The Tax Relief for American Families and Workers Act of 2024

America Needs It, but Can Congress Deliver It?

On January 16, 2024, House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) announced a tax plan entitled The Tax Relief for American Families and Workers Act of 2024 (“The Act”). The House subsequently voted and passed H.R. 7024 on January 31.

The Act primarily addresses several tax deductions that expired under the Tax Cuts and Jobs Act of 2017 (TCJA) and enhances child tax credits and low-income housing credits. 

Whether the Act will be passed into law remains far from certain, as several blue-state Republicans have criticized it for not increasing a state and local tax deduction limitation of $10,000 to $20,000. Rep. Smith has been opposed to addressing the SALT deduction limitation in this package.

The prominent tax elements in The Act and H.R.7024 include:

Reinstatement of R&E Deductions

The 2017 TCJA required taxpayers to capitalize their R&E expenditures for tax years beginning after December 31, 2021 and amortize expenditures over five years for domestic expenditures and 15 years for foreign expenditures. 

In its current form, The Act delays the date of this capitalization requirement for domestic expenditures to December 31, 2025. This would reinstate taxpayers’ ability to fully deduct domestically incurred R&E expenditures for tax years beginning after December 31, 2021, and before January 1, 2026. As currently drafted, The Act does not change the TCJA’s capitalization and amortization requirements for foreign R&E expenditures.

This legislation has been long awaited as the current capitalization and amortization R&E expenditures requirements run contrary to the public policy of incentivizing investment in R&E in the US. This part of The Act appears to have bi-partisan support.  

Higher Limit for Business Interest Deduction

If enacted, The Act would extend the method of determining the Business Interest Deduction Limitation (BIDL) by computing adjusted taxable income without regard to any deduction allowable for depreciation, amortization, or depletion (i.e., earnings before interest, taxes, depreciation, and amortization, or “EBITDA.” The Act would extend this method of computing the BIDL for tax years beginning after December 31, 2023, and before January 1, 2026. Additionally, taxpayers could elect to compute the limitation in this manner for taxable years beginning after December 31, 2021.

Extension of the 100 Percent Bonus Depreciation

The Act would extend 100% bonus depreciation for qualified property placed in service after December 31, 2022, and before January 1, 2026 (January 1, 2027, for certain aircraft and longer production period property).

Increase in Limitations on Expensing of Depreciable Business Assets

The Act increases the limitation for taxpayers to expense depreciable tangible property such as equipment and software that is purchased for use in the active conduct of a trade or business under Internal Revenue Code Section 179 to $1.29 million, reduced by the amount by which the cost of qualifying property exceeds $3.22 million. This represents an increase over the current limitation, (adjusted for inflation) of $1.16 million and $2.89 million respectively in 2023. The increased limitations would apply to property placed in service in taxable years beginning after December 31, 2023.

Expansion of the Child Tax Credit

The Act would modify the computation of the maximum refundable child tax credit by incorporating the number qualifying children into the computation for tax years 2023 through 2025. In addition, The Act increases the per child limitation from $1,600, to $1,800 in 2023, $1,900 in 2024 and $2,000 in 2025. This provision would adjust the $2,000 value of the child tax credit for inflation in tax years 2024 and 2025, rounded down to the nearest $100.

The Act would also:

  1. Eliminate double taxation on certain US / Taiwan cross boarder arrangements.
  2. Extend disaster relief for personal casualty losses that was historically provided by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
  3. Reinstate the previously enacted allocation increase of Low-Income Housing Tax Credits by 12.5% for tax years 2023 to 2025. The prior increase expired in 2021.
  4. Address the fraudulent filing of Employee Retention Tax Credits (ERCs) by:
    • Significantly increasing the penalties of those who promoted the filing of fraudulent ERC claims.
    • Requiring promotors of ERCs to comply with increased due diligence requirements.
    • Extending the statute of limitations from five to six years from the date of the claim.
    • Barring the filing of additional ERC claims after January 31, 2024.

We will continue to follow the progress of this significant legislation over the coming weeks and months. For more information, contact us. We are here to help.

©2024

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Ryan Coleman

Ryan Coleman

Partner, Tax Provisions and Research and Development

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Ryan recently joined Weaver with over 20 years of professional tax experience, including two Big 4 firms. He leads the Research and…

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