In a groundbreaking move, senior lawmakers in Congress have introduced “The Tax Relief for American Families and Workers Act of 2024” (The Act), a bipartisan initiative aiming to ignite American innovation and fuel business growth. This comprehensive legislation introduces significant changes to the tax landscape, particularly in the treatment of Research and Experimental (R&E) expenditures, bonus depreciation benefits, and the Employee Retention Credit (ERC). Let’s delve into the key features of this transformative proposal.
The Act proposes a fundamental shift in deducting Research and Experimental (R&E) costs. Under current law, these costs incurred after December 31, 2021, must be deducted over a five-year period, extending to 15 years for research conducted outside the United States. The Act delays the requirement to deduct domestic R&E costs over five years until taxable years beginning after December 31, 2025. This change enables businesses to immediately deduct domestic R&E costs incurred between December 31, 2021, and January 1, 2026, fostering innovation and economic growth.
The Act seeks to extend the benefits of 100% bonus depreciation retroactively for properties placed in service before January 1, 2026. This change aims to encourage businesses of all sizes to continue fully deducting qualified property placed into service this tax year. The extension of the phase-down start date for bonus depreciation from January 1, 2023, to January 1, 2027, offers businesses greater flexibility to invest in capital improvements and real estate projects, thereby driving economic growth.
A pivotal aspect of The Act is the proposed termination of the Employee Retention Credit (ERC) program. Effectively ceasing any additional claims after January 31, 2024, marks a significant departure from the current filing deadlines. The proposal also addresses concerns of fraud within the ERC program by introducing penalties for preparers of fraudulent claims and disclosing requirements for a new category of “COVID-ERTC Promoters.” Additionally, the bill extends the statute for IRS assessments of ERC from five years to six years, providing a longer timeframe for scrutiny. Taxpayers with disallowed ERC claims also gain an extended period to re-claim deductions for wages through amended returns.
In conclusion, “The Tax Relief for American Families and Workers Act of 2024” represents a pivotal step towards fostering innovation and economic growth. By incentivizing immediate deductions, extending bonus depreciation benefits, and introducing stringent enforcement measures, this legislation aims to create a business-friendly environment that propels the United States into a new era of prosperity. Stay tuned as we monitor the developments and implications of this transformative proposal. If you would like to learn more about these changes, please contact a member of the RCIS team.