Rumors are circulating that House Republicans may assemble an economic incentive package, with potential markup in the Committee on Ways and Means this month or next. This week, we take a look at the potential tax relief components for such a bill and its potential for future consideration and enactment.

From our perspective, the leading contenders for inclusion in the bill could be:

• Section 174 R&D Amortization Fix: Recently introduced bills in the House and Senate demonstrate significant bipartisan support to reinstate immediate expensing of research and development (R&D) with retroactive effect to the beginning of 2022.
• Section 163(j) EBITDA Calculation: Similar to the section 174 R&D amortization fix, there is broad bipartisan support for extending, on a retroactive basis to the beginning of 2022, the allowance for depreciation, amortization, or depletion for purposes of determining the income limitation on the tax deduction for business interest expense. Sens. Shelley Capito (R-WV) and Kyrsten Sinema (I-AZ) are the lead sponsors of a legislative fix (S.1232). In the House, Rep. Adrian Smith (R-NE) is the lead sponsor of a companion bill (H.R. 2788).
• Bonus Depreciation: The third Tax Cuts and Jobs Act (TCJA) "extender" relates to the phase-down in bonus depreciation in 2023 from 100 percent to 80 percent. A potential retroactive reinstatement of 100 percent bonus depreciation for 2023 or a proposal to avoid the further scheduled reduction to 60 percent in 2024 will likely receive consideration. Sen. Jim Lankford (R-OK) and House Budget Committee Chairman Rep. Jodey Arrington (R-TX) have introduced companion bills to make bonus depreciation permanent.
• Extension of Expiring Federal Aviation Administration (FAA) Tax Provisions: Extension of Airport and Airway Trust Fund excise taxes set to expire on September 30 of this year are likely to be included.
• Housing Relief: Recent Congressional hearings highlighted the importance of the low-income housing credit and other incentives to address the need for affordable housing.
• Last In, First Out (LIFO) Tax Relief: The Supply Chain Disruptions Act has been introduced in both the House and Senate, with broad bipartisan support, to provide LIFO tax relief to car dealerships that suffered production issues related to COVID-19 and the global semiconductor chip shortage.
• Technical Corrections: A time-sensitive technical correction to address an error in last year's SECURE 2.0 legislation that would prevent catch-up retirement contributions starting in 2024 will receive strong consideration and hopefully provide a mechanism for the inclusion of other needed technical corrections.
• 1099-K Reporting: Republicans are likely to consider including a provision to repeal or further delay the $600 reporting threshold for third-party payment providers enacted by the Inflation Reduction Act (IRA) but postponed by the IRS for one year.
• OECD Global Minimum Tax: It's complicated and unclear, but some type of tax policy response to mitigate the impact the Organisation for Economic Cooperation and Development's (OECD) imposition of a global 15 percent minimum tax will have on U.S. multinationals is under consideration.

Concerns about the deficit, as seen in the current debt limit extension discussions, will temper the scope and size of the package. Thus, extending the individual and estate tax relief enacted as part of TCJA and set to expire at the end of 2025 are unlikely given their significant revenue cost. Further, with tax rate increases and other traditional revenue offsets "off the table" for Republicans, the package will probably look to spending cuts and another attempt to repeal the green energy tax incentives in the IRA as funding mechanisms.

Assuming the package is marked up in the Committee on Ways and Means and potentially passed by the House with only Republican votes, there is no chance that the bill will be considered by the Democrat-controlled Senate or the White House. Beyond serving as a messaging piece of Republican priorities, as legislative vehicles develop through the remainder of the year (i.e., government spending, FAA reauthorization, the farm bill), it's hoped the bill provides a menu of potential tax relief items for consideration. #TaxTake

Upcoming Speaking Engagements and Events

On May 11, Loren will speak at the Tax Council Policy Institute 2023 Annual Symposium on a panel titled "Building a Better Mousetrap: Future of Cross-Border Dispute Resolution."

Loren will present "Pillar Two and Potential U.S. Response," a panel discussion at the 2023 Texas Federal Tax Institute Annual Conference on June 7. 

On June 20, Loren will present, "U.S. Tax Update - Global Trends with Local Impacts," at the TP Minds International 2023 Conference in London.

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