House Passes R&D Expensing and Bonus Depreciation Bill
The U.S. House of Representatives passed HR 7024, The Tax Relief for American Families and Workers Act of 2024, on Wednesday, January 31, 2024. The bill reinstates immediate domestic research expensing under IRC Section 174, extends 100% bonus depreciation, increases the refundable Child Tax Credit, and terminates the Employee Retention Tax Credit (ERTC). Passing by a House of 357-70 under the suspension of rules procedure, the bill will now move to the Senate for consideration.
Current law requires a 5-year amortization of domestic specified research expenditures (SREs). HR 7024 allows for immediate expensing of SREs, is retroactively applied to the tax year 2022, and remains in effect for tax years beginning before January 1, 2026. Foreign research costs will continue to be amortized over 15 years.
The bill also extends 100% bonus depreciation from January 1, 2023, through December 31, 2025, increases the limit for Section 179 expensing to adjust for inflation, reverts the business interest expense limitation for tax years 2024 and 2025 back to 30% of EBITDA, and increases the refundable Child Tax Credit for tax years 2023 through 2025. As a means to help pay for the bill and stop fraudulent claims, the ERTC will terminate early on January 31, 2024.
While a resounding 83% House approval of this bill is exciting news, there are still legislative hurdles to overcome. And with tax filing deadlines quickly approaching, the Senate will need to address this to avoid taxpayer and tax preparer confusion in March and April.
McGuire Sponsel’s R&D Tax Credit Services team will continue to monitor this bill and provide frequent updates.
Kyle Riddle leads McGuire Sponsel’s highly successful Research and Development Tax Credit Practice. He has played an integral role in taking the practice from a regional service provider to a national industry leader.
He combines his engineering background and knowledge of product and process development life cycles with his extensive experience with the tax code, regulations, and case law to achieve maximum R&D Tax Credits for clients.
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