Examining potential impacts of $78 billion tax package

February 7, 2024

The U.S. House of Representatives recently passed a $78 billion tax package that could have major ramifications for businesses and individuals if signed into law.

The bill, called the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), now is in the hands of the Senate, where it had not yet been referred to a committee as of February 7. It is unclear if the measure has enough support in the narrowly divided Senate to be passed, according to legislative experts.

Key provisions in the bill include:

• Section 174: The bill would allow businesses to deduct domestic research or experimental (R&E) costs incurred or paid during tax years from January 1, 2022, to December 31, 2025. (This would partially address a change related to the Tax Cuts and Jobs Act enacted in 2017 that required that, for tax years beginning after December 31, 2021, businesses could no longer immediately deduct their R&D expenses.)
• Section 168(k): The bill would extend the 100% bonus depreciation for any qualified property placed in service from January 1, 2023, to December 31, 2025. There will continue to be 20% bonus depreciation for property placed in service on or after January 1, 2026.
• Section 163(j): This bill would extend the application of interest deductions to compute alternative taxable income (ATI) without regard to any deduction allowable for depreciation, amortization or depletion (EBITDA) for tax years beginning after December 31, 2021, and before January 1, 2026.
• Child tax credits: The bill raises the amount of the child tax credits that are available as a refund – to $1,800 for 2023, $1,900 in 2024 and $2,000 in 2025. The bill also increases the maximum credit amount to grow at the rate of inflation through 2025.
• Employee Retention Tax Credit: Under the bill, the deadline for filing claims related to the Employee Retention Tax Credit would be moved up and will have ended on January 31, 2024. The IRS in mid-September issued a moratorium on processing new claims amid a “flood of ineligible ERC claims.”

Honkamp experts continue to closely follow the legislation and its potential impacts on the firm’s clients. If you have any questions, contact Honkamp.