Tax Byte

House Republicans have revved the engine on congressional tax talks this year by releasing a trio of bills for an individual and business tax package. The following three bills, released on June 9, make up the American Families and Jobs Act package and serve as the starting line for this year’s congressional tax negotiations:

• Tax Cuts for Working Families Act (H.R. 3936),
• Small Business Jobs Act (H.R. 3937), and
• Build It in America Act (H.R. 3938).

A Look Under the Hood at the American Families and Jobs Act Package

Generally, taking a quick look under the hood shows us that the package would, among other provisions:

• Increase the information reporting threshold for a service-recipient taxpayer for services performed by an independent contractor or subcontractor from $600 to $5,000;
• Restore the previous reporting threshold for Form 1099-K to $20,000 in annual sales and 200 in annual transactions. The American Rescue Plan Act of 2021 (P.L. 117-2) reduced the annual sales threshold to $600 and eliminated the transaction threshold;
• Increase the maximum amount a taxpayer may expense of qualifying property under IRC § 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million;
• Expand the exclusion from gain from qualified small business stock under IRC § 1202;
• Create a new bonus standard deduction on top of the existing standard deduction for tax years 2024 and 2025;
• Delay when taxpayers must begin deducting research and experimental expenditures;
• Extend 100-percent bonus depreciation for qualified property;
• Reinstate reporting requirements for qualified opportunity zones and establishes special rules for capital gains invested in rural opportunity zones; and
• Repeal several clean energy credits created by the Inflation Reduction Act (IRA, L. 117-169) while modifying the clean vehicle credit.

Bumpy Road Ahead

Although the tax package could likely clear the Republican-controlled House, it faces a bumpy road (can’t stop, won’t stop) ahead in the upper chamber as currently drafted. And by bumpy road, I’m talkin’ sinkhole. As it stands, the package is presumed dead on arrival in the Senate where Democrats hold the majority.

Simply put, Senate Finance Chair Ron Wyden, D-Ore., has said “it’s not going to happen.” However, while the vehicle may stall, it ain’t yet out of gas.

“Pairing tax cuts for businesses and families has been the bipartisan practice for several years in recent memory,” Wyden said. “I’m hopeful there’s enough common ground for the two sides to reach an agreement this year, and I’m going to work with my colleagues in the Senate on our own priorities.”

The House Ways and Means Committee has scheduled a markup of the three bills this week on Tuesday, June 13. The package is expected to successfully clear the committee. Of course, we’ll keep our eye on the package as it moves to the House floor and soon take a closer look at these provisions, as they are sure to evolve (or die) in the Senate.

Section-by-Section summaries of the bills are listed below:

• Tax Cuts for Working Families Act (H.R. 3936),
  Section-by-Section Summary
• Small Business Jobs Act (H.R. 3937),
  Section-by-Section Summary
• Build It in America Act (H.R. 3938),
  Section-by-Section Summary

The Joint Committee on Taxation (JCT) descriptions, which include effective dates of the proposed provisions are listed below:

• Description of Tax Cuts for Working Families Act (H.R. 3936),
  JCX-25-23 (June 09, 2023)
• Description the Small Business Jobs Act (H.R. 3937),
  JCX-26-23 (June 09, 2023)
• Description of the Built It In America Act (H.R. 3938),
  JCX-28-23 (June 09, 2023)