The U.S. House of Representatives could consider the bipartisan tax package known as the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) as early as Jan. 29 amid growing momentum. The tax package advanced out of the House Ways and Means Committee Jan. 19, 2024, by a vote of 40-3 and subsequently was posted on the House floor schedule as an item that may be considered by the chamber in coming days.
Crafted by House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), the legislation includes: (1) an extension of 100% bonus depreciation (or “full expensing”); (2) an increase in the Section 179 small business expensing amount; and (3) a more fulsome child tax credit, which may potentially impact product demand and labor market supply.
Should Congress take up the package, bipartisan support for the bill in the House Ways and Means Committee may allow it to advance out of the House. The package faces a harder time advancing through the Senate, however. Notably, last week’s passage of a Continuing Resolution to keep the government open through early March limits the opportunities for Senate vehicles in the near term. As such, the tax package may not advance until there is a legislative vehicle to address FY24 appropriations (now set for March 1 and March 8).
Senate Republicans who were not included in drafting the package also could potentially withhold support. A strong House floor vote, however, could positively impact their position.
Additional details on the bill’s provisions are outlined below.
Business Tax Relief
- Restores Section 168(k) “Bonus” Depreciation – The deduction for bonus depreciation on qualified property is currently phasing out by 20% each year through December 31, 2026. For tax year 2023, the bonus depreciation deduction is currently slated to be limited to 80 percent on eligible property. The legislation would extend 100% bonus depreciation on qualified property through December 31, 2025. This would retroactively apply to tax year 2023, allowing for a 100 percent deduction on eligible property.
- Restores Section 163(j) Interest Deductions – This provision could allow taxpayers to deduct more of their interest expense (considered particularly important with the rising costs of financing). Specifically, it would retroactively adjust the interest expense limitation for taxable years beginning after December 341, 2021, and would be extended through December 31, 2025. The adjustment would revert to prior law and would allow calculation of the limitation based on 30% of EBITDA.
- Provides Temporary Increase in Section 179 small business expensing – Section 179 depreciation limitations would increase to $1.29 million for taxable years beginning after December 31, 2023; the deduction would be reduced for qualifying property purchases in excess of $3.22 million.
- Restores Section 174 Expensing for U.S. Companies (foreign R&D expenses not restored) – Taxpayers would be able to expense domestic costs retroactive to 2022 and through tax years beginning before 2026. (Foreign expenses would continue to be required to be amortized over 15 years.)
- Provides Tax Relief for Disaster-Impacted Communities.
- Provides U.S.-Taiwan Double Taxation Relief.
Individual Tax Relief
- Increases the refundable amount of per-child tax credit for 2023-2025.
- Provides relief for casualty and theft losses for victims of disasters.
- Increases low-income housing tax credit.
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