Key congressional leaders agree to a long-stalled tax package to extend expiring/expired business tax deductions along with expanding the Child Tax Credit and Low-Income Housing Tax Credit. 

On January 15, Chairman of the House Ways and Means Committee Jason Smith (R-Missouri), and Chairman of the Senate Finance Committee Ron Wyden (D-Ore.) announced an agreement on a long-stalled tax package to extend expiring/expired business tax deductions along with expanding the Child Tax Credit and Low-Income Housing Tax Credit. The legislation will be considered on January 19 in the Ways and Means Committee in advance of potential passage by the House in the coming weeks.

The bill would address a number of AGC priority tax issues, including:

• Reinstating the deductibility R&D expenses in the year incurred through 2025. This provision expired at the end of 2021, and has caused construction firms to have to amortize R&D expenses over 5 years.
• Reinstating a more generous limitation on how much “net interest expense” a business can deduct per year.
• Extending full business expensing (the ability to fully deduct the cost of new and used business equipment) through 2025.
• Increasing “Section 179 expensing” (also called “small business expensing”) to $1.29 million, with a $3.22 million phaseout, and permanently adjusted to inflation.
• Increasing the Low-income housing tax credit (LIHTC) from 9 percent to 12.5 percent and reducing the bond financing requirement from 50 percent to 30 percent.
• Increasing the threshold which triggers companies to issue certain informational tax returns (1099-MISC and 1099-NEC) from $600 to $1,000, and permanently tying this to inflation.

To pay for the cost of these temporary tax extensions, the bill would make changes to the Employee Retention Tax Credit (ERTC).

• Most importantly, it significantly moves the cutoff date from filing an ERTC return from 4/15/25 to 1/31/24 (i.e., in approximately two weeks).
• It also significantly increases penalties associated with filing fraudulent returns by ERTC-promoters, which is a new term defined in the bill.

While AGC has some concerns about ending the ERTC early, there are many provisions in the bill that would provide significant benefit to AGC members. And while it’s not clear if or when this legislation will pass through the House or Senate, it is a major priority for Chairmen Smith and Wyden.

If you have any questions or input on this tax agreement, please contact Matthew Turkstra at [email protected], or (202) 547-4733.