TRIM3's federal income tax module to account for the major provisions of the TCJA affecting individual taxpayers. Thus, the information in the model was revised to reflect the new tax brackets and marginal tax rates that apply to them, the suspension of the personal exemption and the increases in the standard deduction, limitations on itemized deductions, including the limitation on the deductibility of state and local taxes (SALT), revised rules for the child tax credit, and other changes to the federal individual income tax code. TCJA Changes Not Modeled A number of changes to the federal income tax were not modeled. These include changes to the treatment of alimony, the mortgage interest deduction, and elimination of the individual mandate for health insurance. The treatment of alimony was not modeled because the changes will apply only to new or revised orders and will not affect many cases in the near term. Limits on interest qualifying for the mortgage interest deduction were not modeled since there are no data to inform the impact of these changes. Additionally, certain smaller changes are not present in the simulation, such as the elimination of the deduction for bicycle commuting. Inflation Adjustment The post-TCJA tax code parameters were deflated to 2016 dollars to answer the question, "What if the 2018 TCJA parameters were in place in 2016 and 2016 was the first year of their enactment?" The adjustment was done using the chained Consumer Price Index for All Urban Consumers (C-CPI-U), since the TCJA requires the use of that price index rather than the CPI-U for future price adjustments. Specifically, the 2018 amounts were adjusted to 2016 dollars using the chained CPI; see. Hence the estimates in this report reflect the impact of the post-TCJA tax code as if the first year of its enactment were 2016 (it actually went into effect in 2018). The Supplemental Poverty Measure The SPM was created to address some of the limitations of the official poverty measure. Particularly relevant for this analysis, the official poverty measure does not take into account taxes (and tax benefits, like refundable credits) and their impact on disposable income. It also does not take into account certain noncash government benefits, such as food benefits from SNAP or the value of housing benefits. The measure of total income in this analysis is computed similarly to the way the U.S. Census Bureau computes total financial resources, though there are a few differences. This analysis uses the TRIM3 estimates for TANF, SSI, and SNAP, rather than amounts reported on the ASEC, to address the underreporting of these income sources on the ASEC. Additionally, the measure of child careâdeducted as a work expense for the SPMâdiffers. This analysis uses TRIM3's estimate of child care expenses, which includes estimated copayments for families receiving child care subsidies from the Child Care and Development Block Grant (CCDBG). The Census Bureau also caps child care expenses at the earnings of the lower-earning parent when determining net financial resources. This analysis deducts all child care expenses as a work-related expense of the family. Appendix B. Estimated Number of Individuals and Families in Poverty Before the Income Tax, 2016 Below are estimates of the number of individuals in poverty before the federal income taxes are subtracted from (or added to) financial resources using the TRIM3 microsimulation model. The individual types used in this table are also found in Table 1 and Table 3 of this report. Below are estimates of the number of families in poverty before federal income taxes are subtracted from (or added to) financial resources, estimated using the TRIM3 microsimulation model. The family types used in this table are also found in Table 2 and Table 4 of this report. Appendix C. How the Major Federal Income Tax Provisions That Affect Low-Income Taxpayers Were Modified by the TCJA Below are descriptions of how the major federal income tax provisions that affect low-income taxpayersâdeductions, exemptions, tax rates, and refundable creditsâwere changed by the TCJA. Stylized examples included at the end of each section help illustrate the impact of these changes for a hypothetical family. Standard Deduction and Personal Exemptions The standard deduction and personal exemption, when combined, represent the minimum amount of income of a tax unit that is not taxed under the federal income tax. The standard deduction is a fixed dollar amount that taxpayers can subtract from their income when determining the amount of their income subject to taxation (e.g., "taxable income"). The TCJA nearly doubled the standard deduction. Specifically, in 2018 the standard deduction for unmarried single filers, head of household filers, and married joint filers increased from $6,500, $9,550, and $13,000 to $12,000, $18,000, and $24,000, respectively. The TCJA suspended the personal exemption, effectively reducing it from $4,150 per person in 2018 to $0. These changes are in effect from 2018 through the end of 2025. The combination of the standard deduction and personal exemption is sometimes referred to as the 0% bracket since that income is not taxed. It is also referred to as the tax entry point since every dollar above this amount is generally taxable (and hence considered taxable income). The increase of the standard deduction combined with the effective elimination of the personal exemption result in a similar or higher tax entry point for some families (unmarried individuals with no children, unmarried individuals with one child, and married couples with no children, as illustrated in Table C-1 ), while larger families, including many with children, will have a lower tax entry point under the new tax law. For these families, more of their income will potentially be subject to the federal income tax. Stylized Example For example, as illustrated in Table C-1 , a married couple with two children would have had a tax entry point in 2018 pre-TCJA of $29,600. If this family had $36,000 of income, only the amount above $29,600â$6,400âwould have been taxable. Post-TCJA this tax entry point is now $24,000 for this same family. Hence, of their $36,000 of income, $12,000 would now be taxable income. Marginal Tax Rates/Tax Brackets A marginal tax rate is the percentage that a taxpayer pays on an additional dollar of taxable income. The federal individual income tax code has seven marginal tax rates ranging from 10% to 37%. The income ranges over which these marginal rates apply, often referred to as tax brackets , differ based on the taxpayer's filing status. The federal income tax is considered a progressive tax by economists because as taxable income increases, income above a given bracket threshold is taxed at a higher marginal rate. Once a tax unit has determined how muchâif anyâof their income is taxable (i.e., after subtracting the standard deduction from their income post-TCJA), they then apply marginal tax rates to this amount. If poor families have any taxable income, most if not all of it is subject to the lowest marginal tax rate, although some of their income may be subject to the second-lowest bracket (the second-lowest bracket was the 15% bracket pre-TCJA, and is now 12% under the TCJA). The lowest marginal tax rateâ10%âwas unchanged by the TCJA. Changes to marginal tax rates are presented in Table C-2 . These changes are in effect from 2018 through the end of 2025. Stylized Example For example, for a married couple with two children and $36,000 in income, their taxable income pre-TCJA would have been $6,400 in 2018. That income would have been subject to a 10% marginal rate, for a tax liabilityâbefore accounting for tax creditsâof $640. Post-TCJA, this same family would have had $12,000 of taxable income, all subject to the 10% marginal rate, which would result in $1,200 of income tax liability before subtracting any tax credits. The Child Tax Credit After taxpayers calculate their income tax liability before credits, they can subtract the value of any tax credits for which they may be eligible. Taxpayers with little or no tax liabilityâwhich includes most of the poorâcan still receive the refundable credits, including the refundable portion of the child tax credit (the ACTC). The ACTC is calculated as a percentage of earnings (the refundability rate) above the refundability threshold up to the maximum amount of the refundable portion of the credit. The ACTC plus the amount of the credit that offsets any income tax liability cannot be greater than the maximum credit per child. (Low-income families who do have a positive tax liability will first reduce their income tax liability by the nonrefundable portion of the child tax credit, and then claim the ACTC.) TCJA made several changes to the child tax credit and ACTC, as outlined in Table C-3 . In addition to modifying the credit formula, TCJA also enacted a new ID requirement for the credit. Prior to TCJA, taxpayers could provide the taxpayer identification number for the child in order to claim the credit. The most common taxpayer ID is a Social Security number (SSN), but other taxpayer identification IDs included individual taxpayer identification numbers (ITINs). Post-TCJA, taxpayers will now need to provide the SSN for the child in order to claim the credit. These changes are in effect from 2018 through the end of 2025. How much a taxpayer's child tax credit changed following the TCJA depends on their income level. As a result of the changes made in the TCJA, the child tax credit doubled for many middle-income families. With the higher income phaseout thresholds, middle- and higher-income families became child tax credit eligible, as illustrated in Figure C-1 . However, many low-income families received a smaller increase, as illustrated in Figure C-2 . Stylized Example For example, for a married couple with two children and $25,000 of income, their child credit as a result of the TCJA would increase from $2,000 to $2,900 ($800 of the increase from the refundable portion and $100 from the nonrefundable portion). For this family, once income was $36,000, their child tax credit would increase from $2,000 to $4,000 (with $800 of that increase from the refundable portion and $1,200 from the nonrefundable portion). Other Changes The law did not directly change the largest antipoverty program in the tax code, the EITC. However, the law did change the measure of inflation used to adjust numerous provisions in the tax code, including the EITC, beginning in 2018. This new inflation index, the C-CPI-U price index, is projected to grow more slowly than the previous inflation index, the CPI-U. Hence, over time the EITC will grow more slowly. In 2018, the differences in the EITC from the adoption of this new measure will be relatively small, reducing the maximum amount of the credit by $1 for recipients with no children, $7 for recipients with one child, $12 for those with two children, and $13 for those with three or more children. However, as the effects of the slower inflation adjustment compound over time, these changes will grow larger. In addition, the income cutoff points of marginal tax rates will grow more slowly. Over time, if wages grow faster than C-CPI-U, some of the income of low-income taxpayers currently subject to the 10% marginal tax rate may become subject to higher marginal rates.


Introduction The federal research and development (R&D) enterprise is a large and complex system, spanning the country, that includes government facilities and employees as well as federally funded work in industry, academia, and the nonprofit sector. In FY2019, federal agencies obligated an estimated $141.5 billion for R&D, including $39.6 billion for intramural R&D and $101.9 billion for extramural R&D. Its work is essential to U.S. economic prosperity, national security, health care, and other national priorities. It also plays a substantial direct role in the U.S. economy. Today, the operation of the system is being affected profoundly by the Coronavirus Disease 2019 (COVID-19) pandemic and the national response to it. This report provides an overview of how the nation's response to COVID-19 is affecting the federal R&D enterprise, how the federal government and others are addressing those effects, and issues that may arise as the situation develops. The scope of this report is limited to the effects of COVID-19 on federally funded R&D. It does not attempt to address effects on the broader U.S. R&D enterprise, the majority of which is funded by and conducted in the private sector. In addition, it does not attempt to address the federal R&D resources now being focused on understanding the science of COVID-19, developing tests and treatments, and otherwise applying R&D to address the pandemic. As the scientific, government, and public understanding of COVID-19 has grown, the national response has evolved, and it is likely to continue to evolve. The scope, scale, and dynamism of responses by the federal government, state and local governments, and the private sector are too great to catalog fully in this report. Rather, the report highlights key effects and issues of concern and provides examples of agency actions. Effects on R&D Institutions and Projects Faced with the global spread of a contagious and deadly virus, U.S. institutions have taken a number of extraordinary measures. One key response has been social distancingâlimiting close contacts between individuals in order to reduce opportunities for transmission of the virus. This response has led to the closure of many businesses, schools, government offices, and other institutions. Where possible, these institutions have continued to operate via telework and e-learning. Research and development activities, however, often require physical access to unique facilities and equipment. As a result, many R&D organizationsâincluding federal facilities as well as industrial and academic laboratories supported by federal fundsâhave closed or curtailed operations. Closure of Laboratories and Laboratory Activities Closures of R&D facilities and social distancing requirements for researchers depend less on coordinated national policies than on the independent decisions of individual agencies, universities, and other institutions. For example, the National Aeronautics and Space Administration (NASA) decides the status of each of its centers separately, based on local conditions, according to a four-stage response framework. At the same time, some NASA centers may be at stage 3 (open to mission-essential personnel) while others are at stage 4 (closed except to protect life and critical infrastructure). During March 2020, NASA made the decision to move to stage 3 and subsequently from stage 3 to stage 4 at different times for different centers. Actions by state or local governments may be a factor in the decisions of some facilities. For example, shutdowns at Department of Energy (DOE) laboratories in California and Illinois followed statewide social distancing orders issued by the governors of those states. In some cases, specific R&D activities may be allowed to continue, despite closures, if an institution determines that the work is sufficiently important, that suspending it would be too costly or disruptive, or that it can be conducted remotely. For example, most employees of the National Institute of Standards and Technology (NIST) are on telework with limited access to the laboratories' physical facilities and only with supervisor approval. However, some NIST employees continue to work onsite to provide certain limited essential services, including the sale of Standard Reference Materials, calibration of precision instruments, distribution of time and frequency signals, and maintenance of the National Vulnerability Database. Many of these considerations for laboratories and other research facilities apply similarly to research conducted in the field. Identification of Essential and Critical R&D Activities The policies guiding these decisions often use terms like essential or critical . In the NASA response framework, for example, mission-essential work includes work needed for the safety of human life or protection of property and "work that must be performed to maintain mission/project operations or schedules and cannot be performed remotely/virtually." The Office of Management and Budget (OMB) has provided guidance to agencies about what travel (including travel to conduct R&D or to attend scientific meetings) should be considered mission-critical, based on a list of 11 factors, such as whether the travel is for activities essential to national security or whether it is time-sensitive. Presidential Policy Directive 21 (PPD-21) identifies the defense industrial base, including defense R&D, as one of 16 critical infrastructure sectors. A memorandum from the Under Secretary of Defense for Acquisition and Sustainment identifies development and testing by Department of Defense (DOD) contractors as an essential part of this critical infrastructure. Some state emergency orders have included exemptions for facilities and organizations that are considered critical infrastructure, suggesting that defense-related R&D may be allowed to continue even when other R&D is suspended. In general, however, state and local authoritiesânot federal agenciesâassume responsibility for adjudicating claims of criticality by private-sector organizations. In some cases, the determination of whether an R&D project should continue is based on how severely it would be affected by being suspended. For example, the relative positions of Earth and Mars in their respective orbits typically create a narrow launch window for NASA science missions to Mars. If a mission misses that window, it is likely to be delayed 26 months until the next launch window. While NASA has suspended a number of other major projects, it is continuing work on the Mars 2020 mission, scheduled for a launch window that opens in mid-July 2020. Other time-sensitive projects may include experiments that require continuity of data collection or that involve caring for live animals or maintaining cell cultures. University decisions about essential research functions may be informed by local conditions, federal funding agency directives, ethical considerations about the well-being of human subjects and animals in discontinued or scaled-back research, and each university's own risk management decisionmaking. Columbia University has defined essential functions to include, in addition to COVID-19 research and ongoing clinical trials, "the maintenance of equipment, laboratory resources, critical animal resources, and cell lines." Johns Hopkins University has defined three tiers of its clinical research. The top, essential, tier includes trials of potential COVID-19 treatments and trials that address certain acute, life-threatening conditions such as Huntington's disease. Only trials in this tier can continue normally, including enrolling new patients. According to the Association of Public and Land-Grant Universities, research functions that some (but not necessarily all) universities have identified as essential include COVID-19 related research; activity that if discontinued would generate significant data and sample loss; activity that if discontinued would pose a safety hazard; activity that maintains critical equipment or core facilities; activity that maintains critical samples, reagents, and materials; activity that maintains animal populations; activity that maintains critically needed plant populations, tissue cultures, or other living organisms; activity in support of essential human subjects research; and clinical trial activity that if discontinued would adversely affect patient care. Not all time-sensitive research is necessarily considered essential, however. One example of an activity that is generally not being treated as essential is agricultural research that depends on an annual planting cycle or an animal maturation cycle. Continuing R&D Remotely Whether researchers can continue to make progress on a particular R&D project remotely may also depend on the nature of the project. For example, researchers working remotely may be able to perform scientific computations, engage in modeling and simulation, design experimental hardware, analyze data already obtained, and prepare journal articles. In contrast, handling physical and biological samples, caring for laboratory animals, and building or operating specialized equipment likely require a researcher to be present in the laboratory. Research involving human subjects may be interrupted if those subjects are unavailable because of social distancing. In some cases, the extent to which research activities can continue may depend on the duration of the disruption; for example, analyzing data and preparing results for publication may no longer be an option once all existing data have been analyzed and written up. These factors may affect different disciplines differently; for example, research in mathematics, computer science, and theoretical physics may be more amenable to remote working than research in agricultural science, geology, or microbiology. Cancellation of Conferences Travel restrictions and social distancing requirements have also resulted in the cancellation of numerous scientific and technical conferences. The person-to-person interactionsâboth formal and informalâthat take place at such conferences are an instrumental mechanism for knowledge sharing, peer feedback, the ideation of new research, technology transfer, and interactions between researchers and agency program managers. Other mechanisms, such as scientific papers and electronic communications, also offer other important ways to exchange knowledge and share ideas, but they lack some of the interactive advantages of in-person conferences. Accordingly, the cancellation of scientific and technical conferences may have a detrimental impact on advances in knowledge and the benefits that emerge from such knowledge. These adverse effects apply both to federal scientists and engineers and to their counterparts in academia and the private sector who work on federally funded R&D. The impact of cancelling conferences may be particularly significant in certain fields. In computer science, for example, papers published in conference proceedings may be as influential as journal articles, to an extent that is rare in other fields. In some cases, conferences are continuing virtually with attempts to facilitate informal interactions that would normally take place in person. For example, the annual Conference on Retroviruses and Opportunistic Infections, originally scheduled to be held in Boston in March 2020, was converted to a virtual conference, with prerecorded presentations, live webcasts, and electronic poster presentations. In April 2020, the annual International Conference on Learning Representations (devoted to machine learning) plans to present papers using prerecorded videos and offer online opportunities to ask questions of speakers, see questions and answers from other participants, take part in discussion groups, meet with sponsors, and join groups for networking. Scientific and technical conferences are often run by professional societies and other organizations that rely on them for revenue. Cancellations are likely to result in financial losses for these organizations as expected revenues are not realized and cancellation costs associated with the use of hotels, meeting facilities, and other services are incurred. Such losses can be considerable for the organizations involved. The cancellation of the March 2020 annual meeting of the American Physical Society cost the society about $7 million, about 12% of its typical annual revenues; other societies have reported cancellation losses that wiped out essentially all of their financial reserves. Federal agencies also run scientific and technical conferences. While these conferences are not generally a significant source of agency revenues, some agencies are likely to face one-time cancellation costs that may be considerable. Researchers planning to attend conferences that have been cancelled may have incurred nonrefundable travel or lodging expenses. Some agencies have determined that awardees may charge these costs to their research awards despite regulations that would normally prohibit doing so. Some of the same considerations apply to other types of meetings. For example, some DOE scientific user facilities have cancelled or postponed their annual user meetings, limiting opportunities for facility outreach and user engagement. Effects on R&D That Is Not Suspended Efficiency and Quality Even when R&D projects can continue, restrictions may affect efficiency or quality. According to one space policy expert, "The enforced separation of people working on the same or related tasks will inject delays and miscommunications. It will certainly be an obstacle to schedules and success in activities like preparing for a launch or building an exploratory spacecraft." A U.S. researcher working remotely on a particle physics experiment has described the inefficiency of guiding an on-site technician through installing a piece of electronics: "I've spent probably 3 hours over the past 24 on Skype with somebodyâ¦. He says something then points the webcam at what we're looking at, then we talk a little bit more." Others note the need to devote time to emergency planning. Additional Costs Institutions may incur unplanned expenses even for R&D that is not suspended. For example, they may need additional computing and networking equipment and services to accommodate researchers working remotely. Janitorial expenses may increase at facilities that remain open, if additional cleaning is required to guard against the spread of infection. Prices may increase for materials and equipment that are in short supply. Disrupted Access to Supplies and Services R&D at institutions that remain open may also be affected by disruptions to the supply of materials and equipment or by closures at collaborating research institutions. Laboratories have reported shortages of widely used supplies, such as RNA-extraction kits, swabs, and personal protective equipment, that are in high demand for COVID-19 testing and patient care. Basic laboratory supplies such as reagents and pipette tips, when still available, may be on backorder or available only at multiples of the usual price. Depending on the duration of the pandemic, NASA's plans for a 2021 launch of the James Webb Space Telescope may be jeopardized. It is to be launched from a European Space Agency spaceport in Kourou, French Guiana, but France suspended launch campaigns from the Guiana Space Center on March 16, 2020, due to the COVID-19 pandemic. Shifts in R&D Focus In some cases, agencies and researchers are shifting their research focus to COVID-19 related topics. The National Institutes of Health (NIH) has issued several funding opportunity announcements for researchers to submit competitive revisions or seek supplemental funding for existing projects, in order to redirect their research efforts to COVID-19. Other agencies that are typically less focused on health research have also sought to shift their R&D priorities. For example, light source user facilities operated by the DOE Office of Basic Energy Sciences are used for structural biology research in partnership with NIH and universities. According to DOE, these facilities are making "every effort to give [COVID-19] researchers priority access" and "want to ensure they are doing everything possible to enable research into this virus and the search for an effective vaccine or other treatment." More generally, DOE wrote an open letter to the research community asking for "ideas about how DOE and the National Labs might contribute resources to help address COVID-19 through science and technology efforts and collaborations." A newly formed consortium of agencies, universities, and companies is making supercomputing resources available "to accelerate understanding of the COVID-19 virus and the development of treatments and vaccines." The NASA Earth Science program has provided guidance to "investigators looking to reprioritize currently-funded efforts" and noted that an existing funding opportunity could support "investigations making innovative use of NASA satellite data to address â¦ impacts of the COVID-19 pandemic." NIST has announced a new grant opportunity under the Manufacturing USA National Emergency Assistance Program to support rapid, high-impact projects that support the nation's response to the COVID-19 pandemic. Up to $2 million is to be available to Manufacturing USA institutes under the program. Other Financial and Infrastructural Effects Shutdown and Restart Costs Suspending research may result in additional costs for activities such as animal care, maintenance of cell cultures and biological samples, and safe storage of hazardous materials. Restarting research, when conditions permit, may also incur costs for staff time and supplies to bring experimental equipment back to operational status, reestablish laboratory animal populations, or replace masks and other personal protective equipment that was donated to hospitals and first responders during the pandemic. The extent to which these costs may be covered out of existing federal research awards is not yet clear. Auditing Issues There may be future auditing issues for federally funded research that is redirected to address COVID-19, or for federally funded researchers who incurred costs to shut down and restart their projects or donated personal protective gear that had been paid for out of grant funds. Even if these changes had the support of the federal funding agency, the time-sensitive circumstances may mean that not all approvals were adequately documented to satisfy auditing requirements. The flexibilities provided to funding agencies in these circumstances (see " Federal Actions to Date " below) may not yet be aligned with corresponding flexibilities for accounting and auditing. University-Based Shared Research Infrastructure There are specific challenges for shared university research infrastructure, including core facilitiesâspecialized laboratories with unique instruments and capabilities that provide services to an institution's researchers âas well as animal care facilities and clinical trial infrastructure. These facilities are typically supported mostly through user fees, often paid from federal funds that are supporting a user's research. They are widely used: one university reported that a majority of its grant-funded research in FY2019 relied in part on core facilities, while a majority of its NIH-funded research made use of shared animal care facilities. Much of this infrastructure has closed, creating uncertainty about funding for shutdown and restart costs as well as continuity of pay for technical staff. Some facilities remain open to support research that is continuing, but open facilities may face their own financial challenges in continuing to operate, as the fees that usually support them are likely to be reduced by the suspension of research by some of their users. Delayed Availability of Major R&D Equipment Planned R&D may be delayed by interruptions in the development or manufacturing of major equipment. NASA, for example, has suspended work on the James Webb Space Telescope, which had been scheduled for launch in March 2021, and on the Space Launch System rocket and Orion crew capsule, needed for its plans to land humans on the Moon in 2024. Loss of Revenues by Federal R&D Agencies Some federal laboratories engage in R&D activities under a Work for Others (WFO) or similar agreement. Using a WFO, a federal agency, federal laboratory, or company can pay to have R&D conducted by another federal laboratory. This often enables access to unique facilities, equipment, and personnel. While the cancellation or suspension of WFO projects due to the COVID-19 response may reduce costs to the sponsoring organization, it may simultaneously reduce revenue that would otherwise have supported the staff, facilities, and equipment of the laboratory that was to perform the work. According to the Government Accountability Office, from FY2008 through FY2012, DOE performed about $2 billion worth of R&D annually under WFO agreements, accounting for 13%-17% of total DOE laboratory revenues. Most of the work (88%) was performed for other federal agencies. NIST conducted $94.4 million in research, development and supporting services for other federal agencies in FY2019. NIST certifies and provides more than 1,300 Standard Reference Materials (SRM) that are used to perform instrument calibrations, verify the accuracy of specific measurements, and support the development of new measurement methods. NIST SRMs are used by industry, academia, and government to facilitate commerce and trade and advance R&D. NIST revenues from SRMs in FY2019 were $21.8 million. NIST also provides calibration and testing services for industry, academia, and government; its FY2019 revenues for these services were $33.5 million. As of the date of this report, NIST continues to provide SRM and calibration services, but it is unclear how long NIST will be able to provide these services if the pandemic continues for an extended period. Future Availability of Federal Funding As some agencies and researchers shift their R&D priorities to respond to the COVID-19 pandemic, the funding available for R&D on other topics may be reduced, at least in the near term. More generally, the federal funding needed for the national response to COVID-19 may reduce the overall federal resources available for R&D. While supplemental appropriations already enacted include additional funds for R&D and institutions that conduct R&D, increased federal spending to address the pandemic, coupled with decreased federal revenue associated with potential economic contraction, may lead to a future fiscal environment with constrained spending across the government. These outcomes may not be clear for some time, however, and may depend on a host of independent decisions by agencies and Congress. Impact on Students, Postdoctoral Researchers, and Early-Career Faculty University research typically involves postdoctoral researchers (postdocs), graduate students, and sometimes undergraduate students in addition to faculty members. Even if the nature of a particular research project qualifies it to continue despite COVID-19, many universities are limiting the continued participation of postdocs and students. Cancelled or suspended research may be of particular concern to these groups. Continuing to work remotely may also be more challenging for students, postdocs, and early-career faculty who have families, as their children are more likely to be young than those of more senior researchers. Failing to complete a project on time may delay the completion of a degree or make it difficult to demonstrate research success when applying for a job or seeking tenure. Cancelled conferences are also a particular concern for postdocs, students, and other early-career researchers, who often rely on conferences to meet more senior scientists, present their work, and find jobs. In some circumstances, there may be uncertainty about continuity of pay for students employed as research assistants or teaching assistants. Because there are disparities between disciplines in the extent to which research can continue while working remotely, students and postdocs in different disciplines may find disparities in how their careers are affected. Disparities may also arise between students and postdocs whose experiments can be suspended and restarted and those whose experiments must simply be abandoned and begun afresh. To the extent that research disruptions, delayed graduation, or difficulty obtaining in-field employment discourage students and early-career researchers from continuing in their field of research, those outcomes could create challenges for the future science and engineering workforce. Continued travel restrictions may also affect the enrollment of foreign science and engineering students in U.S. universities in the 2020-2021 academic year. As well as potentially creating financial challenges for some universities, reduced international enrollment could have long-term workforce consequences, given that many foreign students in science and engineering remain in the United States after graduation. Federal Actions to Date On March 9, 2020, OMB authorized federal agencies to provide certain short-term relief from administrative, financial management, and auditing requirements for grantees involved in research related to COVID-19. On March 18, four organizations representing universities and other research organizations wrote to OMB requesting the expansion of these flexibilities to all research grants. On March 19, OMB provided relief for "an expanded scope of recipients affected by the loss of operational capacity and increased costs due to the COVID-19 crisis." The Appendix summarizes OMB's government-wide administrative actions, extensions of authorities, and guidance. It also provides a link to a compilation maintained by the Council on Governmental Relations (COGR) of guidance from federal agencies, academic institutions, and other organizations, as well as frequently asked questions about how federal agencies that fund R&D are implementing the OMB-directed flexibilities. Some agencies have compiled special guidance for awardees. For example, an NIH webpage provides information on changes to proposal submission and award management, updated policies on clinical trials and animal welfare, and revised procedures for peer review. The National Science Foundation (NSF) has issued guidance for contractors operating NSF-funded facilities. COGR has compiled links to such guidance, sorted by agency, along with links to institutional guidance from a long list of individual universities. Some agencies have extended the due dates for research proposals, announced that they will accommodate applications received late, or reduced the institutional approvals required for an initial proposal. While these accommodations provide additional flexibility for researchers, delays in receiving and acting on proposals may result in delays in issuing awards. Some agencies have announced accommodations for existing awardees, such as no-cost extensions of awards, extensions of financial and other reporting deadlines, changes to the allowability of cancellation fees and costs resulting from the pausing and restarting of research, and allowing the continued payment of salaries and benefits out of grant funds. While these steps give researchers additional flexibility, they may create challenges once research resumes. For example, grant funds that have been spent on cancellation fees, activities required for the suspension of research, or researcher salaries while research is suspended necessarily reduce the balance of funds subsequently available to complete a research project. No-cost extensions extend an award's completion date; they do not provide additional funds to cover costs incurred because of delays. Congress has already enacted some legislation with R&D-related funding and provisions in response to the COVID-19 pandemic. For example The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ), enacted on March 6, 2020, appropriated $836 million in supplemental funding for NIH, with additional transferrable amounts from other accounts. Some of the $3.1 billion appropriated to the Public Health and Social Services Emergency Fund may also be made available to the Biomedical Advanced Research and Development Authority for the development of COVID-19 medical countermeasures, such as therapies and vaccines. The Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136 ), enacted on March 27, 2020, appropriated more than $1 billion in supplemental funding for R&D. Most of this total was for research on COVID-19 itself, including $945 million for NIH, $415 million for research, development, testing, and evaluation (RDT&E) in the DOD Defense Health Program, and smaller sums for several other agencies. The act also provided funding to several R&D agencies to offset unanticipated costs arising from the pandemic. For example, NASA received $60 million to cover the costs of mission delays caused by center closures, while the U.S. Forest Service received $3 million to reestablish experiments affected by travel restrictions. Section 18004 of the CARES Act established a $14 billion Higher Education Emergency Relief Fund for colleges and universities. At least half of this total must be allocated for emergency financial aid grants to students. It is not yet clear how much, if any, will be available to address issues directly related to R&D. Section 3610 of the CARES Act authorized federal agencies to reimburse contractors for "any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state" when they are unable to work on-site due to facility closures and telework is not an option. Although this provision is not specifically directed at R&D, it could be significant for agencies such as DOE and NASA whose R&D facilities are staffed with numerous contractor employees. Section 12004 of the CARES Act authorized the Patent and Trademark Office to temporarily suspend, modify, adjust, or waive timing deadlines under the Patent Act and the Trademark Act during the COVID-19 emergency period. Section 13006 of the CARES Act gave DOD additional flexibility in the use of its other transaction authority for the development of prototypes related to COVID-19. The CARES Act provided NIST laboratories with $6 million in additional funding, including $5 million to support and accelerate measurement science related to viral testing and biomanufacturing; $50 million for the NIST Manufacturing Extension Partnership program to help companies across the country transform operations in support of COVID-19 related needs and to foster development of COVID-19 related supply chains; and $10 million for research related activities at Manufacturing USA's National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL). The CARES Act provided $2.25 million for the Environmental Protection Agency's Science and Technology account to prevent, prepare for, and respond to coronavirus, domestically or internationally, including $1.5 million for research on methods to reduce the risks from environmental transmission of coronavirus via contaminated surfaces or materials. The CARES Act provided NSF with $76 million "to prevent, prepare for, and respond to coronavirus, domestically or internationally, including to fund research grants and other necessary expenses." The Senate Appropriations Committee summary notes that $75 million is to support NSF's RAPID grant mechanism, "which will support near real-time research at the cellular, physiological, and ecological levels to better understand coronavirus," and $1 million is to assist in the administration of these grants. In the House, Speaker Pelosi has announced plans for a special committee to oversee the federal response to COVID-19, including the spending of supplemental funding provided under the above legislation. Potential Additional Federal Actions Several organizations from industry and academia have put forward policy recommendations to address R&D-related challenges resulting from COVID-19. Congress may also seek to take additional actions through legislation or oversight. The Commercial Spaceflight Federation, an industry group, has asked Congress for legislation directing the Internal Revenue Service to provide for immediate refunds of accumulated research and experimentation (R&E) tax credits. It argues that this would allow "continued innovation through R&D reinvestment." In many cases, under current law, companies that qualify for this credit are unable to use the full amount immediately because of insufficient tax liability or other factors; unused amounts can be carried forward for up to 20 years. The credit only applies to R&D funded by a company itself, but companies that conduct R&D with federal funding often fund their own R&D as well. Organizations representing research universities, medical schools, and teaching hospitals have asked Congress, among other steps, to give research institutions receiving federal funding additional flexibility to cover researcher salaries and benefits while their institutions are affected, to provide $13 billion in additional extramural research funding, and to allow agencies to reprogram any supplemental funds that are not spent within a year for new awards. The latter proposal, they argued, "could have a stimulative effect and help to address the nation's research competitiveness." Noting that "many scientific societies have been and will continue to be adversely impacted by meeting and conference cancellations as a result of COVID-19," the Federation of American Societies for Experimental Biology has asked Congress to include measures such as zero-interest loans and grant to associations, nonprofit organizations, and other tax-exempt organizations in future economic stimulus packages and supplemental appropriations measures. While OMB has issued guidance to agencies regarding administrative flexibilities and other issues, as described above, agency implementation of that guidance has varied. Representatives of the Association of American Universities have indicated that more uniform implementation by federal research funding agencies would reduce administrative burdens and uncertainties for award recipients. Congress may consider a variety of other legislative and oversight actions, either in the near term while the pandemic continues or retrospectively to improve the response to future crises. These might include seeking a clearer understanding of how federally funded R&D is being affected by COVID-19, through hearings, mandates for agency reports, support for academic studies, or mandates for reports by organizations such as the Government Accountability Office or the National Academies of Sciences, Engineering, and Medicine; directing OMB, the Office of Science and Technology Policy, or an interagency task force to develop more uniform guidance on how to identify essential or critical R&D activities, with recommendations for implementing that guidance at government laboratories, universities, companies, and other institutions involved in intramural and extramural federally funded R&D; and establishing a post-pandemic task force on the federal R&D enterprise to examine lessons learned from the COVID-19 pandemic and recommend policy changes to improve the national response of the R&D community in the event of future pandemics. Concluding Observations Over time, the near-term and long-term effects of COVID-19 on the nation's R&D enterprise will become more apparent. Congress may monitor these effects and develop a deeper understanding of their implications for the wide-ranging national policy objectives that motivate federal spending on R&Dâsuch as national security, economic growth and job creation, public health, transportation, and agricultureâas well as the implications for the U.S. science and engineering workforce and the education of the next generation of American scientists, engineers, and technicians. The effects of COVID-19 on federally funded R&D, as described in this report, may adversely affect the pace of R&D generally and the pace of the innovation that builds on it. The national and global economic consequences may have implications for economic growth, the workforce, the development of new products and services, and the competitiveness of companies and nations. The extent of these effects cannot yet be known and may not be fully understood for years. An optimist might hope for a silver lining. If the R&D community learns to overcome some of the challenges of remote working and travel restrictions, that might create future opportunities, after the COVID-19 pandemic is over, for increased workplace flexibilities and reduced travel expenses. The pandemic has also highlighted issues that Congress may seek to address in the future, such as additional R&D on cybersecurity for virtual collaboration and rural access to broadband internet for off-site work during emergencies. Appendix. Government-wide COVID-19 Related Guidance and Other Resources Office of Management and Budget Memoranda OMB has issued a number of memoranda related to the COVID-19 response. These memoranda are written broadly, not focused solely on federal R&D activities. Nevertheless, elements included in these memoranda have relevant information regarding the operation of the federal R&D enterprise. The memoranda are downloadable from the OMB website. As of the date of this report, COVID-19-related memoranda include M-20-19 Harnessing Technology to Support Mission Continuity (March 22, 2020) Directs agencies to utilize technology to the greatest extent practicable to support mission continuity. The memorandum addresses a set of frequently asked questions to provide additional guidance and assist the IT workforce as it addresses impacts of COVID-19. https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-19.pdf M-20-18 Managing Federal Contract Performance Issues Associated with the Novel Coronavirus (COVID-19) (March 20, 2020) Identifies certain agency actions to relieve short-term administrative, financial management, and audit requirements under 2 C.F.R. Â§200, Uniform Administrative Requirements, Cost P rinciples and Audit Requirements for Federal Awards , without compromising federal financial assistance accountability requirements. These include (1) flexibility with System for Award Management (SAM) registration/recertification for applicants, (2) waiver for Notice of Funding Opportunities (NOFOs) publication, (3) pre-award costs, (4) no-cost extensions on expiring awards, (5) abbreviated noncompetitive continuation requests, (6) expenditure of award funds for salaries and other project activities, (7) waivers from prior approval requirements, (8) exemption of certain procurement requirements, (9) extension of financial and other reporting, and (10) extension of Single Audit submission. In accordance with 2 CFR Â§200.102, "Exceptions," OMB is allowing federal agencies to grant class exceptions in instances where the agency has determined that the purpose of the federal awards is to support the continued research and services necessary to carry out the emergency response related to COVID-19. The memorandum also reminds agencies of existing flexibility to issue exceptions on a case-by-case basis in accordance with 2 CFR Â§200.102, "Exceptions." https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-18.pdf M-20-17 Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) Due to Loss of OperationsÂ (March 19, 2020) Identifies steps to help ensure safety while maintaining continued contract performance in support of agency missions, wherever possible and consistent with the precautions issued by the Centers for Disease Control and Prevention (CDC). Agencies are urged to work with their contractors, if they have not already, to evaluate and maximize telework for contractor employees, wherever possible; be flexible in providing extensions to performance dates if telework or other flexible work solutions, such as virtual work environments, are not possible, or if a contractor is unable to perform in a timely manner due to quarantining, social distancing, or other COVID-19 related interruptions; take into consideration whether it is beneficial to keep skilled professionals or key personnel in a mobile-ready state for activities the agency deems critical to national security or other high priorities; consider whether contracts that possess capabilities for addressing impending requirements such as security, logistics, or other functions may be retooled for pandemic response consistent with the scope of the contract; and leverage the special emergency procurement authorities authorized in connection with the President's emergency declaration under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. Â§Â§5121-5207 (the Stafford Act). The memorandum also provides answers to a set of frequently asked questions intended to assist the acquisition workforce as it addresses impacts due to COVID-19. https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-17.pdf M-20-16 Federal Agency Operational Alignment to Slow the Spread of Coronavirus COVID-19 (March 17, 2020) Provided agencies with initial guidance, consistent with the President's Coronavirus Guidelines for America, directing agencies to take appropriate steps to prioritize all resources to slow the transmission of COVID-19, while ensuring mission-critical activities continue. The memorandum further required all agencies, within 48 hours, to review, modify, and begin implementing risk-based policies and procedures based on CDC guidance and legal advice, as necessary to safeguard the health and safety of federal workplaces to restrict the transmission of COVID-19. https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-16.pdf M-20-15 Updated Guidance for the National Capital Region on Telework Flexibilities in Response to Coronavirus (March 15, 2020) Directs agencies to offer maximum telework flexibilities to all current telework-eligible employees, consistent with operational needs of the departments and agencies as determined by their heads, as well as to use all existing authorities to offer telework to additional employees, to the extent their work could be telework enabled. https://www.whitehouse.gov/wp-content/uploads/2020/03/M20-15-Telework-Guidance-OMB.pdf M-20-14 Updated Federal Travel Guidance in Response to Coronavirus (March 14, 2020) Advises that "only mission-critical travel is recommended at this time." The memorandum also authorizes executive branch agency heads to determine what travel meets the mission-critical threshold and provides a list of factors to be considered in this determination. https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-14-travel-guidance-OMB-1.pdf M-20-13 Updated Guidance on Telework Flexibilities in Response to Coronavirus (March 12, 2020) Encourages agencies to maximize telework flexibilities (1) to eligible workers within those populations that the CDC identified as being at higher risk for serious complications from COVID-19 (e.g., older adults and individuals who have chronic health conditions, such as high blood pressure, heart disease, diabetes, lung disease, compromised immune systems); and (2) to CDC-identified special populations including pregnant women. Further directs that agencies do not need to require certification by a medical professional, and may accept self-identification by employees in one of these populations. The memorandum also encourages agencies to consult with local public health officials and the CDC about whether to extend telework flexibilities more broadly to all eligible teleworkers in areas in which either such local officials or the CDC have determined there is community spread. Agencies are also encouraged to extend telework flexibilities more broadly to accommodate state and local responses to the outbreak, including, but not limited to, school closures. Agencies are encouraged to consider the mission-critical nature of employees' work in determining telework and leave decisions. https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-13.pdf M-20-11 Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) (March 9, 2020) Identifies and authorizes agency actions to relieve short-term administrative, financial management and audit requirements under 2 C.F.R. Â§200, Uniform Administrative Requirements, Cost P rinciples and Audit Requirements for Federal Awards , without compromising federal financial assistance accountability requirements. Notes that OMB is allowing federal agencies to grant class exceptions in instances where the agency has determined that the purpose of the federal awards is to support the continued research and services necessary to carry out the emergency response related to COVID-19. The memorandum also notes agencies' existing flexibility to issue exceptions on a case-by-case basis in accordance with 2 C.F.R. Â§200.102, "Exceptions." https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-11.pdf Compilation of Other Resources The Council on Governmental Relations maintains an online compilation of guidance from federal agencies, academic institutions, and other organizations, as well as responses to frequently asked questions about how federal agencies that fund R&D are implementing the OMB-directed flexibilities. See "Institutional and Agency Responses to COVID-19 and Additional Resources," https://www.cogr.edu/institutional-and-agency-responses-covid-19-and-additional-resources .