Hope for pre-election legislative action on R&E expensing, other tax relief, ends in the Senate

Executive summary

The Senate today did not advance a tax measure that, among other things, would have temporarily restored R&E expensing for domestic costs, full bonus depreciation and a more generous business interest deduction limitation calculation. The “Tax Relief for American Families and Workers Act of 2024” (HR 7024), which passed the House in January on a bi-partisan vote of 357-70, failed to secure the 60 votes required in the chamber to advance the legislation. This ends, at least for now, the latest chapter for this group of tax proposals and all but assures they will not be reconsidered prior to the election in November. Whether these provisions are revisited in a post-election session of Congress remains to be seen, but, right now, the likelihood of passage this year is unlikely.

Reporting requirements

The Senate today did not advance a tax measure that, among other things, would have temporarily restored R&E expensing for domestic costs, full bonus depreciation, and a more generous business interest deduction limitation calculation. The “Tax Relief for American Families and Workers Act of 2024” (HR 7024), passed by the House in January by a 357-70 margin, failed to secure the 60 votes required in the chamber to advance the legislation, thus bringing to a close this current chapter around this group of provisions.

The vote was mostly along party lines, with almost all Democrats supporting the bill and almost all Republicans opposing the bill. Democrats faulted the Republicans for not supporting expansions of the child tax credit. Mike Crapo (R, Idaho), ranking member of the Senate Finance Committee opposed the bill, stating: “One would think the Senate Republican request for a Finance Committee markup on this bill would have been well received. Instead, those requests, which began in January, have continued to go ignored.”

Other items that were part of the House-passed measure, and whose path forward is now unclear, includes:

• Restoration of the section 280C(c) haircut to the research credit benefit. Prior to 2022, section 280C(c) cut the benefit of the research credit by 21%. Section 280C(c) was essentially de-fanged in Tax Cuts and Jobs Act (TCJA) effective 2022, so now there is generally no research credit haircut. The House-passed measure would have restored this haircut to the research credit benefit.
• Modification of the child tax credit calculation to enable families with multiple children to claim a larger credit for 2023 through 2025, and allow a look back to the prior taxable year’s earned income in determining the maximum credit (2023-2025)
• An increase to the maximum amount that may be expensed under section 179
• Extension of favorable casualty loss treatment for recent disasters
• An increase in the low-income housing tax credits by raising thresholds and credit ceiling amounts
• An increase in certain information reporting thresholds

The measure would have also provided targeted and expedited relief from double taxation on United States-Taiwan cross-border investment through changes to the United States tax code.

It is possible that Congress may timely address the disaster provision in separate legislation, leveraging recent efforts undertaken by lawmakers from impacted states. It remains uncertain, however, whether the Senate will be able to take this bill up prior to departing for its August recess. The House has already begun its recess.

Looking ahead, there is a small possibility for post-election tax related legislation, but that will track closely to the election outcome and the political will of the current Congress to get something done. Congress typically considers a “lame duck” bill at year end, which may include spending provisions as well as other priorities that were not addressed earlier in the year. The prospects for such a measure this year, as well as its contents, must also be viewed in the context of the expiration of TCJA’s individual provisions at the end of 2025. On one hand, this could provide some momentum for 2024 year-end action (i.e., a “clear the decks” mentality). Conversely, lawmakers (especially those about to assume leadership positions) may decide it’s strategically in their interest to await any action on tax until next year.

This article was written by Dave Kautter, Matt Talcoff, Fred Gordon, Tony Coughlan and originally appeared on 2024-08-01. Reprinted with permission from RSM US LLP.
© 2024 RSM US LLP. All rights reserved. https://rsmus.com/insights/tax-alerts/2024/senate-ends-pre-election-hopes-for-r-and-e-expensing-tax-relief.html

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent assurance, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/about for more information regarding RSM US LLP and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.