House Panel Advances Tax Bill With 100% Bonus Depreciation
What You Need to Know
The bill now heads to the House floor.
The House Ways and Means Committee passed by a 40-3 vote Friday new bipartisan legislation, the Tax Relief for American Families and Workers Act of 2024, which includes 100% bonus depreciation as well as research and development expensing and also expands the Child Tax Credit.
The bill moves to the House floor.
The bill, agreed to on Jan. 16 by Senate Finance Committee Chairman Ron Wyden, D-Ore., and House Ways and Means Committee Chairman Jason Smith, R-Mo., also expands the small-business expensing cap, increasing the amount of investment that a small business can immediately write off to $1.29 million from the $1 million cap enacted in 2017.
Committee Chairman Jason Smith, R-Mo., said during the Friday morning markup that “right now, small and midsize businesses are getting hammered by interest rates that are the highest in 23 years. Restoring this provision will create more than 850,000 jobs and $58 billion in additional take-home pay for workers.”
The bill, Smith stated, “contains important provisions that individually have bipartisan support. Democrats have voted to extend R&D expensing. Republicans created the Child Tax Credit and support minimum work requirements to promote a connection to the workforce and greater prosperity.”
The bill also expands 100% expensing, Smith continued, “which allows employers to fully deduct the cost of equipment and machines that increase productivity and worker wages. When this policy was originally implemented, investment in American businesses grew 20%,” Smith said.
Under the bill, “investment will grow by an additional $400 billion,” Smith said. “Restoring this policy will increase wages, create more than 70,000 jobs, and incentivize more companies to bring their manufacturing back to the United States.”
The Wyden-Smith agreement “would restore three major business provisions (100% bonus depreciation, R&D expensing for domestic R&D only, and a looser limitation on business interest deductions) through 2025,” Erica York, senior economist and research manager at the Tax Foundation in Washington, told ThinkAdvisor in a previous interview.
York told ThinkAdvisor Friday that “the deal moves in the right direction by temporarily improving the tax treatment of R&D and other business investments,” and that “It’s a promising sign of fiscal responsibility that lawmakers have identified a payfor to offset the cost of the tax changes.”
However, “it’s unfortunate that the deal is short-term,” York added. “Allowing the provisions to expire undermines their effectiveness and adds to taxpayer uncertainty.”
Child Tax Credit
The bill increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024 and $2,000 in tax year 2025. The $2,000 value of the child tax credit would be adjusted for inflation in tax years 2024 and 2025, rounded down to the nearest $100.
