Outlook on tax policy changes

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Taxpayers are navigating a rapidly evolving policy landscape, one that includes changing tax rates, new tax credits and incentives, and legislation responding to challenging economic environments. Adding to the noise is the looming expiration of significant portions of the Tax Cuts and Jobs Act at the end of 2025. While Republicans generally support a broad extension of the expiring provisions, uncertainty remains on when and how that could take shape — and what tradeoffs might be made in the process.

In the face of these questions, it’s time to find steady ground. Our tax specialists cut through the tax noise, so you can better understand what could happen and how you or your business could be affected. We track the latest developments in tax policy and the legislative process, keeping you informed on individual, gift/estate, corporate, and international tax changes. Explore more from our tax leaders and consider subscribing to receive select updates direct to your inbox.

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Key tax policy considerations and legislation affecting taxpayers

Employee retention credit

The employee retention credit (ERC) has been fraught with challenges since its enactment during a rapid series of COVID-19 relief legislative packages in early 2020. Legislative changes to the ERC in 2020 and 2021, along with varying opinions regarding ERC qualifications, have created confusion for both taxpayers and the IRS.

Please see our ERC page for more information on the credit.

Expiration of Tax Cuts and Jobs Act provisions

The future of business taxation has been the subject of much speculation leading into 2025, with significant portions of the Tax Cuts and Jobs Act (TCJA) set to expire at the end of the year. Heavily discussed topics include corporate taxes, pass-through business income, R&D, business interest deductions, bonus depreciation, state pass-through entity tax deductions, expiring tax credits, and international tax implications. This article discusses these items of Trump’s tax policy in more detail.

Inflation Reduction Act

The Inflation Reduction Act (IRA) was signed into law on Aug. 16, 2022. The tax items in the IRA include:

Taxes impacting very large or publicly traded corporations, such as the book minimum tax and excise tax on corporate stock buybacks.
Substantial energy-related tax credits and other incentives for individuals and businesses participating in the green energy sector or using energy-efficient property and vehicles.
Extension of a loss rule, Section 461(l), impacting pass-through business owners.
Increased IRS funding for enforcement and other actions.
Other enhancements to tax rules.

Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act (the Infrastructure Act) was signed into law on Nov. 15, 2021. This bill provides funding for many forms of national infrastructure projects and only includes four tax changes:

The expiration of the ERC was accelerated.
Form 1099-B-style tax information reporting is extended to include cryptocurrency and other digital assets.
The rules extending disaster-related tax deadlines are expanded.
Capital contributions to public utilities from the government for certain infrastructure projects can be received tax-free.

Section 1202

Section 1202 was enacted in 1993 to encourage investment in small businesses. It allows individuals to avoid paying taxes on up to 100% of the taxable gain recognized on the sale of qualified small business corporation stock, sometimes referred to as QSBS. And even though it’s framed as a small business tax incentive, a business can be quite large and still qualify as a “small business.” While this provision has been in place for many years, the current 100% gain exclusion continues to garner significant interest.

Please see our Section 1202 page to learn more about how you may be able to take full advantage of Section 1202.

Section 174

One of the most significant tax changes for businesses in 2022 was a requirement that taxpayers capitalize and amortize their research and experimentation (R&E) expenses paid or incurred after Dec. 31, 2021, under Section 174. This was originally enacted as part of the Tax Cuts and Jobs Act in 2017 but had a delayed effective date.

Tax Relief for American Families and Workers Act of 2024

The Tax Relief for American Families and Workers Act of 2024 (TRAFWA), which passed the House in January 2024 and failed in the Senate in July 2024, was the culmination of several years of developments and lobbying efforts. It included significant proposals about many items, including the deductibility of research and experimentation (R&E) expenses under Section 174, deductibility of business interest expenses under Section 163(j), restoration of 100% bonus depreciation, and ERC enforcement, among others.

TRAFWA ultimately wasn’t enacted despite considerable bipartisan support for its proposed tax changes. However, core provisions from that bill will undoubtedly feature prominently during 2025 as negotiations regarding the expiration of the TCJA advance.