UPDATE 1/31 The House of Representatives has passed HR 7024, the Tax Relief for American Families and Workers Act of 2024 by a bipartisan vote of 357-70. The bill now goes to the Senate, where it has support from Democratic leadership but it is not known whether Republican leaders will support a speedy passage.
- The Hill: House Passes Tax Bill in Bipartisan Vote
- Politico: House Passes $78B tax bill in Rare Bipartisan Vote
UPDATE 1/18 SBTC has sent the letter below to Congress in support of the Wyden-Smith Tax bill and urging Congress to pass it promptly:
Chairman Jason Smith (R-MO) of the House Ways & Means Committee and Chairman Ron Wyden (D-OR) of the Senate Finance Committees announced this morning that they have come to an agreement on the framework of a deal that would restore the Sec. 174 R&D Tax Deduction. The agreement would not permanently restore Sec. 174 Tax expensing, but instead push back the implementation date of the 5-year amortization requirement for domestic research from January 1, 2022 to January 1, 2026. We believe that this would make the fix retroactive, although we encourage companies to consult with their tax experts. From the technical summary of the agreement:
Deduction for Research and Experimental Expenditures.
—Current law provides that research or experimental costs paid or incurred in tax years beginning after December 31, 2021, are required to be deducted over a five-year period. Research or experimental costs that are attributable to research that is conducted outside of the United States are required to be deducted over a 15-year period.
The provision delays the date when taxpayers must begin deducting their domestic research or experimental costs over a five-year period until taxable years beginning after December 31, 2025. Therefore, taxpayers may deduct currently domestic research or experimental costs that are paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2026.
While both parties have been supportive of restoring the R&D tax deduction, the Democrats pushed for the R&D deduction to be tied to an expansion of the Child Tax Credit, which until recently the Republicans had refused to consider. The breakthrough came when the two parties finally came to an agreement on expanding the Child Tax Credit.
Now that an agreement in place, the next step is getting a bill passed. There is a a possibility that it could could be attached as an amendment to the short-term spending Continuing Resolution that is expected to pass by January 19, although there that leaves very little time to draft legislation and get sign-off from leadership. The other possibility is to pass it as a stand-alone bill. This is rarely done due to procedural difficulties in the Senate, but there is a lot of pressure to get this bill passed before the end of January, when tax-filing season begins.
Click on the links below for more information:
- House Ways & Means: Smith, Wyden Announce Agreement on Tax Framework
- Senate Finance: Wyden, Smith Announce Agreement on Tax Framework
- Politico: Tax breaks for parents, businesses possible in last-minute deal
- The Hill: House, Senate tax chiefs announce deal on business deductions, low-income credits