On January 31, the House voted to advance the bipartisan tax package with key business tax changes on a vote of 357-70. Some of these changes include retroactive changes to the research expense capitalization provisions of Section 174, interest limitations under Section 163(j), and bonus depreciation. Additionally, the bipartisan tax package would terminate the ability to file employee retention credit (ERC) claims after Jan. 31, 2024. The bill now heads to the Senate for consideration and potential passage in the coming days.
How did we get here?
The Tax Relief for American Families and Workers Act of 2024 is the culmination of several years of developments and lobbying efforts. Specifically, the business tax changes are responsive to deferred tax rules enacted as part of the Tax Cuts and Jobs Act in 2017. In addition, the changes to the ERC program were motivated by developments in the marketplace that have been perceived as abusive.
The bill was first announced on January 16 and moved expeditiously to a markup hearing in the House Ways and Means Committee on January 19. That committee voted by a margin of 40-3 to send the bill to the House floor. Such strong support in the committee was an early signal of broad bipartisan agreement on these changes. Consideration in the House was delayed slightly as questions about potential amendments to the bill were raised. Ultimately, the bill wasn’t amended and proceeded to a final vote in the House on January 31. Passage on the House floor was completed on a bipartisan basis with a final tally of 357-70.
Key considerations
The bill would implement key tax changes for both businesses and individual taxpayers. Since no changes were made on final passage in the House, the details from our prior alert remain current. Although a few additional points may warrant consideration, such as:
- Employee Retention Credit (ERC) filings — The January 31 deadline for the filing of any ERC refund claims has now passed, so new filings won’t be permitted if this bill is enacted. Since the bill was first announced, one technical question raised is what constitutes a new refund claim. The House Ways and Means Committee Report specifically addresses this by stating that an amendment to a prior claim filed after January 31 that either increases or decreases (but not to zero) the amount of the ERC will be treated as a disallowed claim. If this interpretation holds, that could complicate the processing of otherwise valid claims to the extent that any changes at all are necessary. The language of that report would seem to indicate that withdrawals of pending ERC claims can still be submitted. The IRS also recently reiterated the availability of the withdrawal and voluntary disclosure programs.
- Planning for business changes — Businesses wishing to take advantage of the various tax changes will be required to use a combination of amended returns and accounting method changes. We don’t anticipate receiving any technical guidance from the IRS on those matters until after legislation is enacted. Thus, businesses that may be significantly impacted may want to begin considering how this could impact the timeline of filing their 2023 tax returns.
What’s next?
The bill now goes to the Senate for consideration. Public comments from Senators over the past week indicated a willingness to move on the bill despite some reservations. Since this will likely be one of the few tax bills considered prior to the November election, many Senators would like to see changes. However, the strong bipartisan votes in the House — 40-3 in the Ways and Means Committee and 357-70 on the floor — signal that the bill will likely be taken seriously in the Senate.
