Tax Deal Possible; Pay-For Would End ERC

  • Health care and life sciences
  • 1/17/2024

A large tax proposal released in the U.S. House on January 16 could end claims for the COVID-era Employer Retention Credit if enacted. The proposal includes various ...

ERC claims by employers must be submitted by Jan. 31

Two key tax leaders in the U.S. Senate and U.S. House have reached an agreement on policies that have been the source of negotiations for well over a year. The draft legislation, called ‘The Tax Relief for American Families and Workers Act of 2024,” was released by the U.S. House Ways & Means Committee on January 16 and includes a variety of family and business tax changes. 

Multiple policies center on the child tax credit, which would be extended for three years and would allow families with multiple children to qualify. Other policies are specific to businesses, such as restoring immediate expensing for domestic research and experimental expenditures, extending the 100% bonus depreciation, changing the deductibility limitation on business interest expense, and increasing the limitation on expensing of depreciable business assets. Review the draft framework for more details on these and other policies.

The bill is estimated to cost over $70 billion, which is offset (i.e.: paid for) by ending all Employee Retention Credit filings. Under current law, taxpayers can claim the ERC until April 15, 2025. The draft legislation bars any additional filings after January 31, 2024.

In addition, the bill takes aim at ERC promoters, as defined in the bill, who would be subject to substantially higher fines among other policies.

Ideally, passage of the bill would be by the start of the tax filing season, January 29, 2024. This is an aggressive timeline and requires many pieces to quickly fall into place, including garnering more Congressional support. As of right now, this is only a draft framework and not final. CLA will be monitoring all activity on this proposed legislation.

Next Steps

If you are a health care or life science employer interested in the ERC, timeliness is of the essence.

  1. Read CLA’s full article for more information
  2. Reach out to your tax profession or CLA advisor if you have questions on ERC eligibility, filing an ERC claim, collecting appropriate supporting documentation and more.

As a reminder, the IRS recently provided a pathway for employers to repay improper ERC funds received. If you have questions or concerns related to that process, reach out to your CLA advisor today.

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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