Senate returns to face tax extender time crunch

 

The Senate returns this week after a two-week recess to a calendar that continues to be unfriendly to the nearly $80 billion bicameral, bipartisan tax deal known as the Tax Relief for American Families and Workers Act (H.R. 7024). The bill has already passed the House, but Senate leadership has not yet settled on a path forward.

 

Advocates for the legislation are pushing for passage by March 15, but other priorities like government funding, Federal Aviation Administration reauthorization and the impeachment of Homeland Security Secretary Alejandro Mayorkas could make that difficult.

 

Some Senate Republicans, most notably senior Senate Finance Committee Ranking Member Mike Crapo, R-Idaho, continue to hold reservations around the design of the extension of an expanded child tax credit with a lookback component for eligibility calculation. That, as well as process concerns over how negotiations proceeded late last year and in early January, continue to complicate the outlook. An agreement to offer a vote on amendments, either in committee or on the Senate floor, would likely help smooth over those process concerns and allow for objections to different parts of the bill to be aired. However, any substantive changes made would send the bill back to the House, further slowing the proposed tax credit extensions.

 

While there are still issues that must be resolved, significant optimism remains about the prospects for enactment.

 

If the bill becomes law, it will restore and extend the ability to expense domestic research costs under Section 174 domestic, a more favorable calculation of the limit on interest deductions under Section 163(j), and 100% bonus depreciation, with retroactivity to 2022 for the R&E and interest deduction provisions and to 2023 for bonus depreciation claims. All provisions would expire at the end of 2025, when many other provisions of the Tax Cut and Jobs Act are also scheduled to sunset.

 

There are important transition rules and elective options for both retroactive and prospective implementation (see our prior legislative updates for more information). Taxpayers should consider assessing the potential impact and evaluating their planning opportunities in preparation for potential enactment.

 

For more details on this extenders bill, see our prior legislative update.

 

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