On January 31st, the U.S. House of Representatives passed the “Tax Relief for American Families and Workers Act of 2024” (H.R. 7024) by a bipartisan vote of 357 to 70. However, prospects for passage in the Senate remain uncertain, which is currently on a two-week recess that began February 12th. With twin government funding deadlines in the first two weeks of March, as well as an ongoing focus on emergency aid packages and border funding, the House-passed tax bill does not seem to be a top priority among Senators. Per Sen. John Kennedy, R-Louisiana, “It’s not the most important thing we’re working on right now.”
Other Senators, particularly Republicans, have also expressed apathy and reservations about the tax bill, including Finance Committee member Sen. Chuck Grassley, R-Iowa, who has noted unease with the negotiations between Finance Committee Chair Sen. Ron Wyden, D-Oregon, and House Ways and Means Committee Chair Rep. Jason Smith, R-Missouri that did not include more Senators. Sen. Mitt Romney, R-Utah has called the child tax credit expansion in the bill a “new entitlement,” and as such is not inclined to lend support given new spending. Senate Finance Committee ranking member Mike Crapo, R-Idaho has pushed back against the notion of Senate passage of the House bill as is, indicating he would like to see committee markups, which could easily upend the fragile bipartisan framework holding the tax bill together.
In the face of inaction and ambiguity from Congress, and with the 2024 tax filing season having been officially opened on January 26th by the IRS, U.S. taxpayers once again find themselves amid tax compliance and planning uncertainty. This uncertainty has lingered for years, particularly following the arrival of broadly unfavorable tax provisions, originally built into the 2017 massive tax legislation commonly known as The Tax Cuts and Jobs Act; those include, beginning in 2022, capitalization of R&D expenditures and further limitations on business interest deductibility, and beginning in 2023, the phaseout of 100% bonus depreciation.
In addressing these unfavorable provisions, the House-passed Tax Relief for American Families and Workers Act of 2024 would:
- Reinstate immediate expensing of domestic research and experimental expenditures for taxable years beginning before December 31, 2025, with expenditures capitalized in the 2022 taxable year allowed to be deducted ratably in the 2023 and 2024 tax years.
- Reinstate the add-back for the allowance for depreciation, amortization, or depletion to the calculation of deductible business interest for taxable years beginning before December 31, 2025, which can be retroactively applied at the election of the Taxpayer to the 2022 taxable year.
- Reinstate 100% bonus depreciation, which had phased down to 80% as of January 1, 2023, through December 31, 2025. 179 deduction limits would also be given inflation-adjusted increases.
Paired with these business provisions is an expansion of the per-child calculation of the refundable portion of the child tax credit. The bill also includes double taxation relief for residents of Taiwan with U.S. income sources. To help offset the cost of these provisions, the bill bars additional employee retention tax credit claims as of January 31, 2024.
While the prospect of retroactive tax law changes appears to be fading, they remain a possibility as filing deadlines quickly approach. We at Smith Leonard remain equipped and on hand to help guide taxpayers through these continually challenging times.
