Bipartisan tax legislation is currently under consideration, known as the Wyden-Smith Tax Deal and the Tax Relief for American Families and Workers Act of 2024.   While this is still only PROPOSED legislation, many of the provisions could be RETROACTIVE.  Introduced on January 17, 2024 and quickly approved by the House Way and Means Committee on January 19, this proposed legislation holds significant implications, particularly concerning the Employee Retention Credit (ERC), research & experimental expenses, and bonus depreciation.

A particularly noteworthy provision would accelerate the due date for ERC claims to January 31, 2024 – that’s next week!  So if this legislation is enacted, there may be a very narrow timeframe for submitting any new eligible claims.  This includes the claims for 2020 currently due on April 15, 2024 and claims for 2021 due on April 15, 2025.  Importantly, the January 31, 2024 date may still apply even if the legislation is enacted later in the year.  Additionally, the proposed legislation adds penalties for certain COVID-ERC promoters and extends the statute of limitations to 6 years.

Other notable tax-related provision in the PROPOSED legislation include:

Child Tax Credit Expansion:

  • Increase the refundable amount of the credit from $1,600 to $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025. Inflation adjustments would commence after 2023.  Also, an election could be made for 2024 and 2025 to use the prior year’s earned income in the calculation.

Section 174 Research & Experimental Expenditures:

  • Delay changes to the deduction for Section 174 research & experimental expenditures (excluding foreign R&E). The capitalization requirement would be postponed until taxable years beginning after 12/31/25, presumably retroactively to 2022.

100% Bonus Depreciation Extension:

  • Extend 100% bonus depreciation, delaying the decreased percentage until 2026 when it would be 20%, presumably retroactive to 2023.

Section 163(j) Interest Expense Calculation:

  • Extend the Section 163(j) interest expense calculation as EBITDA, delaying until January 1, 2026 the change excluding allowance for depreciation, amortization or depletion in determining the limitation with an election to apply retroactively for 2022 and 2023.

Section 179 Expensing Increase:

  • Increase maximum Section 179 expensing amount to $1,290,000 for 2024 (Rev. Proc. 2023-34 lists 2024 amount as $1,220,000) with phaseouts starting at $3.22M of purchases, up from $2.5M.

Disaster Assistance:

  • Provide assistance for disaster-impacted communities, including victims of certain wildfire and the East Palestine train derailment.

1099-MISC and 1099-NEC Threshold Amount Adjustment

  • Increase threshold amounts for filing 1099-MISC and 1099-NEC from $600 to $1,000 for payments made starting in 2024 and adjusted for inflation.

While this legislation is still proposed, it contains important provisions that merit close attention.  Stay informed as developments unfold.