Enhanced Tax Credits for Businesses and Families: A $78 Billion Proposal
January 16, 2024
In a bipartisan effort, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason Smith (R-Mo.) have announced a new tax framework that could bring significant relief to American businesses and families. The proposed Tax Relief for American Families and Workers Act of 2024 has a budget of $78 billion and aims to enhance several tax credits while also providing disaster relief for certain taxpayers.
Among other items, the bill proposed in the framework contains measures to improve the research and development (R&D) expensing. This would allow businesses to immediately deduct R&D expenses, providing them with an incentive to invest in innovation and technology. As currently understood, the framework would apply this change in treatment retroactively to January 1, 2022, potentially giving taxpayers that were adversely affected a well-needed reprieve. Other taxpayer-positive provisions would include an extension of 100 percent bonus depreciation through at least 2025, as well as an increase in the amounts eligible for treatment as Section 179 property.
On the other hand, the bill proposed in the framework seeks to phase out the employee retention tax credit (ERC), which was introduced as a temporary measure during the COVID-19 pandemic. While the program is currently slated to run through April 2025 for claims arising in 2021, the framework would drastically cut that timeframe (possibly ending the program as soon as this month).
In addition to the business tax provisions mentioned earlier, the bill proposed in the framework would also provide significant enhancements to the child tax credit, enhancements to the low-income housing credit, and enhanced disaster relief for certain taxpayers affected by natural disasters, which includes allowing individuals to claim casualty losses in the year of the disaster and providing them with additional time to file their taxes.
If approved by Congress, this comprehensive tax framework has the potential to bring much-needed relief to American families and businesses. Tri-Merit will keep you informed as we await further developments on this proposal.