Today congressional tax leaders announced that they have reached a deal that includes, among other items, long-awaited business tax relief, expansion of the refundable portion of the Child Tax Credit, and expanded disaster relief. While this bipartisan agreement is a big step forward, there is still no actual bill, nor any guarantee that these provisions will actually be enacted in a highly divided Congress.
Highlights of the agreement include:
- Increasing the maximum refundable Child Tax Credit from $1,600 to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025, as well as revising the refundable portion of the credit to be calculated on a per-child basis;
- Retroactively deferring until 2026:
- The reduction in the 100% bonus depreciation deduction to 80% (originally scheduled to go into effect for property placed in service in 2023);
- The implementation of the IRC §174 research expense five- or 15-year amortization mandate until the 2026 tax year. (Mandatory amortization went into effect in 2022. Therefore, if this provision is enacted, it may require taxpayers to file amended tax returns.); and
- The removal of depreciation, amortization, or depletion deductions in the calculation of the business interest expense adjusted taxable income limitation (again, this provision originally went into effect beginning with 2022 tax year and may require amended tax returns);
- Increasing the maximum amount of the IRC §179 current expense deduction to $1.29 million and the investment limitation cap to $3.22 million for property placed in service in 2024, providing inflation adjustments for post-2023 tax years;
- Barring new Employee Retention Credit (ERC) claims after January 31, 2024, and enacting substantial penalties that may be imposed against ERC promoters equal to the greater of:
- $200,000 ($10,000 in the case of a natural person); or
- 75% of the gross income derived from the ERC promoter from providing aid, assistance, or advice with respect to a return or claim for ERC refund or a document relating to the return or claim;
- Extending the current five-year statute of limitations for certain ERC claims to six years;
- Retroactively excluding qualified wildfire relief payments from gross income for payments received by individuals during the 2020 through 2025 tax years, allowing disaster-related personal casualty loss provisions for victims of post-2019 disasters, and treating disaster relief payments to victims of the East Palestine, Ohio, train derailment as qualified disaster relief payments for purposes of IRC §139(b);
- Increasing the reporting threshold for filing Form 1099-NEC and 1099-MISC from $600 to $1,000, applicable to payments made after 2023, and providing for inflation adjustments beginning in 2024; and
- Enacting various provisions to prevent double-taxation on U.S.–Taiwan cross-border investments.
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