The House of Representatives passed a tax deal that would restore bonus depreciation, end the Employee Retention Credit early, and expand the Child Tax Credit.
The House of Representatives passed a tax deal that would restore bonus depreciation, end the Employee Retention Credit (ERC) early, and expand the Child Tax Credit (CTC).
The House Ways and Means Committee had previously voted 40-3 to advance the proposal to the floor. Senate Finance Committee Chair Ron Wyden (D-Ore.) indicated that he and House Ways and Means Committee Chair Jason Smith (R-Mo.) had wanted to advance the new law immediately so that taxpayers could take advantage of the breaks as they file tax returns this year, vowing, “I’m going to pull out all the stops to get that done.” With the tax season opening on Jan. 29, 2024, the vote took on a new urgency.
On Jan. 31, 2024, the bill was fast-tracked to the floor with a vote that required a two-thirds majority. The vote wasn’t even close—357 yeas to 70 nos.
You can see how your representative voted here.Child Tax Credit
The most talked about part of the deal? It would expand the child tax credit. It would phase in a refundable portion of the child tax credit and increase the maximum refundable amount per child to $1,800 in the tax year 2023, $1,900 in the tax year 2024, and $2,000 in the tax year 2025—a refundable credit would allow lower-income families to qualify for the credit even if they did not owe any tax. The provision would also allow for the same flexibility taxpayers had during Covid to use the current tax year or prior tax year earned income to calculate the credit. The value of the credit would also be adjusted for inflation.
Eligible families stand poised to receive an additional $900 on average this tax filing season.Early End To ERC
Under current law, taxpayers can claim the Employee Retention Credit—or ERC—until Apr. 15, 2025. This proposal would end the beleaguered program early on Jan. 31, 2024.
The ERC was intended to aid businesses that were shut down or experienced a specific decline in gross receipts during Covid. The credit only applies to wages paid through 2021, but due to the statute of limitations, claims can be made through 2025. However, the IRS saw an uptick in claims, many of which appeared fraudulent. “We assumed we’d see a trickle,” IRS Commissioner Danny Werfel said, referencing the timing of the claims. “We are seeing a tsunami.” The IRS subsequently announced an immediate moratorium on processing new ERC claims.
Much of the fraud, the IRS believes, is attributable to promoters who enticed businesses to apply for credits they were not eligible to receive.
