House Passes Bipartisan Tax Relief Bill
Feb 1, 2024
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Mary Kimmitt
The House of Representatives voted Wednesday, January 31, to pass a bipartisan tax bill that would benefit millions of taxpayers. The vote, which passed 357 to 70, approved a $78 billion tax package, known as the Tax Relief for the American Families and Workers Act of 2024 or H.R. 7024. H.R. 7024 would restore crucial research and experimentation (“R&E”) deductions for taxpayers as well as provide other needed business tax and small business relief.
Why is this important?
Previously, the Tax Cuts and Jobs Act required taxpayers to capitalize and amortize their R&E costs under IRC § 174 for tax years ending after December 31, 2021 over five or fifteen years, depending on if the research is domestic or foreign.
Under H.R. 7024, new provisions would allow taxpayers to immediately deduct R&E costs, delaying the capitalization requirement for domestic R&E expenses until December 31, 2025. This immediate deduction does not apply to foreign R&D expenses. Additionally, it appears that eligible taxpayers who have already complied with Section 174 on their 2022 returns will be allowed to correct their deductions to reflect the change in § 174 expensing as part of the transition rules.
With regard to other tax changes, the bill effectively ends the Employee Retention Credit (“ERC”), as any effort to claim an ERC credit after January 31, 2024 would be barred, although the statute of limitations for assessment and compliance is extended. Additionally, H.R. 7024 extends the 100-percent bonus-depreciation deduction for property placed in service between December 31, 2022 and January 1, 2026 (with exceptions), and the ceiling for 179 depreciable assets has been increased for property placed into service beginning December 31, 2023.
What comes next?
The bill now moves to the Senate for consideration, and at this time, it is unclear if the bill will be discussed before the scheduled two-week recess starting February 12, 2024. It is worth noting that while the fate of the tax bill remains to be seen, it was negotiated by Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO), and passed with very strong bipartisan support. If the bill passes the Senate, it would then move to President Biden’s desk to be signed into law.
