The bipartisan bill offers tax incentives popular with businesses, such as full, immediate deductions for many capital investments, which the 2017 federal tax overhaul extended until 2022. It would also allow corporations to deduct domestic research and development expenditures immediately rather than over a five-year period as required under the 2017 tax legislation.
Immediate R&D deductions are “critical” to US innovation and jobs
The loss of full expensing and the requirement to amortize R&D expenses have caused surprise tax bills for small- and medium-sized manufacturers, which many struggle to cover.
Restoring the immediate deduction for R&D expenses will help ensure that manufacturers can continue to utilize this vital tax provision critical to competitiveness, innovation, and US jobs.
Increased Child Tax Credit
If passed by Congress, the bipartisan Tax Relief for American Families and Workers Act of 2024 would raise the maximum refundable child tax credit from $1,600 to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, with an inflation adjustment in tax years 2024 and 2025.
Other Changes
The bill would tighten enforcement and make other changes to the COVID-era Employee Retention Tax Credit (ERTC), which under current law may be claimed on amended returns through April 15, 2025, in order to pay for the tax cuts over the 10-year budget window.
The statute of limitations on ERTC assessments might be extended, penalizing ERTC promoters for not meeting the requirements for preparing claims, and prohibit submissions made after January 31, 2024.
Upcoming Uncertainity and Possible Delays
The law may or may not succeed despite its bipartisan credentials. Approval of the proposal during the Ways and Means Committee markup session is the next step. The proposed legislation will be considered by the whole US House of Representatives if it receives committee approval. Under “suspension” procedures, the measure might be processed in the House and move to the Senate for additional consideration with a two-thirds vote rather than a simple majority.
Tax experts and entities think it is uncertain if the bill will pass the House and Senate in its current form (or at all). Ranking members don’t seem to be involved in the recent announcement of the bipartisan framework for proposed tax legislation made by Senate Finance Chair Ron Wyden and Chairman Jason Smith.
If Congress waits this long, the tax package won’t be passed in time for people and businesses to take advantage of it during this tax filing season. In fact, the adoption of a government financing package in early March, or maybe later, might also postpone the final settlement for taxpayers.
- Increase access to the child tax credit with a progressive increase in the refundable component for 2023, 2024, and 2025.
- Eliminate the penalty for more prominent families: Ensure that the child tax credit phase-in is administered evenly to households with numerous children.
- One-year income lookback: Allow taxpayers to compute the child tax credit using current or prior-year income in 2024 or 2025, similar to bipartisan action taken six times in the previous 15 years.
- Inflation relief: Beginning in 2024, the tax credit will be adjusted to reflect inflation.
- Research and Development (R&D) expensing allows firms of all sizes to immediately deduct the cost of their R&D expenditures rather than waiting five years, promoting American innovation and enhancing our competitive position against China and the rest of the world.
- Interest deductibility: Continued flexibility for firms that borrow at higher interest rates to satisfy payroll obligations and expand operations.
- 100% expensing: Restore complete and prompt expensing for machinery, equipment, and vehicle expenditures.
Taiwan double tax relief: Strengthen America’s competitive position against China by eliminating the present double taxation for enterprises and personnel having operations in both the United States and Taiwan.
- Expand the small company expensing ceiling: Increase the investment that a small firm may immediately write off to $1.29 million, up from the $1 million maximum set in 2017.
- Reduce red tape for small firms by increasing the reporting threshold for enterprises that utilize subcontract labor from $600 to $1,000 and indexing for inflation, the first change since the 1950s.
- Help households get back on their feet by providing catastrophe tax assistance for recent storms, flooding, wildfires, and the Ohio train disaster.
- Increase the availability of low-income housing by expanding the Low-Income Housing Tax Credit, a successful public-private collaboration with more significant state allocations and a lower tax-exempt bond financing threshold.
- Saving approximately $70 billion in public cash by extending the deadline for filing backdated claims under the COVID-era Employee Retention Tax Credit to January 31, 2024, a program plagued with cost overruns and fraud.