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Federal Tax

2024 Snapshot: Potential TCJA-CTC Deal in Play Ahead of Filing Season, Tax Pro Says

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

Although the tax legislative outlook is unclear leading up to the 2024 elections, PricewaterhouseCoopers Washington National Tax Services Co-Leader Rohit Kumar predicts there could be a possible bipartisan deal involving three Tax Cuts and Jobs Act (PL 115-97; TCJA) provisions and the child tax credit (CTC) at the beginning of tax season.

In an interview with Checkpoint, Kumar, who was previously the deputy chief of staff and chief economic policy advisor Senate Minority Lader Mitch McConnell (R-KY) before joining private practice, said he has heard that taxwriters on the Hill are “very close to striking a deal” on the so-called TCJA Big Three and reviving (at least to some degree) the expanded child tax credit under the American Rescue Plan Act of 2021 (PL 117-2; ARPA).

A 150-member House Republican coalition in December advocated for legislation addressing Code Sec. 174 research and development five-year amortization; the phaseout of the bonus depreciation rate for qualifying assets or property; and the Code Sec. 163(j) deduction for business interest expenses. Democrats want to make permanent temporary changes made to the child tax credit during the COVID-19 pandemic, when the credit was worth more and available to a broader swath of taxpayers.

“Interestingly, I’m picking up that [the] child tax credit component could well involve calendar year 2023, which means … it would have to be enacted by late January [or] very early February at the latest to not disrupt the filing season,” said Kumar.

He explained that a possible agreement affecting 2023 puts pressure on lawmakers to expedite negotiations because “people are going to claim it on the return that they file in the spring of [2024] and what we know from lots and lots of experiences, people who are getting refunds tend to file early in the season and people who are making payments tend to file on April 15.”

According to Kumar, there is general support on both sides of the isle going back to 2021 to act on the TCJA Big Three, but Democrats see an opportunity to make Republicans pay a “political price” for those unpopular changes impacting businesses. For example, taxpayers could, prior to the enactment of the 2017 Republican tax reform bill, immediately deduct R&D expenses. Tethering the CTC to those TCJA components is a pathway for Democrats to score a policy win that otherwise may not be possible in a Republican-controlled House. Kumar said this is akin to the “Pottery Barn Rule,” as in, “you break it, you buy it.”

However, Kumar clarified that whatever action is taken on the CTC will not be close to the expanded version under ARPA. “The TCJA provisions are roughly $47 billion of revenue loss over the ensuing decade,” he explained. “So you couldn’t do anything even remotely approaching [the] ARPA-level CTC for that amount of money. The ARPA-level CTC was like $100 billion a year of revenue loss — a trillion over 10. We’re talking about something that would be $47 billion over three years, for calendar years, [2023, 2024, and 2025].”

It is not “out of the question” for a potential bill to be stand-alone and not wrapped up in a larger January 19 government shutdown prevention package or national security supplemental funding bill, Kumar forecasted. The decision of which procedural mechanism to pursue is a challenge, he said, but “we’re doing things on the suspension calendar these days that we never used to do, so I don’t think you can rule anything out.”

 

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