Update on 174 Amortization as We Near April 15

Over the last 16 months, McGuire Sponsel has intentionally educated CPAs and clients on the dynamics of 174 amortization. Given the firm’s R&D Tax Credit Practice, we understand our role in addressing the problematic tax legislation putting tremendous pressure on many businesses. 

In addition to educating on 174 and performing the necessary calculations, the firm has been active in the Main Street Innovation Coalition. Main Street Innovation Coalition is a group of companies that engaged Washington consultants to provide insight into our elected representatives’ efforts to correct 174 amortization requirements. This group has also been meeting with Congress to educate them on the strain 174 amortization has on closely held businesses. Depending on how you view it, these meetings have been fascinating or frustrating. To experience firsthand the disconnect between Washington and Main Street, as well as our elected representatives’ unfortunate and glacial pace, has left me speechless on many occasions over the past year. 

Given McGuire Sponsel’s position with the R&D Tax Credit, our national reach, and our desire to advocate for our alliance partners and clients, we receive the continual questions of “Is 174 amortization going to get repealed?” and “What’s the status on H.R. 7024?” every day. 

As we near the April 15th deadline and face the reality of this election year, I wanted to update our network. Unfortunately, the chances of the U.S. Senate passing their version of H.R. 7024 in the coming weeks are slim. The issue is not about 174 amortization or bonus depreciation. It is centered around child tax credits. Senate Republicans are balking at the increase in child tax credits and the potential impact that it would have on individuals’ desire to gain full-time employment. 

At this point, there are two paths for the bill, or some version of it, to pass this spring. The first option would be for Sen. Chuck Schumer to put the current tax bill on the Senate floor for a cloture vote. This option would force Republicans to vote “no” on important business tax legislation. The bill needs nine U.S. Senate Republicans to vote “yes” on the bill. The question on this strategy is whether Schumer would put this bill before bills addressing aid for Ukraine, Israel, and potential border legislation. The second option would be for the House and Senate to scrap the current tax bill and return to the negotiating table to address Senate Republicans’ concerns about expanding child tax credits. If one of these two options does not happen, it’s doubtful that the tax bill will be revisited until the lame-duck session after the November election.

Even though H.R. 7024 has lost momentum in the U.S. Senate in recent weeks, McGuire Sponsel will continue to work on this initiative and communicate updates as we understand the enormous pressure that 174 amortization requirements have on our clients.