By Kristina Peterson, Andrew Duehren and Richard Rubin 

WASHINGTON -- Senate Democrats struck a last-minute agreement Friday to set federal unemployment benefits at $300 a week, down from the $400 passed by the House, but extend their duration by more than a month as part of the $1.9 trillion coronavirus relief package, according to a Democratic aide.

The federal jobless benefits, which are in addition to state benefits, would now extend through Oct. 4, instead of Aug. 29. In addition, the first $10,200 of the 2020 benefits wouldn't be taxable, the aide said. The changes will be made through an amendment from Sen. Tom Carper (D., Del.).

The developments came as the Senate on Friday braced for an hourslong marathon of amendment votes on the relief package expected to stretch into Saturday morning ahead of the bill's final passage.

The blitz of amendments, known as a vote-a-rama, stood as the last hurdle between Democrats and Senate passage of President Biden's relief plan. Democrats are using a special process tied to the budget to pass the package without any GOP support, with Vice President Kamala Harris casting the tiebreaking vote.

The last-minute changes to unemployment benefits capped a week of alterations made by Senate Democrats to accommodate their 50 members, who must be united in order to pass the bill.

"It defies common sense to have a cliff in the middle of August when you've got the Senate out of session," said Sen. Ron Wyden (D., Ore.), chairman of the Senate Finance Committee. "I have personally felt that the benefit should be $400, it should certainly run into September, but I know some of my colleagues feel otherwise," Mr. Wyden said.

A spokeswoman for Mr. Carper said keeping the weekly benefit at $300, where it currently is, would make it easier for states to administer.

The impact of the tax exemption would vary by person. Some with relatively low incomes overall wouldn't get much of a benefit but a middle-income person could save more than $1,000.

It wasn't immediately clear how the tax break would line up with the current tax filing season, given that IRS computers are programmed to see this income as taxable and some people have already filed returns with unemployment benefits as taxable income on them.

The move would reduce or eliminate surprise tax bills for people. Withholding varies across states so many people hadn't been paying enough during the course of 2020.

"For some of us, good Zoom lighting has been our biggest pandemic problem," said Brian Galle, a Georgetown University law professor who has been advocating for the tax change. "But millions of others are still out of work, and this ensures they won't have to choose between paying the IRS and paying for rent or their kids' vaccinations."

The new agreement also extends limits on how high-income users can deduct certain business losses. Those limits, created in the 2017 tax law, were suspended by last year's coronavirus relief law, to the frustration of progressive Democrats. They are now in effect but are scheduled to expire in 2025 like other pieces of the 2017 law. The Democratic plan would generate revenue by extending the provision through 2026.

The relief bill also provides $1,400 direct payments to many Americans, sends $350 billion to state and local governments, funds vaccine distribution, and expands the child tax credit, among other measures. The package advanced on a procedural vote Thursday with the support of all 50 members of the Democratic caucus and no Republicans.

Once it passes the Senate, the bill will return to the House, which will need to approve the altered bill again before sending it to the White House. Liberal Democrats had pushed to keep the unemployment benefits at $400 a week and weren't expected to be pleased with the Senate's changes. House leaders can lose no more than four House Democrats if all Republicans oppose the bill, as they did in the previous vote.

Senate Democrats are using a process known as reconciliation, which allows them to pass legislation tied to the budget with just a simple majority, rather than the 60 votes most bills require. But because the process allows the majority party to pass legislation on their own, Senate rules carve out a place for lawmakers in the minority to make their voice heard, by allowing them to vote on an unlimited number of amendments. In practice, lawmakers generally get tired in the early hours of the morning and agree to wrap up the amendments, before voting on final passage.

"There will be a lengthy amendment process as the rules of the Senate require," Senate Majority Leader Chuck Schumer (D., N.Y.) said on the Senate floor Friday. "The Senate is going to take a lot of votes, but we are going to power through and finish this bill however long it takes."

Senate Minority Leader Mitch McConnell (R., Ky.) said Democrats had assembled a wish list of liberal priorities that weren't needed as the economy improves. But he said GOP lawmakers would try to alter the bill during the amendment votes.

"Republicans have many ideas to improve this bill," he said on the Senate floor. "And we're about to vote on all kinds of amendments in the hopes that some of these ideas make it into the final product."

Many of the amendments expected on Friday and Saturday are designed to force lawmakers from the other side of the aisle to go on the record on a contentious political issue. Sen. Tom Cotton (R., Ark.), for example, said he would offer an amendment to block prisoners from receiving the direct checks.

Others give lawmakers a chance to demonstrate their support for a policy.

The Senate blocked an amendment from Senate Budget Committee Chairman Bernie Sanders (I., Vt.) to increase the minimum wage to $15 an hour. That was a plank of the bill passed by the House, but stripped out of the Senate version when the chamber's parliamentarian ruled it didn't comply with the rules. The amendment was opposed by all 50 Republicans and eight members of the Democratic caucus.

"If any senator believes this is the last time they will cast a vote on whether or not to give a raise to 32 million Americans, they are sorely mistaken," Mr. Sanders said after the vote. "We're going to keep bringing it up," he said.

The amendment votes started later than otherwise planned because Sen. Ron Johnson (R., Wis.) forced the Senate's clerks to read the entire 628-page bill, which stretched from 3:21 p.m. Thursday until 2:04 a.m. Friday. That added time to the process because it didn't count as part of the official debate time, split between the two parties. However, party leaders later agreed to collapse the 20 hours permitted into three hours of debate.

Democrats made a series of last-minute alterations to the bill this week, largely to satisfy the demands of centrist members of their caucus.

They narrowed the group of Americans who will receive direct payments following a push from a group of centrist Democrats. Senate Democrats added a provision that would make much student-loan forgiveness free from income taxes, creating an exception from 2021 through 2025 to the normal rule that canceled debt is income. They also increased the size of healthcare subsidies for laid-off workers.

Write to Andrew Duehren at andrew.duehren@wsj.com and Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

March 05, 2021 14:10 ET (19:10 GMT)