The U.S. House of Representatives voted overwhelmingly in favor of tax legislation that would enhance the child tax credit for millions of lower-income families and extend tax breaks for businesses, The Associated Press and others reported.
The 357-70 vote did not include a lifting of the $10,000 cap on state and local tax (SALT) deductions, for which Republican lawmakers from high-tax states such as New York and New Jersey have been advocating. Through a spokesperson, House Speaker Mike Johnson (R-La.) said that he and Rep. Jason Smith (R-Mo.), chair of the Committee on Ways and Means, agreed to work with lawmakers to “find a path forward.”
“There was a commitment to work in good faith,” Rep. Andrew Garbarino (R-N.Y.), from eastern Long Island, said of the leadership, according to CPA Practice Advisor. “I don’t know if there’s draft legislation right now, but there’s a thought about what it could be, and now they’re talking to people about whether or not to make it out of Rules and to the floor.”
House Republicans wanted to restore full, immediate deductions for the business purchase of new equipment and machinery, and for domestic research-and-development expenses. The bill also provides businesses more flexibility in determining how much borrowing can be deducted.
The bill would incrementally raise the amount of the child tax credit, which is currently $2,000 per child, but not all of it is refundable, the AP reported. The legislation would incrementally raise the amount of the credit that is available as a refund, increasing it to $1,800 for 2023 tax returns, $1,900 for the following year and $2,000 for 2025 tax returns. The bill would also adjust the topline credit amount to temporarily grow at the rate of inflation, and keep a threshold of a household having $2,500 in income to be eligible for refundable child tax credit payments.
But some representatives were not satisfied with the legislation. “This bill provides billions of dollars in tax relief for the wealthy, pennies for the poor,” said . Rep. Rosa DeLauro, (D-Conn.), while Rep. Thomas Massie (R-Ky.) called the child tax credit “welfare by a different name.”
The package would restore a 12.5 percent allocation increase to the Low Income Housing Tax Credit (LIHTC) that expired at the end of 2021, and would reduce from 50 percent to 30 percent the amount of private activity bond financing required to access the 4 percent LIHTC, Accounting Today reported. The bill would also enhance a tax credit for the construction or rehabilitation of rental housing targeted to lower-income households, adding an estimated 200,000 housing units around the country.
The cost of the bill would be paid for by ending the Employee Retention Credit on Jan. 31. "At the end of the day, we are replacing bad tax policy with good tax policy by cutting off funding for the employee retention tax credit—a COVID-era program that costs six times its original amount and is so riddled with fraud, that the IRS put it on its "dirty dozen" list of the worst scams in America," said Smith, Accounting Today reported. "This will save American taxpayers over $75 billion."
The AP reported that while the most conservative and liberal members of the House found fault with the legislation, a significant majority from each party voted for it. The bill's proponents are hoping that this strong showing of support will persuade the Senate to pass it. But passage in the Senate remains uncertain, Accounting Today reported, because that chamber is so narrowly divided.