The U.S. House of Representatives passed this bipartisan tax plan on January 31, 2024. The bill still needs Senate approval and could be subject to amendments before final passage.  President Biden has indicated that he supports the bill.

Expanded Child Tax Credit

The bill would increase the child tax credit for low income families and includes authority for the IRS to automatically recompute the credit for individual filers who submitted tax returns for 2023 under prior law.  This would eliminate the need to file amended returns to claim the expanded credit.

Disaster Relief

The bill provides long-awaited relief to victims of federally declared disasters, including Hurricane Ian.  The bill would classify such events as qualified federal disasters, allowing much more generous tax benefits to victims.

Business Provisions

The Tax Cuts and Jobs Act, passed in December 2017, included several revenue-raising provisions which took effect in 2022 or 2023.  The bill would retroactively restore many of these business tax benefits.

Starting in 2022, research expenses under Internal Revenue Code Section 174 were required to be capitalized, and amortized over a period of years.  The bill retains the capitalization provisions for foreign R&D expenditures, but allows immediate expensing of domestic R&D retroactive to 2022.

Internal Revenue Code Section Section 163(j) limits the deductibility of business interest expense to a percentage of net income.  Prior to 2022, businesses could add back depreciation, amortization, and depletion in computing net income for this purpose. The bill would retroactively reverse the 2022 change and allow the addback of depreciation, amortization, and depletion resulting in higher interest expense deductions for some businesses.

The  bill would restore 100% bonus depreciation through 2025. However, the reduction of bonus depreciation to 20% in 2026 and 0% in 2027 would remain in place.  The bill increases the Section 179 deduction limit.

Employee Retention Credit

The bill would establish a deadline of January 31, 2024 for ERC claims, effectively ending the program.  The bill includes provisions that increase penalties on promotors of fraudulent ERC services.  Taxpayers who engaged with such promoters may need to reevaluate their claims.