A bipartisan tax package had been expected to move through the House of Representatives this week, but some Republican congressmen are threatening to derail the measure over their concerns about the bill.
On Jan. 16, Senate Finance Committee Chairman Ron Wyden, D-Ore., and House Ways and Means Committee Chairman Jason Smith, R-Mo., jointly announced what they called “a commonsense, bipartisan, bicameral tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.”
The plan, introduced as The Tax Relief for American Families and Workers Act of 2024, generally proposes to revive expired breaks for businesses and increase the child tax credit for low-income families. However, the plan also includes disaster relief provisions and other tax relief measures. Congress hopes to push the roughly $80 billion in tax breaks through Congress in the next few weeks – and before the Jan. 29, 2024, start of tax season – with parts of the bill being retroactive. The agreed-to framework proposes to pay for the tax breaks by cutting off new claims for the COVID-19 era employee retention credit program filed after Jan. 31, 2024.
The bill would amend portions of the Internal Revenue Code of 1986, and would:
Increase refunds under, expand eligibility for, and adjust the child tax credit to account for inflation for tax years 2023 through 2025.
Allow businesses to deduct expenses for domestic research and experimentation and to depreciate certain equipment more quickly than under current law.
Increase the amount of interest that businesses can deduct as an expense.
Increase the threshold for businesses to report certain payments to contractors and subcontractors.
Stop claims of the employee retention tax credit and increase penalties for promoters’ violations.
But whether the bill will actually make it to the House for a vote remains up in the air, as Politico reported that House Republican leaders are hearing complaints from some members who are unhappy that the bill does not contain any provisions to provide state and local tax relief, as well as conservative members who want to discuss border issues along with the tax debate.
The bill does not contain any provisions that will have a direct impact on investors, Daniel Phillips, tax shareholder and Certified Public Accountant, at Schneider Downs, a tax consulting firm, told InsuranceNewsNet. However, he added, some parts of the bill could have an indirect impact.
“When we look at some of the business tax breaks regarding bonus depreciation and some of the potential rollback of research and development expensing, that changed,” he said. “We’re also looking at the limitation on interest expense deduction that came into play in 2022, and seeing whether that gets rolled back. Those were part of the Tax Cuts and Jobs Act that was passed in late 2017 and most of those provisions took effect in 2018.”
The bill’s provisions to allow businesses to deduct expenses for domestic research and development, and to depreciate certain equipment more quickly has implications for certain segments of the economy, Phillips said.
“Some startup and technology companies with R&D expenses, pharma companies with large R&D expenses could be impacted significantly,” he said. “Highly leveraged companies were impacted by the interest expense limitations and they could be impacted by this bill. Also, capital-intensive companies such as manufacturing and transportation could be impacted by the bonus depreciation.”
House Speaker Mike Johnson has been hoping for the House vote this week on the tax deal that would require a two-thirds majority to pass. But whether that happens is up in the air. House Freedom Caucus Chair Bob Good, R-Va., complained that Johnson is trying to move the bill via a House maneuver that allows the speaker to pass the tax deal with a two-thirds majority rather than steer it through the conservative-dominated Rules Committee, Politico reported.
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on X @INNsusan.
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