The bill includes tax legislation to help small and private businesses, including the ability to immediately expense domestic research and experimental expenditures, allowing for 100% bonus depreciation for qualifying property, and loosening the interest expense limitation rules.
|Immediate expensing of domestic R&E expenditures (IRC Section 174)
|R&E expenditures paid or incurred in taxable years beginning after December 31, 2021
|R&E expenditures paid or incurred in table years beginning after December 31, 2025
|100% bonus depreciation (IRC Section 168(k))
|Qualifying property place in service after December 31, 2022
|Qualifying property place in service after December 31, 2025
|Interest expense limitation allowing depreciation and amortization added back (IRC Section 163(j))
|Applicable to taxable years beginning after December 31, 2023
**However, taxpayers can elect to apply the proposed law change to taxable years beginning after December 31, 2021
|Ceases for taxable years beginning after December 31, 2025
The bill also modifies the child tax credit to be assessed on the number of qualifying children (as opposed to per taxpayer) and increases the maximum refundable child tax credit from $1,600 to $1,800 for the 2023 taxable year. The refundable child tax credit would continue to increase by $100 per year through Dec. 31, 2025. The bill would also expand low-income housing credit and financing, disaster tax relief, and U.S.-Taiwan tax provisions.
The benefits provided by the bill will be largely offset by accelerating the deadline for submitting employee retention credit claims to Jan. 31, 2024. If the bill does become law, it is anticipated that the application deadline for employee retention credits will remain January 31 as the date was made public.
How Does the Bill Impact the Federal Budget?
Based on the Congressional Budget Cost Estimate, the bill would reduce federal revenues by approximately $399 million over 10 years. As reference, the federal budget deficit totaled nearly $1.7 trillion for the fiscal year ending 2023.
What To Expect in the Senate
Ron Wyden, the Senate Finance Committee chair, has been reported as encouraging Senate leadership to get the bill on the Senate floor quickly. However, Senate Finance Committee ranking member Mike Crapo wants the ability to adjust or amend the legislation. How amendments will be integrated into the bill will be strategic. Limiting the ability for amendments to occur in the Senate Finance Committee could expedite the bill’s passing.
While many initially hoped the bill would pass both the House and the Senate by the start of the IRS tax filing season on Jan. 29, 2024, a short window still exists for the Senate to pass the bill before its 2-week recess, which starts on February 12. To the extent the bill is prolonged, it is more apt to get caught in the crossfire of other nonpartisan bills and be swayed by the impending November 2024 election. While there is concern that the Senate may not be able to pass the bill by February 12, there is hope that the strong bipartisan vote in the House could carry momentum into the Senate.
The White House previously expressed its support of the bill when the House Ways and Means Committee approved the bill on Friday, January 19.
So, What’s Next?
So many small and private business owners, entrepreneurs, and researchers need this bill passed to continue their business operations without significant modifications or closures. Many business owners have been extremely active in conveying their stories to their Representatives and Senators. This grassroots effort was reflected in over 465 business association statements of support received by the House Ways and Means Committee.
Business owners should consider continuing these efforts by communicating their support of the bill directly with Senators. Due to the minimal impact the bill would have on the federal deficit, the strong bipartisan support, and the grassroots efforts explaining the impact this is having on many U.S. businesses, we can only hope that the Senate hears the call to pass the bill expeditiously.