The House passed the Tax Relief for American Families and Workers Act of 2024 (the “Bill”), a $78 billion bill, with provisions for employee retention credit restrictions (ERC), child tax credit expansion, reinstating R&E expenditure expensing, and restoring certain business tax breaks. It aims to offset added costs with savings from revised ERC deadlines and includes various enforcement measures against abuse. Key business provisions include Section 174 expensing for domestic R&E, extension of business interest limitation and bonus depreciation, and several other measures to support businesses, families, and low-income housing, with almost full offset from changes to the ERTC. Following are some of the significant provisions contained in the Bill:
The Bill updates Section 174, postponing the start of the five-year amortization period for domestic R&E costs to after December 31, 2025. This adjustment allows for the immediate deduction of such costs incurred between December 31, 2021, and January 1, 2026.
The Bill modifies Section 163 business interest deduction limitation to maintain the method of calculating business interest deductions without depreciation, amortization, or depletion deductions through 2025. Prior to 2022, the calculation of adjusted taxable income (ATI) for the limit on business interest deductions excluded deductions for depreciation, amortization, or depletion. The legislation proposes to extend this calculation method through 2025, allowing businesses to compute ATI without these deductions, effectively boosting the amount of interest they can deduct.
Additionally, the Bill extends the 100% bonus depreciation for eligible assets until 2026 and raises the Section 179 expensing limits, with adjustments for inflation post-2024.
Relief for US-Taiwan Double-taxation
The Bill proposes to mitigate double taxation for businesses operating between the U.S. and Taiwan, extending treaty-like benefits. It builds on a July 2023 discussion draft by key congressional committee leaders, offering relief to Taiwan's corporate taxpayers engaged in active business, a new criterion compared to the earlier proposal. Additionally, the bill supports the formation of a U.S.-Taiwan tax agreement to further alleviate double taxation, aligning with the goals of a similar Senate-approved bill from July 2023.
For the Tax Relief for American Families and Workers Act of 2024 to become law, it must pass the Senate and then be signed by the President. Given its strong bipartisan support in the House and backing from key Senate figures, the bill stands a good chance of passing. However, the outcome will depend on negotiations and potential amendments in the Senate. If it aligns with the priorities of both the Senate and the President, its enactment into law is likely, leading to significant tax policy changes.