House OKs $78B tax bill

February 1, 2024

By Martha Waggoner, for the Journal of Accountancy

The House on Wednesday passed a roughly $78 billion tax bill that contains provisions making changes to restrict the employee retention credit (ERC), expand eligibility for the child tax credit (CTC), and temporarily reinstate the expensing of research or experimental (R&E) expenditures. It also restores tax breaks for companies from the law known as the Tax Cuts and Jobs Act, P.L. 115-97, that have expired or would expire in the coming years.

The House passed the bill, The Tax Relief for American Families and Workers Act of 2024, H.R. 7024, in a 357–70 vote after House Speaker Mike Johnson, R-La., said he supported the legislation. It now moves to the Senate, where it has support from Finance Committee Chair Ron Wyden, D-Ore., and Majority Leader Chuck Schumer, D-N.Y., among others.

The top line items include a bar on additional claims for the ERC as of Jan. 31, 2024; the deadline under current law is April 15, 2025. According to the Joint Committee on Taxation, the bill has $77.5 billion in added costs that would be partially offset by $77.1 billion in savings from the revised ERC filing deadline.

It also includes various other enforcement provisions related to the ERC, including extending the statute of limitation on assessment for the ERC to from five years to six years from the date of the claim, defining who qualifies as a "COVID-ERTC promoter," and increasing certain penalties and reporting requirements for those who are COVID-ERTC promoters.

The bill would define a COVID-ERTC promoter as a person who aids, assists, or advises on an affidavit, refund, claim, or other document related to the ERC if the person charges fees based on the amount of the credit (sometimes called a contingency fee) or meets a gross receipts test as defined in the law. The bill would:

  • Increase the penalty on a COVID-ERTC promoter for aiding and abetting the understatement of a tax liability to the greater of $200,000 ($10,000 in the case of a natural person) or 75% of the gross income of the ERC promoter derived (or to be derived) from providing aid, assistance, or advice with respect to a return or claim for ERC refund or a document relating to the return or claim.
  • Require a COVID-ERTC promoter to comply with due-diligence requirements (similar to the due-diligence requirements applying to paid tax return preparers) with respect to a taxpayer's eligibility for (or the amount of) an ERC, and the bill applies a $1,000 penalty for each failure to comply with the requirements.
  • Require a COVID-ERTC promoter to file return disclosures and provide lists of clients to the IRS on request similar to those that material advisers are required to provide with respect to listed transactions and to make available at the IRS's request lists of advice recipients with respect to such transactions.

Child tax credit

For the Sec. 24 CTC, the bill increases the maximum refundable amount per child to $1,800 in tax year 2023, up from the current $1,600 per child. The amount increases to $1,900 in tax year 2024 and $2,000 in tax year 2025 and includes inflation adjustments for those two years.

The bill would also change how the CTC is calculated. Under current law, taxpayers compute the amount by multiplying their earned income (in excess of $2,500) by 15%. The bill calls for the same percentage but allows taxpayers to multiply that amount by the number of children. This change would be effective for tax years 2023, 2024, and 2025.



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