Tax Relief for American Families & Workers Act

By: LSN Partners on January 25, 2024

Tax Relief for American Families & Workers Act 

Overview 

On January 19, 2024, the House Ways & Means Committee voted 40-3 to advance a bipartisan tax package that would devote about $33 billion to revive three business tax credits and expand the child tax credit. The package would also boost credits for building affordable housing, provide tax relief to victims of natural disasters, and extend tax treaty-like benefits to Taiwan. 

Across the Capitol, Senate Finance Chair Ron Wyden (D-R) touted the Ways & Means Committee’s “terrific” 40-3 vote to approve the package he helped negotiate with Chairman Jason Smith (R-MO).  Equally strong backing on the House floor would put pressure on the Senate to act swiftly to pass the bill. 

Senate Majority Leader Chuck Schumer (D-NY) and the White House strongly support the bipartisan tax package. However, support from Senate Republicans is uncertain, with at least nine votes needed for passage. Senate Finance Committee ranking minority member Mike Crapo (R-ID) is actively seeking changes and has been critical of the changes that the bill would make to work requirements attached to the child tax credit. 

While the bipartisan nature of the package adds momentum, several hurdles remain before the law’s potential enactment. House Speaker Mike Johnson (R-LA) has not publicly weighed in, and there have been calls from a small group of Republicans to amend the bill to allow a higher cap on state and local tax deductions, a proposal popular among high-tax states but deeply opposed by other Republicans. Speaker  Johnson must also contend with members of his far-right flank that want to tie the tax bill to discussions regarding border policy.  

The House could vote on the legislation as soon as next week. 

Section-by-Section Analysis 

Tax Relief for Working Families 

• Modifies the calculation of the maximum refundable child tax credit. 
• Increases the maximum refundable amount per child for tax years 2023 to 2025.
• Adjusts the child tax credit for inflation for tax years 2024 and 2025. 
• Allows taxpayers to use their earned income from the prior year to calculate their maximum child tax credit for tax years 2024 and 2025. 
• Includes a special rule for certain early-filed 2023 returns to ensure taxpayers receive the correct child tax credit amount.

American Innovation and Growth 

• It delays the requirement for taxpayers to deduct domestic research or experimental costs over a five-year period until tax years begin after December 31, 2025. 
• Extends the application of EBITDA for the computation of adjusted taxable income for limitation on business interest deduction. 
• Extends 100 percent bonus depreciation for qualified property placed in service after 2022.
• Increases the limitations on the expensing of depreciable business assets. 

Assistance for Disaster-Impacted Communities 

• Extends rules for the treatment of certain disaster-related personal casualty losses.
• Excludes from gross income compensation for losses or damages resulting from certain wildfires.
• Treats East Palestine train derailment payments as qualified disaster relief payments. 

More Affordable Housing 

• Increases the State Housing Credit Ceiling for Low-Income Housing Credit for certain years. • Lowers the tax-exempt bond financing requirement for affordable housing projects. 

Increasing Global Competitiveness 

• Provides targeted and expedited relief from double taxation on U.S.-Taiwan cross-border investment. • Reduces withholding taxes for qualified residents of Taiwan on certain U.S. source incomes. 
• Applies permanent establishment rules for taxation of Taiwan residents’ income from U.S. trade or business. 
• Excludes U.S. tax on certain wages of qualified residents of Taiwan for personal services performed in the U.S. 
• Determines qualified residents of Taiwan, including rules for dual residents. 
• Authorizes negotiation and entry into a U.S.-Taiwan tax agreement. 

Tax Administration and Eliminating Fraud 

• Increases the threshold for information reporting on Forms 1099-NEC and 1099-MISC. 
• Includes enforcement provisions related to COVID-Related Employee Retention Tax Credit (ERTC),  such as penalties for aiding and abetting understatement of tax liability, due diligence requirements for  ERTC promoters, and requirements for ERTC promoters to file disclosures and maintain lists of clients. 
• This legislation aims to provide tax relief for working families, promote American innovation and growth, increase global competitiveness, provide assistance for disaster-impacted communities, make housing more affordable, and strengthen tax administration and fraud elimination measures. 

You can read more about this legislation and watch the House Ways & Means Committee markup at this link.