The U.S. Senate is poised to vote tomorrow on the $78 billion Tax Relief for American Families and Workers Act of 2024, a broad tax measure that includes significant provisions for both families and businesses. The bill, which advanced from the House in January with bipartisan support, now faces a critical vote in the Senate before lawmakers head into a five-week recess.
Majority Leader Chuck Schumer (D-N.Y.) speaks to the press after the weekly policy luncheon on Tuesday, July 9, 2024.
Focus on 174 Amortization:
Among the key provisions of the proposed legislation is a notable change to Section 174 of the Internal Revenue Code. This proposed revision would allow businesses to immediately deduct the costs of U.S.-based research and experimental activities through the end of 2025. Currently, businesses are required to amortize these costs over five years, a change that was implemented under the Tax Cuts and Jobs Act (TCJA) starting in 2022.
Key Features of the Proposal:
- Immediate Deduction: The bill proposes revising Code Sec. 174 to enable businesses to fully deduct their R&D expenses in the year they are incurred, rather than amortizing them over five years.
- Incentives for Innovation: This change is aimed at stimulating investment in innovation by providing businesses, particularly small ones, with greater financial flexibility.
Impact on Businesses: The potential immediate deduction for R&D costs could have substantial benefits for businesses engaged in research and development. This change is expected to enhance cash flow and encourage further investment in innovative projects. Additionally, the broader bill includes provisions that could benefit businesses involved in energy-efficient practices through Section 179D deductions.
Legislative Journey: Although the bill passed the House with a strong bipartisan vote earlier this year, it has not yet been approved by the Senate. Senate Majority Leader Chuck Schumer (D-NY) has emphasized the urgency of passing the bill before the recess, while opponents, particularly Senate Republicans, have raised concerns about specific provisions, including those related to the Child Tax Credit.
Implications for EPSA’s Tax Services:
As the Senate vote approaches, EPSA is prepared to support clients in navigating the potential changes to 174 Amortization and other tax incentives. Staying informed and adapting to these legislative changes will be crucial for businesses aiming to optimize their tax benefits and reinvest in R&D and sustainability.
Questions? Please contact us here.