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Proposed Bill Stands to Make Retroactive Changes to 2022 Tax Returns

The House Ways and Means Committee on January 19, 2024 approved a bill titled the "Tax Relief for American Families and Workers Act of 2024".  The bill still needs approval by both houses of Congress before being signed into law by the President. 

If approved, this bill could retroactively restore certain provisions that had expired, while also extending other planned expiration dates.  For the wine industry, some of these extensions (or reinstatements) could bring welcome relief (along with additional filing requirements for prior years .) 

Proposed Business Provisions

Research and Experimental Expenses

In 2022, a  provision expired that allowed certain research and experimental expenditures to be deductible.  If enacted, the new rule would delay the expiration of this favorable tax treatment until 2026

The change as proposed would apply retroactively, enabling many businesses who were adversely impacted to recalculate their 2022 income taxes under the new rules. It would also beneficially impact the calculation of 2023 income taxes. 

How the retroactive changes are to be applied is not yet clear. 

Please be aware that these pending provisions (until resolved) could delay the filing of your 2023 income tax returns. 

Bonus Depreciation 

The TCJA (Tax Cuts and Jobs Act) of 2017 allowed certain qualified property that was acquired between September 17, 2017 and January 1, 2023 to be 100% expensed in the year placed in service.  The act called for an increasing reduction in the allowed percentage that could be expensed for 2023 and forward.  

The proposed bill, if enacted as written, would extend the 100% expensing option to property placed in service before January 1, 2026. 

Increased Interest Expense Deduction for Businesses

If passed, the bill would change the calculation of the limitation on deductible business interest to be based on Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) rather than Earnings Before Interest and Taxes (EBIT) for tax years 2024 to 2026. This could potentially allow businesses to claim a larger deduction for interest expense. 

Other Proposed Changes

Other provisions of the bill would increase the section 179 deduction for new property placed in service after 2023, expand the child tax credit,  tighten the Employee Retention Credit (ERC) rules, clarify certain disaster relief provisions, and increase the thresholds for filing certain 1099 forms from $600 to $1000 for payments made after December 31, 2023. 

Full details of the bill are available here

As always, please consult your tax advisor for advice related to your specific set of circumstances.