While you might be itching to get your 2023 tax returns filed as soon as possible, waiting for just a little while longer may end up saving you both time and money.
With only a few days to spare before the IRS begins accepting tax returns for the 2023 tax year, Congress has been presented with the Tax Relief for American Families and Workers Act of 2024 (“the bill”). The bill contains several proposed tax law changes that would have a significant impact on many individuals and businesses alike. In addition, some of these proposed changes would be retroactive, and may present either an opportunity or requirement to amend previously filed tax returns.
The Bill: Tax Relief for American Families and Workers Act of 2024
The framework and technical summary of the bill was announced by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason Smith (R-Mo.) on January 16, 2024. Three days later, the House and Ways and Means Committee advanced the actual bill text to the House floor. Update: as of January 31, 2024, the Bill passed the House of Representatives in a rare bipartisan vote of 357 to 70.
While it is promising to see a tax-focused bill that has the support of committee chairs from both political parties, the future of the bill is uncertain and faces uphill battles in both the House and Senate. We’ve outlined some of the most impactful provisions currently included in the bill below, but it is important to keep in mind that the drafted provisions below could either be modified or removed entirely as the bill moves through the legislative process.
Impactful Proposed Currently Included in the Bill
The bill, if passed as currently drafted, would:
- Terminate the CARES Act employee retention tax credit (ERC) program early (deadline for application would be January 31, 2024), extend the ERC statute of limitations for all periods to six years, and increased the penalties for promoters of fraudulent ERC claims (would apply retroactively).
- Delay the requirement for businesses to capitalize and amortize their domestic research or experimental costs over a five-year period until taxable years beginning after December 31, 2025.
- This would result in the need to amend tax returns already filed for the 2022 tax year where such costs were capitalized and amortized over a five-year period under existing tax law.
- Change the definition of adjusted taxable income (ATI) for purposes of computing currently deductible business interest expense under Internal Revenue Code (“IRC”) Section 163(j) for taxable years beginning after December 31, 2023 and before January 1, 2026. The change would generally allow most businesses and individuals that are subject to the rules under IRC Section 163(j) to deduct additional amounts of interest expense that would otherwise be suspended as excess business interest expense.
- An election could also be made to apply this provision to taxable years beginning after December 31, 2021.
- Reinstate 100% bonus depreciation for most qualified property placed in service after December 31, 2022 and before January 1, 2026. Qualified property placed in service on or after January 1, 2026 would be eligible for 20% bonus depreciation. Similar changes would also apply to property with longer production periods and for plants that bear fruits or nuts.
- Increase the IRC Section 179 small business expensing limit for property placed in service in taxable years beginning after December 31, 2023 to $1.29M (begins to phase out after $3.22 million of qualified property expenditures).
- Increase the Form 1099 reporting threshold to $1,000 per applicable payee for payments made after December 31, 2023.
- Increase the refundable portion of the child tax credit for tax years 2023, 2024 and 2025.
- Expand and increase the low-income housing tax credit for both newly constructed and rehabilitated buildings.
- Expand disaster tax relief for certain federally declared disasters. In addition, certain payments received in connection with qualified wildfire disasters and the East Palestine, Ohio train derailment would be excluded from a taxpayer’s gross income.
- Add several provisions applicable to Taiwanese individuals and businesses that do business in or with the United States.
It’s apparent that this bill contains a lot of significant tax provisions, and although it’s future is uncertain (and all of the above is subject to change), we encourage you to consider the impacts of this potential legislation. If you need further guidance or have any questions on this topic, our trusted experts are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.