"as well as payroll tax expense"

Wages. Not Taxes.

"If both are reduced, this is double counting."

You really are overthinking this. For one thing, the "tax" amount that is Employee share, is from Wages. It's not Taxes.

"The company must debit an asset for the $2 million payroll tax refund/credit, so say it debits $2 million to cash or refunds receivable. Obviously it would credit payroll tax expense and/or health insurance expense by the same $2 million"

Wages expense gets reduced. it's right there in the Form instructions.

"What am I missing? All I can think of is that the $2 million credit, like the PPP loan forgiveness, is treated as tax exempt income as to the payroll tax & health insurance items"

Wages. It's right there in the Form instructions. It's not like loan forgiveness. it's a reduction of an amount you don't need to send on, when you are filing for the credit and not asking for the refund. So in this example, there is no Debit to Bank, because you didn't have to make that payment. It removes the liability.

"you do debit cash or refunds receivable but you do NOT credit an expense account. Instead, you credit tax exempt income. Then you go over to wages on Line 7 & 8"

Again: you are overthinking this. It isn't tax exempt Income. It's a reduction of Costs.

You can read the CARES Act for yourself, you know.

Yes, your Update is more on target.

There is a lot of misdirection in this topic. It never was this hard.