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Velázquez Introduces Legislation to Make Federal Pandemic Unemployment Benefits Tax-Free

Velázquez Introduces Legislation to Make Federal Pandemic Unemployment Benefits Tax-Free
January 22, 2021
Press Release

Washington, DC – As the COVID-19 pandemic continues to ravage the economy, Rep. Nydia M. Velázquez (D-NY) has introduced legislation that would exempt Federal Pandemic Unemployment Compensation (FPUC) benefits from counting as taxable income. In the CARES Act, passed in the early months of the pandemic, Congress authorized additional funding for weekly unemployment benefits, and has since extended the program through March 14, 2021. To ease the financial burden on struggling families, Velázquez’s bill would make federal unemployment payments tax-free. 

“Right now, millions of Americans have found themselves out of work through no fault of their own,” said Velázquez. “By relieving the income tax on federal unemployment benefits, we can help lift a financial burden on these families as COVID-19 cases continue to persist and the economy inches towards recovery. This bill is a commonsense step with the potential to provide a bit more peace-of-mind to millions of Americans who are facing the darkest period since the Great Depression.” 

The bill would also ensure that in making federal unemployment benefits tax-free, Congress does not inadvertently kick off or prevent Americans from qualifying for other federal benefits such as the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF).                                            

As of December of 2020, 10.7 million Americans were considered to be unemployed, according to a report from the United States Department of Labor Bureau of Labor Statistics. In the past year, claims for unemployment insurance in New York State rose by 235%.

Velázquez’s bill is cosponsored by 14 of her colleagues.

The text of the bill can be found here.