On January 31, 2024, the U.S. House of Representatives voted 357 to 70 to approve H.R. 7024, the “Tax Relief for American Families and Workers Act of 2024”. The bill now goes to the Senate for consideration.
The Tax Relief for American Families and Workers Act of 2024 provides extensions or modifications of key provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”) aimed at both businesses and middleclass taxpayers. Significant key provisions include the following:
Restoration of Section 174 deductions for research and experimental costs
Under the TCJA effective for tax years beginning on or after January 1, 2022 previously deductible costs paid or incurred during the tax year on research and experimental costs were required to be capitalized and amortized over 5 years for domestic section 174 expenses and over 15 years for foreign section 174 expenses. H.R. 7024 proposes to allow for the immediate expensing of section 174 expenses incurred in tax years ending before January 1, 2026. Foreign section 174 expenses would continue to be capitalized and amortized over 15 years.
Taxpayers can reflect this retroactive change by filing an application for change in accounting method and electing either a one year or two year section 481(a) adjustment. Alternatively, eligible taxpayers would generally be permitted to amend their prior year filings to reflect the current expensing of eligible section 174 costs.
Expansion of Section 163(j) interest expense limitation
H.R. 7024 proposes to revert the 30% interest expense limitation calculated in accordance with section 163(j) from an adjusted taxable income before interest and taxes back to adjusted taxable income before depreciation, amortization, interest, and taxes (e.g., reverting from EBIT to EBITDA).
Reinstatement of Section 168(k) 100% bonus depreciation
H.R. 7024 would extend the timeframe to claim 100% bonus depreciation on qualified property placed into service after December 31, 2022 and before January 1, 2026. Currently, bonus depreciation on qualified property placed into service after December 31, 2022 and before December 31, 2023 is limited to 80% with a 20% decrease in the following tax years until completely phased out.
Expansion of the Child Tax Credit
H.R. 7024 proposes to increase the refundable maximum amount of the credit to $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025. The bill would also begin to index the $2,000 credit for inflation beginning in 2024 and index the refundable maximum amount beginning in 2025.
Other provisions
- Temporary increase the section 179 small business expensing limitation
- Provide additional relief for disaster-impacted communities
- Adjustments to low-income housing tax credits and tax-exempt financing provisions
- Relief for small businesses from complying with certain Form 1099-MISC and 1099-NEC informational reporting for services performed by an independent contractor or subcontractor
Congress proposes to offset the expected expense of the tax bill, projected at $79 billion over a 10 year period, by accelerating the deadline for businesses to file Employee Retention Tax Credit claims. Generally, business would have until April 15, 2024 to amend 2020 returns and April 15, 2025 to amend 2021 returns. Under the proposed bill, the deadline to file all claims would be accelerated to January 31, 2024.
