Update
The House passed the tax bill on January 31, 2024, with a 357-70 vote through an expedited process. Now the big hurdle will be getting it through the Senate. We will provide updates as we continue monitoring Senate actions. The bill provisions are described below.
The Tax Relief for American Families and Workers Act of 2024, recently unveiled by the U.S. Senate Finance Committee and the House Ways and Means Committee, represents a significant tax framework aiming to reshape the fiscal landscape for American families and businesses. Here is an overview of the key provisions of the Act, offering insights into how it may influence financial planning and business strategies.
Enhancements in Innovation and Competitiveness:
The Act introduces provisions aimed at fostering business innovation and enhancing competitiveness on a global scale. This includes the immediate expensing of U.S.-based Research and Experimental Expenditures and continued flexibility in business interest deductibility. The Act also proposes to restore full expensing for investments in machinery, equipment, and vehicles. Additionally, it addresses international taxation concerns by proposing Taiwan double tax relief, intending to streamline operations for businesses with a presence in both the U.S. and Taiwan.
Strengthening Main Street and Community Development
Recognizing the role of small businesses and communities in the economy, the Act proposes to increase the small business expensing cap and adjust the reporting threshold for subcontract labor. It also includes provisions for disaster tax relief to support communities affected by recent natural and man-made disasters. The Low-Income Housing Tax Credit is set to be enhanced, aiming to increase the availability of affordable housing.
Support for Working Families
A central aspect of this legislative framework is the modification of the Child Tax Credit. The Act proposes a phased increase in the refundable portion of the credit for the tax years 2023, 2024, and 2025. It seeks to address the needs of families with multiple children by adjusting the phase-in of the credit and offers a one-year income lookback option, allowing for the use of either current or prior-year income for credit calculations in 2024 or 2025. Starting in 2024, the credit is planned to be indexed for inflation.
Measures Against Fraud and Waste
The Act includes provisions aimed at eliminating fraud and waste, notably by proposing the termination of the Employee Retention Tax Credit program. It sets a deadline for filing backdated claims to January 31, 2024, in an effort to recover funds and address the program’s susceptibility to fraud and fiscal mismanagement.
Conclusion
The Tax Relief for American Families and Workers Act of 2024 is positioned as a multifaceted approach to tax reform, with implications for individual taxpayers, businesses, and communities. As the legislative process progresses, understanding the specifics of the Act and its potential impacts will be essential for effective financial and business planning. As always, we encourage clients to reach out to their advisor to discuss their unique circumstances. We will be keeping our eye on this legislation and provide updates as they become available.
John Hadwen joined ARB in 2021 as a tax director. He specializes in providing individuals and businesses with comprehensive tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
