Tax Byte
Capitol Hill Connection: Top Taxwriters Unveil Bipartisan Tax Framework
As Congress races the clock in negotiations to keep the government fully funded beyond January 19, top congressional taxwriters have unveiled a much-anticipated framework, which would retroactively enhance the Child Tax Credit and extend certain business tax breaks, among other things. The bipartisan, bicameral tax measure faces a tough road ahead, however, a senior congressional aide told Western CPE on January 16.
Tax Relief for American Families and Workers Act of 2024
Although we don’t currently have legislative text to review, the proposal is expected to be introduced as the Tax Relief for American Families and Workers Act of 2024, according to Senate Finance Committee Chair Ron Wyden, D-Ore. “My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done.”
While Wyden’s statement did not include a “my bad” to the IRS and tax pros alike for possibly muddying the waters this tax filing season with retroactive provisions, the potential complexity for both is already creating a buzz in the tax community.
What’s Inside
A snapshot of the framework’s temporary provisions includes:
- An expansion of the Child Tax Credit through 2025 – increases the maximum refundable amount per child to $1,800 in tax year 2023, and $1,900 in tax year 2024 and $2,000 in tax year 2025, adjusted for inflation;
- A delayed start when taxpayers must begin deducting their domestic research or experimental costs over a five-year period until taxable years beginning after December 31, 2025. Thus, taxpayers could deduct currently domestic research or experimental costs that are paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2026;
- Extension of the allowance for depreciation, amortization, or depletion in determining the limitation on business interest to taxable years beginning after December 31, 2023 (and, if elected, for taxable years beginning after December 31, 2021), and before January 31, 2026;
- Generally, extends 100-percent bonus depreciation for qualified property placed in service after December 31, 2022, and before January 1, 2026. The provision retains 20-percent bonus depreciation for property placed in service after December 31, 2025, and before January 1, 2027;
- Increases the maximum amount a taxpayer may expense under Section 179 to $1.29 million, reduced by the amount by which the cost of qualifying property exceeds $3.22 million. The $1.29 million and $3.22 million amounts would be adjusted for inflation for taxable years beginning after 2024. The proposal applies to property placed in service in taxable years beginning after December 31, 2023; and
- Increases the threshold for information reporting on Forms 1099-NEC and 1099-MISC from $600 to $1,000, effective after December 31, 2023.
Additionally, the framework would bar all Employee Retention Credit claims after January 31, 2024, putting an early end to the controversial COVID-related relief program while implementing some stiff penalties for bad actors.
Looking Ahead
However, if Senate Finance Committee Ranking Member Mike Crapo’s, R-Idaho, lackluster statement on the framework serves as any indication, we may not want to get too excited just yet. “The agreement announced today by Chairman Smith and Chairman Wyden is a thoughtful starting point for the House to begin the process,” Crapo said. “I will continue working with my Senate colleagues to build broad, bipartisan support for a tax package that provides appropriate relief for working families and businesses.”
Whether lawmakers attempt to attach the tax measure to a continuing resolution this month or a longer-term government funding bill likely expected in March, both legislative vehicles may prove for a bumpy ride. And if the talk on Capitol Hill is true that lawmakers may even have the gumption to try and enact this thing as a standalone tax bill, which rarely ever happens, and it comes to pass…well, that may just inspire me to start buying lottery tickets.
A technical summary of the tax framework can be found HERE.
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