Tax Relief for Working Families and Workers Act of 2024
January 24, 2024 - The House Ways and Means Committee, by a vote of 40-3, recently approved the Tax Relief for Working Families and Workers Act of 2024. The tax framework would restore certain 2017 tax reform business provisions, as well as boost the child tax credit. Surprisingly, the bill overwhelmingly passed through the committee in a show of bipartisan support rarely seen in a tax-focused bill. While there is still uncertainty regarding its ultimate passage, the bill sits in limbo waiting for the full House chamber to return on January 29.
The current language of the Tax Relief for Working Families and Works Act of 2024 is subject to change as it moves through Congress, but it contains a number of tax provisions that would significantly impact tax filings for 2023, as well as previously filed tax returns for 2022.
Key Provisions of the Bill
If the bill is passed by Congress and signed into law by the President, some of the key provisions would be as follows:
Restoration of expensing for domestic research and development expenditures.
One of the most impactful changes in the proposal is the treatment of research and development expenditures. The proposal would change the date of required capitalization for domestic expenditures from dates beginning after December 31, 2021, to December 31, 2025. The required capitalization of foreign research and development expenditures would not change.
Extension of 100% bonus depreciation and increased IRC 179 deduction limitations.
The proposal would extend 100% bonus depreciation through 2025. The allowance for bonus depreciation was scheduled to be reduced to 80% for 2023 and continue to decrease by 20% for the next several years.
The IRC 179 expensing amounts were increased for years beginning in 2024 to $1.29 million with phaseout beginning with total qualifying purchases exceeding $3.22 million.
Extension of addition of depreciation and amortization in calculation of interest expense limitation.
The deductibility of interest expense would increase for many taxpayers with the reinstated inclusion of depreciation and amortization in the definition of adjusted taxable income. The change is generally effective for years beginning after December 31, 2023, however, taxpayers can elect to apply the extension retroactively to years beginning after December 31, 2021.
Expansion of the child tax credit.
While the majority of the tax changes in the bill impact business taxpayers, individual taxpayers can be impacted by the extension/expansion of the child tax credit through 2025 with amounts adjusted for inflation beginning in 2024.
Funding of the Bill
The government would fund the cost of some of these changes by closing the period taxpayers can apply for the employee retention tax credit (for both 2020 and 2021 claims) on January 31, 2024. Increased enforcement levied through fines and penalties for those found violating rules for claiming the tax credit, or engaged in outright fraud, will provide additional funding for the bill.
The ultimate fate of the bill is not clear, but the impact on businesses could be significant. If you have any questions or concerns regarding how passage of the Tax Relief for American Families and Workers Act of 2024 may affect your or your business, you can reach out to a Redpath and Company advisor here.
John Kammerer, CPA
John Kammerer, CPA, is a tax partner at Redpath and Company and holds a seat on the firm’s board of directors. He leads the firm’s business tax service area, assisting clients with tax planning and preparation, entity structuring, and M&A transactions. John works with a variety of clients in industries such as manufacturing, construction, real estate, and professional services. He is a frequent presenter on topics of business taxation and entity structuring. John is also a member of the S Corp Association advisory board and is actively involved with the group to promote and support tax policies that positively impact S Corporations and privately-held businesses. John graduated from Winona State University with a Bachelor of Science degree in Accounting. He is a member of the American Institute of Certified Public Accountants (AICPA) and the Minnesota Society of Certified Public Accountants (MNCPA). He has provided public accounting services at Redpath and Company since 2004.
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