The Tax Relief for American Families and Workers Act of 2024, the bipartisan tax bill that sailed through the House of Representatives on Jan. 31, 2024, by a vote of 357-70, faces an uncertain outcome in the Senate. The proposed legislation would provide low-income families with additional access to the child tax credit and would address a trio of business tax provisions recently curtailed by phase-out provisions from the Tax Cuts and Jobs Act of 2017.
Prospects for passage
Following the decisive, bipartisan vote in the House, the proposed legislation has remained stalled in the Senate. Several Republican Senators, including the Senate Finance Committee’s ranking member Mike Crapo (R – ID), have expressed a desire to make changes to the bill, particularly surrounding a child tax credit refundability provision.
Changes to the carefully crafted framework could put existing support for the deal at risk. Any alterations to the bill would force it to go back through the House for another vote, a process that will take time and is likely to create additional political hurdles. Alternatively, Senate Majority Leader Chuck Schumer (D – NY) could try to attach the House-passed version of the bill to another must-pass legislation, such as one of the government funding bills; however, to do so, Schumer would need to have a minimum of 60 votes.
The longer this process takes, the harder it will be for Congress to pass a bill with changes retroactive to the beginning of 2023. The immediate relief those provisions provide are a cornerstone of the compromise; without them, the deal could lose most of its support and all its momentum.
Retroactive provisions
The tax deal contains several provisions with retroactive applications including:
- Expensing of domestic research and experimental expenditures (section 174) – retroactive to 2022 and 2023;
- Changes to the calculation of the business interest deduction limitation (section 163(j)) – optionally retroactive to 2022 and 2023;
- Immediate expensing of qualified property, also known as “bonus depreciation” (section 168(k)) – retroactive to 2023;
- Termination of the Employee Retention Credit (ERC) program – retroactive to Jan. 31, 2024; and
- Changes to the refundability of the Child Tax Credit (CTC) – retroactive to 2023.
If the bill were to become law, many of these provisions would affect 2023 tax return filings. For a more detailed explanation of what’s included in the proposal, view our tax alert “Bipartisan tax deal framework released.”
Deciding whether to file
Deciding whether to file your 2023 return while this tax bill remains in limbo should be an individual decision made by each taxpayer. Should you choose to file, know that if the bill is enacted, you may need to file an amended or superseded return. Fortunately, most proposed changes are taxpayer favorable and could result in reduced tax liabilities.
Some partnerships are not eligible to file amended returns and must, instead, file administrative adjustment requests (AARs). AARs can be significantly less taxpayer friendly than amended or superseded returns; therefore, we strongly advise that all partnership taxpayers extend their returns, even if they intend to file timely. Applying for an extension will preserve a partnership’s ability to file a superseded return through the extended due date.
Questions? Contact your Baker Tilly advisor to discuss how the Tax Relief for American Families and Workers Act of 2024 could affect your 2023 tax filings.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. Baker Tilly US, LLP does not practice law, nor does it give legal advice, and makes no representations regarding questions of legal interpretation.
