“Breakfast just got a whole lot sweeter for American businesses! As the Senate gears up to consider a bill that could bring a welcome wave of tax relief, entrepreneurs and CEOs alike are holding their collective breath. At the heart of this legislative package lies a tantalizing prospect: the extension of crucial provisions from the Tax Cuts and Jobs Act (TCJA) and a fresh injection of business tax relief. But what does it all mean for the average business owner? Will this be the shot in the arm that the economy needs to keep thriving, or just another false dawn? Morningpicker digs in to explore the implications of this potential legislative game-changer, and what it could mean for your bottom line.”
Senate to Consider Bill Containing Business Tax Relief and TCJA Extensions – RSM
Favorable business tax provisions advance in Congress. The House of Representatives on January 31 passed its version of the Tax Relief for American Families and Workers Act of 2024, a milestone that brings the measure closer to potential enactment.
The bill, which contains favorable business tax provisions and expands the child tax credit, passed by the substantial margin of 357-70. Specifically, the bill proposes temporary reinstatement of certain business tax benefits that were part of the Tax Cuts and Jobs Act, including:
- Research and development (R&D) expensing (section 174)
- Less stringent business interest limitations (section 163(j))
- Continuation of 100% bonus depreciation
- Increasing the Qualified Business Income (QBI) Deduction from 20% to 23% and making it permanent
- Extending eligibility for the deduction to certain interest dividends paid by qualified business development companies
- The proposal would also extend eligibility for the deduction to certain interest dividends paid by qualified business development companies
It now moves to the Senate with significant momentum but an uncertain fate. The Senate holds the keys to whether the bill advances, and in what form.
Pass-Through Businesses, Qualified Business Income (QBI) and Interest Dividends
Changes and Eligibility Extensions:
Restructuring Income Limitations and Thresholds:
Senate Consideration and Uncertainty
Tax Relief Bill Advances to Senate with Significant Momentum but Uncertain Fate:
The fate of the Tax Relief for American Families and Workers Act of 2024 remains uncertain as it moves to the Senate with significant momentum following the House of Representatives’ 357-70 vote to approve it on January 31.
Leading Republican senators have expressed reservations about the bill, particularly about some elements of the child tax credit, and have called for changes. Meanwhile, some leading Democratic senators have expressed concerns about some of the business provisions.
It is unlikely, however, that there would be any further substantive changes to the three major provisions related to the Tax Cuts and Jobs Act—more favorable tax treatment of research and development expenses, a more favorable calculation affecting the limit on deductions of business interest expense, and restoration of full bonus depreciation.
The legislation will likely need 60 votes to pass in the Senate. Also, the question of timing adds uncertainty to the bill’s fate. The Senate is scheduled to be in session the week of February 5 but in recess for the following two weeks.
House Passes its Version without Adding SALT Provision:
No amendments were offered on the House floor before it passed. The House floor vote was by a “suspension of the rules,” which required a two-third majority vote, thus bypassing the Rules Committee and precluding amendments.
Notably, no provisions addressing the deduction for state and local taxes (SALT) were added to the legislation that the House Ways and Means Committee approved on January 19.
Several lawmakers from high-tax districts demanding action on the SALT issue were able to secure a commitment to a separate vote on the SALT cap that would move independently from the tax relief bill.
Conclusion
In conclusion, the Senate’s deliberation on a bill that combines business tax relief with TCJA extensions is a pivotal moment for the business community. As discussed, the bill aims to provide respite to companies struggling with the current tax landscape, while also extending the benefits of the Tax Cuts and Jobs Act. The key takeaway is that the proposed bill has the potential to stimulate economic growth, create jobs, and increase competitiveness for American businesses. Moreover, the extension of TCJA provisions will provide much-needed certainty for companies looking to invest and expand their operations.
