On January 31, 2024, the U.S. House approved the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). This $78 billion bipartisan bill, crafted by Senate Finance Committee Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.), would revive or extend certain business tax incentives and enhance the child tax credit.
Provisions in Bill
As passed by the House, the bill would:
- Retroactively reinstate current expensing for domestic qualified research expenses to January 1, 2022.
- Restore 100% bonus depreciation for property placed in service after December 31, 2022, and before January 1, 2026.
- Ease the limitation on business interest expense deductions, with taxpayers able to apply this retroactively back to 2022.
- Increase the Sec. 179 limitation amounts putting the maximum amount a taxpayer could expense under Sec. 179 to $1.29 million.
- Increase the Child Tax Credit for lower income families.
Additionally, the bill terminates the employee retention credit (ERC) as of January 31, 2024, earlier than its April 15, 2024, for 2020 claims and terminates ERC for 2021 claims as of April 15, 2025. The statute of limitations period for ERC claims would be extended to six years and the time in which taxpayers could claim valid wage deductions attributable to invalid ERC claims would be extended. It is unclear if the January 31, 2024, end date for the ERC would remain in any final bill, as that date has already passed. It is possible that a final bill would drop the accelerated end date or move it out to an after-enactment date, but doing so would necessitate other changes, as this is the funding mechanism for the included tax cuts.
Outlook on Passage of Legislation
The version passed by the House enjoyed broad bipartisan support—188 Democrats and 169 Republican voted for it. The bill now heads to the Senate. Its future is uncertain given the enthusiastic support from Republicans, some of whom oppose the expansion of the child tax credit, and the concern from Democrats about the bill’s business tax provisions. If the Senate chooses to adopt any amendments to the bill, the House will have to vote again on the bill as amended by the Senate.
If this bill or a revised version does become law, it would present challenges to the IRS in accommodating the new law in its forms and processing given that the tax filing season has started. This has the potential to result in slower processing of 2023 tax returns, particularly if they are impacted by a new law. If the business tax provisions included in the bill are ultimately enacted as proposed, it could also open the door for a flurry of amended returns.
The Senate is unlikely to hold a vote on the legislation until after it returns from its two-week recess scheduled for February 10 to February 24. We will continue to provide updates on this legislation as it progresses through the Senate and potentially to the President’s desk. For additional information call us at 630.954.1400 or click here to contact us. We look forward to speaking with you soon.