January 19, 2024
Ways & Means approves tax bill
The House Ways & Means Committee January 19 approved the $78 billion Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) proposed by Chairman Jason Smith (R-MO) with Senate Finance Committee Chairman Ron Wyden (D-OR), addressing TCJA pre-cliffs and the Child Tax Credit (CTC) plus the United States-Taiwan Expedited Double-Tax Relief Act, disaster relief, and affordable housing provisions. The vote was 40-3, with Democratic Reps. Lloyd Doggett (D-TX), Linda Sanchez (D-CA), and Gwen Moore (D-WI) opposed. Chairman Smith has said he will work to pass the bill in the House in the coming weeks (the House is scheduled to be out next week).
After raising questions about the adequacy of the bill's CTC expansion after it was released January 15, most Democrats ultimately supported the bill. Rep. Mike Thompson (D-CA) was the first to indicate Democratic support. Rep. Earl Blumenauer (D-OR) was one of several Democrats who suggested the bill would increase complexity and doesn't go far enough on the CTC, but they would vote in favor, nonetheless. Rep. Bill Pascrell (D-NJ) said the CTC could have been further expanded but he would support the bill, not allowing the perfect to be the enemy of the good. Rep. Sanchez said the bill has strong provisions on rental housing, disaster, and US-Taiwan double taxation, but there is the opportunity to improve it. Rep. Suzan DelBene (D-WA) said the bill is imperfect but does include policies to build more affordable housing, including on the Low-Income Housing Tax Credit (LIHTC).
In amendment votes:
Withdrawn amendments included:
CTC and business tax provisions are split roughly evenly at roughly $33 billion each, and the bill is close to paid for with $77.2 billion from enforcement provisions for the Employee Retention Tax Credit (ERTC). Restoring IRC Section 174 expensing for domestic R&D and the prior IRC Section 163(j) interest deductibility parameters are proposed to be retroactive to 2022 and extended through 2025. Also included are an extension of 100% bonus depreciation and an increase in the IRC Section 179 small business expensing amount.
The CTC expansion in the bill would increase the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, with the value of the credit adjusted for inflation in tax years 2024 and 2025. The bill also includes provisions on the calculation of the refundable credit on a per-child basis and allow the use of earned income from the prior tax year to calculate the maximum child tax credit if earned income in the current tax year was less than the prior year.
Also included are provisions consistent with the Federal Disaster Tax Relief Act (H.R. 5863) to provide personal casualty loss relief for any disaster area declared since 2020, and benefits for payments related to wildfire relief and train derailments. Housing provisions would restore the 12.5% LIHTC ceiling increase for calendar years 2023 through 2025 and provide a transition rule regarding the tax-exempt bond financing requirement. The revenue offset for the package is enforcement provisions with respect to covid-related Employee Retention Tax Credit (ERTC), including increased penalties, enhanced disclosure requirements, and barring additional claims after January 31, 2024.
Materials related to the markup are available here.