Over nearly the past two years, enacting tax legislation has stalled despite bipartisan efforts. The fate of changes in the near future likely depends on the outcome of this November’s elections. 

Recent Bills Flounder 

Recurring items in proposals of late have included delaying implementation of mandatory research expense capitalization, restoring 100 percent bonus depreciation, and enhancing the Child Tax Credit.

Most recently, the Tax Relief for American Families and Workers Act of 2024 H.R. 7024 contained these items and more on a retroactive basis, with a proposed pay-for of ending the Employee Retention Credit early. The bill was fast-moving, introduced and overwhelmingly passed in the House within two weeks this past January. However, regardless of the fanfare and bipartisan support, the bill collapsed in the Senate and ultimately failed to advance. 

Part of the breakdown involved disagreements over specifics of the Child Tax Credit and setting up negotiations for a potentially bigger tax package next year. What that bill would look like varies greatly depending on who has control in Congress, as each side has its own ideas for the future of tax policy. Add to it the Tax Cuts and Jobs Act (TCJA) temporary provisions expiring soon, and it’s easy to anticipate future legislative movement.

TCJA Cliff

It's been several years now since the TCJA was enacted and while it may seem like all of its changes are here to stay, many will sunset after 2025, returning thereafter to pre-TCJA law. As Democrats and Republicans generally disagree on the future of TCJA provisions, the November elections will likely predict their path. If there is a Republican sweep, it’s possible for all TCJA items with exception of the SALT cap to be extended. On the other hand, Democrats are likely to let them expire where there’s no impact to those making less than $400,000 per year. If a split Congress continues, compromise will be needed and negotiations could continue to drag on. Extending all of the TCJA temporary items has been estimated to cost $4.1 trillion. 

Below is a look at some TCJA cliff items:

Year-End Deal?

We’ve become accustomed to the federal government’s annual extension on determining its fiscal funding to avoid a shutdown, called a continuing resolution, that temporarily delays decision making deadlines. This year is no different, as they agreed to temporary funding through December 20th.  If history repeats itself, a funding bill could again be a vehicle for tax changes. However, House Speaker Johnson has vowed to forgo traditional last-minute, year-end omnibus bills containing substantial add-ons. If this promise is kept, 2025 could be when we see the next significant tax package cross the finish line.

Please reach out to your RubinBrown representative with questions or concerns regarding your unique tax situation. 

Published: 10/28/2024

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