Bipartisan Tax Package Would Strengthen LIHTC, Help Small Businesses
This post has been updated.
The chairmen of the Senate Finance Committee and House Ways and Means Committee have released a joint framework for tax legislation called the Tax Relief for American Families and Workers Act of 2024 that would expand the federal child tax credit and enact a number of other business-related provisions.
NAHB strongly supports the bill, and the House Ways and Means Committee has approved the measure by a strong bipartisan 40-3 vote. The next step in the process is for the full House to consider the bill, and there is pressure on lawmakers to complete this process prior to the start of tax filing season, which begins at the end of the month. Timing of any House action will be determined by the speaker, and NAHB will urge the House to proceed with urgency.
Of interest to NAHB members, the roughly $80 billion tax package would:
- Strengthen the Low-Income Housing Tax Credit (LIHTC). In calendar years 2018 through 2021, the 9% LIHTC ceiling was increased by 12.5%, allowing states to allocate more credits for affordable housing projects. The legislation restores the 12.5% increase for calendar years 2023 through 2025 and is effective for taxable years beginning after Dec. 31, 2022. The measure also lowers the 50% bond test threshold to 30% for 4% LIHTC bond projects, which will allow for more production and lower costs.
- Extend the 100% Bonus Depreciation. Businesses were permitted to claim 100% bonus depreciation in 2022 for qualifying assets placed in service in 2022. The rate decreased to 80% in 2023, and was set to drop to 60% in 2024, 40% in 2025, 20% in 2026, and zero in 2027. The legislation would allow businesses to claim 100% bonus depreciation for investments in machines, equipment and vehicles for tax years 2023, 2024 and 2025, providing a retroactive tax benefit for 2023.
- Expand Section 179 Expensing. The provision increases the maximum amount a taxpayer may expense to $1.29 million, reduced by the amount by which the cost of qualifying property exceeds $3.22 million. The $1.29 million and $3.22 million amounts are adjusted for inflation for taxable years beginning after 2024.
- Increase the Threshold for Information Reporting on Forms 1099-NEC and 1099-MISC. Under current law, the reporting threshold for payments by a business for services performed by an independent contractor or subcontractor and for certain other payments is generally $600. The legislation would increase the threshold to $1,000 and adjusts it for inflation after 2024.
The legislation is paid for at least in part by accelerating the deadline for filing backdated claims under the Covid-era Employee Retention Tax Credit (ERC), as well as increasing penalties on entities promoting fraudulent ERC claims and granting the IRS additional time to scrutinize ERC claims.
While the ultimate fate of this tax package is uncertain, NAHB will be urging House and Senate lawmakers to move quickly to pass this legislation.