The tax bill currently working its way through Congress passed the House of Representatives on Wednesday evening with a bipartisan 357-70 vote. While this is a big win for the bill’s progress, it still has to clear the Senate, who may delay its movement by debating on changes.

The bill, titled the Tax Relief for American Families and Workers Act of 2024, contains enhancements to the Child Tax Credit, disaster relief, and a host of retroactive business tax breaks. More specifically, the bill would:

• Enhance the Child Tax Credit through 2025 – changes are not as robust as in 2021, but increased credits would occur nonetheless for some families.
• Retroactively delay domestic mandatory research expense capitalization – businesses could again immediately expense domestic research expenses through 2025, but foreign research expenses would still require capitalization and amortization. 
• Retroactively change the computation of section 163(j) business interest expense limitation through 2025 – EBITDA would be used, rather than EBIT (a favorable change). 
• Reinstate 100 percent bonus depreciation through 2025, retroactively for equipment placed into service after 2022 – bonus depreciation had started to phase down in 2023.
• Increase the section 179 expense limitation and phase-out amount.
• Expand qualified disaster relief to more recent disasters. 
• Provide favorable Low Income Housing Tax Credits (LIHTC) changes. 
• Increase the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $1,000, adjusted for inflation going forward.

Several of the above provisions have been sought after for some time and could be beneficial to many families and businesses. To pay for those items, the bill would significantly alter the Employee Retention Credit (ERC) by:

• Increasing penalties for aggressive ERC claim promoters.
• Providing additional time for the IRS to audit ERC claims, but also extending the time period for which those with claims denied could reverse the income tax effect. 
• Ending the submission of new ERC claims on January 31, 2024. Currently the statute allows for claims to be filed up until April 15, 2024 for a 2020 claim, and April 15, 2025 for a 2021 claim.

As mentioned, the bill still has hurdles to overcome and its outcome remains uncertain. It’s possible negotiations and debate could push a Senate vote closer to the March governmental shutdown deadlines if no immediate action occurs. We are closely monitoring the situation and will continue communications as developments occur.

 

Published: 02/01/2024

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