Democrats and Republicans appeared to narrow some of their differences over a year-end tax extenders package over the last week, raising hopes that a deal to restore expensing of research and experimental (R&E) costs under Section 174, extend 100% bonus depreciation, and provide relief from the Section 163(j) limit on interest deduction remains possible.
For weeks, negotiations appeared largely stalled as Democrats were demanding enhancements to the child tax credit that Republicans insisted were nonstarters. Those stances seemed to soften last week, with Democrats signaling a potential willingness to pare back the potential CTC provisions. The hint of optimism comes after approximately 400 manufacturers, trade organizations, and business groups recently wrote congressional leadership to urge lawmakers to enact a retroactive extension of full expensing of R&E costs under Section 174, stating a switch to amortization instead of full expensing would lead to a loss of more than 400,000 jobs over the next 10 years.
The outlook for a deal nonetheless remains tenuous at best. If Republicans win both the House and Senate in the Nov. 8 elections, they may abandon negotiations in favor of waiting until 2023 when the new majorities are sworn in. Even if Democrats hold onto the Senate, there are no guarantees that Democrats and Republicans can reach an acceptable compromise for both sides.
While a deal remains possible, taxpayers should consider how a failure to reach an extenders deal could affect their estimated tax payments, financial statements and business plans. Taxpayers also should assess the impact of amortizing R&E costs and could consider accelerating investments to place property in service before the scheduled expiration of 100% bonus depreciation.
Contact:
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.