Legislation Passed by House: Tax Relief for Working Families and Small Businesses

The House of Representatives passed the Tax Relief for American Families and Workers Act on January 31, 2024, paving the way for increased support of growing families and small businesses. The legislation aims to help small businesses, working parents, and workers by restoring key tax incentives from the 2017 tax cuts, providing assistance to combat increased pricing over the last several years. As we monitor the progression of this bill, it is crucial to understand its key components.

Key Items to Note

• The deal will include $600 billion contributed towards tax incentives like the Research and Development (R&D) tax credit.
• The Child Tax Credit is enhanced by indexing it to inflation, ending penalties on large families, and addressing issues arising from increased prices.
• The proposed legislation would end the Employee Retention Credit (ERC) program as of January 31, 2024.
• The legislation includes measures to support small businesses, cut red tape, provide disaster tax relief, and enhance low-income housing initiatives.

R&D Expensing

The Tax Relief for American Families and Workers Act allows businesses to immediately expense their domestic R&D expenditures instead of spreading the deductions over five years, as previously stated by law. The legislation encourages investment in innovative activities by reducing the upfront costs of R&D projects. By providing a tax benefit for R&D expenses, businesses are incentivized to allocate more domestic resources toward developing new products, technologies, and processes.

Child Tax Credit

The Child Tax Credit enhanced provisions within the legislation to provide enhanced support to families with children by indexing the credit to inflation, eliminating penalties for larger families, and maintaining work requirements. These provisions ensure that the credit is more accessible, sustains its value over time, provides sustainable assistance to families of all sizes, and incentivizes workforce participation.

Employee Retention Credit (ERC)

If passed, the bill will officially end the ERC program as of January 31, 2024. Businesses would no longer be eligible to claim the ERC or be able to participate in the ERC voluntary disclosure program for inaccurately filed claims. Ending the ERC program is intended to save over $70 billion in taxpayer dollars by preventing further spending. This would also likely lead to increased penalties for tax preparers who failed to undertake due diligence in submitting incorrect claims.

Disaster Relief

Tax relief for families affected by recent disasters like hurricanes, flooding, wildfires, and the Ohio rail disaster would help individuals and communities recover and rebuild. This could ease the financial strain on affected taxpayers and facilitate recovery. Relief would take the form of tax credits, deductions, or exemptions designed to mitigate the losses, expenses, or damages caused by disasters.

What Happens Now?

This act is now in the hands of the Senate Finance Committee for deliberation. This bipartisan initiative addresses the nation’s critical economic challenges through targeted measures designed to alleviate financial burdens placed on small businesses, support working families, and encourage research and innovation. The legislation will reach workers and families across the US as it unfolds, stimulating job growth, nurturing economic expansion, and strengthening confidence in America’s economic trajectory.

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