2024 elections: The impact on the TCJA expiring tax provisions

Taxes often take center stage during an election year, and although there aren’t any formal tax policies or plans from either presidential candidate this year, taxes have become an increasingly important issue for many American voters, as many of the provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025.

Many TCJA provisions set to sunset

When Congress enacted the TCJA in December 2017, it provided for several provisions to phase out, phase in, and in some cases, expire at the end of 2025. This was largely done to limit the cost of the TCJA to $1.5 trillion over the budget period of 2018–2027 in accordance with the budget reconciliation procedures.

TCJA business provisions

Some business tax provisions of TCJA have already phased out, phased in, or expired.

From 2018 through 2022, businesses could immediately deduct the cost of depreciable tangible personal property, such as equipment and machinery. However, beginning in 2023, bonus depreciation was reduced by 20% each year, completely phasing out by 2027.

Beginning in 2022, Congress provided that businesses could no longer immediately deduct R&D costs but rather had to deduct such costs over five years if for domestic research and 15 years if for foreign research.

Also beginning in 2022, businesses could only deduct business interest expense to the extent of 30% of earnings before interest and taxes (EBIT), while in the prior four years, such expense was generally deductible to the extent of 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA).

There are also notable business provisions in TCJA that are not currently set to expire, including:

• Flat 21% corporate tax rate
• Simplified methods of accounting for small business taxpayers
• Section 179 expensing

TCJA expiring individual provisions

The chart below highlights the key individual provisions which are set to expire under current law and what comes as a result.

Possible election implications

Whether Congress will extend the TCJA provisions that are set to expire at the end of 2025 or enact other tax proposals put forth by the presidential candidates will depend on the outcome of the November elections.

If one political party wins the White House and obtains a majority in both the Senate and the House of Representatives — the trifecta — it can enact tax legislation through the budget reconciliation process with no input or votes of any members of the opposing political party. Achieving a trifecta allows the political party to pass a concurrent budget resolution in 2025 and use the budget reconciliation process to enact tax legislation with a simple majority vote in not only the House but also the Senate, where such legislation cannot be filibustered.

If the November elections result in split or divided government, then the budget reconciliation process for enacting tax legislation is — as a realistic matter — likely not available. So, any tax legislation passed by the House could be filibustered in the Senate with 60 votes needed to invoke cloture and end the filibuster. In addition, such legislation could be vetoed by the White House.

With split government, the two political parties will be forced to negotiate in enacting any tax legislation. Additionally, some tax provisions could be addressed during the post-election lame duck session of Congress that’s expected when Congress returns on Nov. 12, 2024, for a scheduled five-week session.