House Ways and Means Committee approves business and individual tax relief bills, Taiwan trade agreement

In brief

The House Ways and Means Committee late on June 13 voted along party lines to approve an economic growth package consisting of three separate tax bills: (1) the Tax Cuts for Working Families Act (H.R. 3936); (2) the Small Business Jobs Act (H.R. 3937); and (3) the Build It in America Act (H.R. 3938). The committee also voted unanimously to advance a bill (H.R. 4004) that approves the first trade agreement signed under the U.S.-Taiwan Initiative on 21st-Century Trade. 

The Tax Cuts for Working Families Act was approved by a vote of 24 to 16. The legislation renames the “standard deduction” as the “guaranteed deduction” and provides an additional “guaranteed deduction bonus” for tax years 2024 and 2025 in the amount of $4,000 for a jointly filed return or surviving spouse ($3,000 for head of household and $2,000 for any other taxpayer). The additional deduction is subject to a phaseout based on modified adjusted gross income.

The Small Business Jobs Act was approved by a vote of 24 to 18. The legislation provides an increase in the Section 179 small business expensing limitation, modifies the exclusion for gain from qualified small business stock, restores a Form 1099-K reporting rule for certain third-party network transactions that was modified by the 2022 Inflation Reduction Act (IRA), increases the threshold for Form 1099 information reporting, and includes "opportunity zone” tax provisions.

The Build It in America Act was approved by a vote of 24 to 18. The legislation includes provisions to restore retroactively through the end of 2025 the tax rules for research and experimentation (R&E) expensing under Section 174, business interest deduction limitation under Section 163(j), and 100% bonus depreciation under Section 168(k), each of which was the subject of scheduled modifications under the 2017 Tax Cuts and Jobs Act (TCJA). The Build It in America Act also includes provisions addressing recent foreign tax credit regulations, certain foreign acquisitions of US agricultural interests, and Superfund tax repeal. The bill also repeals or modifies certain IRA clean energy tax credits.

Observation: The Ways and Means-approved bill seeks to align a temporary extension of certain TCJA business provisions as they were initially in effect with the scheduled expiration of TCJA individual and pass-through business tax provisions after 2025.

The takeaway: The committee’s economic growth package may be approved by the Republican-controlled House but will not advance in its current form in the Democratic-controlled Senate. Efforts to address TCJA provisions affecting Section 174 expensing, interest deductions, and bonus depreciation are expected to require negotiations later this year with Senate Democrats and the White House seeking some level of increase in the child tax credit. Federal budget deficit considerations also may affect the overall scope of any tax package later this year given the difficulty of identifying revenue offsets that can secure bipartisan approval.