Potential Changes to 174
J. Jordan Wilson
Tax Credits and Incentives #FUNDYOURFUTURE #R&D #COSTSEG #179D #Stateincentives #JobsCredits #GreenEnergyIncentives
As you’ve likely heard this morning, the House W&M and Senate Finance Committees have released their tax package framework. This will be the first meaningful tax bill since 2017. The primary elements are: Child Tax Credit, Full R&D, Interest Deductibility, Full Expensing, as well as a few new provisions that cover low-income housing tax credit and U.S.-Taiwan tax relief. Importantly, they are also proposing new enforcement requirements to reign in ERC fraud and to end the program early to help pay for the cost of the package.
The package would restore full expensing for R&D retroactive to Dec 31, 2021 and sunsetting again Jan 1, 2026 – this would align it with several other TCJA era tax deadlines that will need to be extended. They anticipate doing another large (TCJA-like) bill in 2025, after the elections, to address the slew of expiring tax provisions at that time.
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It’s not clear how/when this will get passed. Smith and Wyden would like it to go to the Floor this week as a standalone bill, but on the House side, it would require a two-thirds majority to pass it. And, unclear how the Senate will handle it. I’m not sure it can be ready in time to ride on the Continuing Resolution that Congress plans to pass this week to avert a government shut down. But the Continuing Resolution punts the votes on the big spending bills to March, and Smith and Wyden want to pass this before the end of the month if they can so that people can factor it in for this year’s tax filing season. There are a fair share of people on both sides of the aisle that think the Child Tax Credit either doesn’t go far enough or goes too far, so this week will be telling to see if the momentum can carry the day.