H.R. 7024 — what changed
Tax Relief for American Families and Workers Act of 2024
From Introduced in House to Reported in House. 5 sections amended and 1 added between Introduced in House and Reported in House.
Sec. 104 Rule for determination of earned income
In general— Paragraph (6) of section 24(h) of the Internal Revenue Code of 1986 is amended—
by striking “credit.—Subsection” and inserting “credit.—
“(A) In general—Subsection”
changed
by adding at the end the following new subparagraphs:subparagraphs
“(B) Rule for determination of earned income
“(i) In general—In the case of a taxable year beginning after 2023, if the earned income of the taxpayer for such taxable year is less than the earned income of the taxpayer for the preceding taxable year, subsection (d)(1)(B)(i) may, at the election of the taxpayer, be applied by substituting—
“(I) the earned income for such preceding taxable year, for
“(II) the earned income for the current taxable year.
“(ii) Application to joint returns—For purposes of clause (i), in the case of a joint return, the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year.”
Errors treated as mathematical errors— Paragraph (2) of section 6213(g) of the Internal Revenue Code of 1986 is amended by striking “and” at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting “, and”, and by inserting after subparagraph (V) the following new subparagraph:
“(W) in the case of a taxpayer electing the application of section 24(h)(6)(B) for any taxable year, an entry on a return of earned income pursuant to such section which is inconsistent with the amount of such earned income determined by the Secretary for the preceding taxable year.”
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2023.
Sec. 105 Special rule for certain early-filed 2023 returns
addedadded In the case of an individual who claims, on the taxpayer’s return of tax for the first taxable year beginning after December 31, 2022, a credit under section 24 of the Internal Revenue Code of 1986 which is determined without regard to the amendments made by sections 101 and 102 of this Act, the Secretary of the Treasury (or the Secretary’s delegate) shall, to the maximum extent practicable—
added
redetermine the amount of such credit (after taking into account such amendments) on the basis of the information provided by the taxpayer on such return, and
added
to the extent that such redetermination results in an overpayment of tax, credit or refund such overpayment as expeditiously as possible.
Sec. 201 Deduction for domestic research and experimental expenditures
Delay of amortization of domestic research and experimental expenditures— Section 174 is amended by adding at the end the following new subsection:
“(e) Suspension of application of section to domestic research and experimental expenditures—In the case of any domestic research or experimental expenditures (as defined in section 174A(b)), this section—
“(1) shall apply to such expenditures paid or incurred in taxable years beginning after December 31, 2025, and
“(2) shall not apply to such expenditures paid or incurred in taxable years beginning on or before such date.”
Reinstatement of expensing for domestic research and experimental expenditures— Part VI of subchapter B of chapter 1 is amended by inserting after section 174 the following new section:
“174A. Temporary rules for domestic research and experimental expenditures
“(a) Treatment as expenses—Notwithstanding section 263, there shall be allowed as a deduction any domestic research or experimental expenditures which are paid or incurred by the taxpayer during the taxable year.
“(b) Domestic research or experimental expenditures—For purposes of this section, the term domestic research or experimental expenditures means research or experimental expenditures paid or incurred by the taxpayer in connection with the taxpayer’s trade or business other than such expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F)).
“(c) Amortization of certain domestic research and experimental expenditures
“(1) In general—At the election of the taxpayer, made in accordance with regulations or other guidance provided by the Secretary, in the case of domestic research or experimental expenditures which would (but for subsection (a)) be chargeable to capital account but not chargeable to property of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion), subsection (a) shall not apply and the taxpayer shall—
“(A) charge such expenditures to capital account, and
“(B) be allowed an amortization deduction of such expenditures ratably over such period of not less than 60 months as may be selected by the taxpayer (beginning with the month in which the taxpayer first realizes benefits from such expenditures).
“(2) Time for and scope of election—The election provided by paragraph (1) may be made for any taxable year, but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). The method so elected, and the period selected by the taxpayer, shall be adhered to in computing taxable income for the taxable year for which the election is made and for all subsequent taxable years unless, with the approval of the Secretary, a change to a different method (or to a different period) is authorized with respect to part or all of such expenditures. The election shall not apply to any expenditure paid or incurred during any taxable year before the taxable year for which the taxpayer makes the election.
changed
“(d) Election To to capitalize expenses—In the case of a taxpayer which elects (at such time and in such manner as the Secretary may provide) the application of this subsection, subsections (a) and (c) shall not apply and domestic research or experimental expenditures shall be chargeable to capital account. Such election shall not apply to any expenditure paid or incurred during any taxable year before the taxable year for which the taxpayer makes the election and may be made with respect to part of the expenditures paid or incurred during any taxable year only with the approval of the Secretary.
“(e) Special rules
“(1) Land and other property—This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.
“(2) Exploration expenditures—This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).
“(3) Software development—For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
“(f) Termination
“(1) In general—This section shall not apply to amounts paid or incurred in taxable years beginning after December 31, 2025.
“(2) Change in method of accounting—In the case of a taxpayer’s first taxable year beginning after December 31, 2025, paragraph (1) (and the corresponding application of section 174) shall be treated as a change in method of accounting for purposes of section 481 and—
“(A) such change shall be treated as initiated by the taxpayer,
“(B) such change shall be treated as made with the consent of the Secretary, and
“(C) such change shall be applied only on a cut-off basis for any domestic research or experimental expenditures paid or incurred in taxable years beginning after December 31, 2025, and no adjustment under section 481(a) shall be made.”
Coordination with certain other provisions—
Research credit—
Section 41(d)(1)(A) is amended by inserting “or domestic research or experimental expenditures under section 174A” after “section 174”.
Section 280C(c)(1) is amended to read as follows:
“(1) In general—The domestic research or experimental expenditures otherwise taken into account under section 174 or 174A (as the case may be) shall be reduced by the amount of the credit allowed under section 41(a).”
AMT adjustment— Section 56(b)(2) is amended by striking “174(a)” each place it appears and inserting “174A(a)”.
Optional 10-year writeoff— Section 59(e)(2)(B) is amended by striking “section 174(a) (relating to research and experimental expenditures)” and inserting “section 174A(a) (relating to temporary rules for domestic research and experimental expenditures)”.
Qualified small issue bonds— Section 144(a)(4)(C)(iv) is amended by striking “174(a)” and inserting “174A(a)”.
Start-up expenditures— Section 195(c)(1) is amended by striking “or 174” in the last sentence and inserting “174, or 174A”.
Capital expenditures—
Section 263(a)(1)(B) is amended by inserting “ or 174A” after “174”.
Section 263A(c)(2) is amended by inserting “or 174A” after “174”.
Active business computer software royalties— Section 543(d)(4)(A)(i) is amended by inserting “174A,” after “174,”.
Source rules— Section 864(g)(2) is amended in the last sentence—
by striking “treated as deferred expenses under subsection (b) of section 174” and inserting “allowed as an amortization deduction under section 174(a) or section 174A(c),”, and
by striking “such subsection” and inserting “such section (as the case may be)”.
Basis adjustment— Section 1016(a)(14) is amended by striking “deductions as deferred expenses under section 174(b)(1) (relating to research and experimental expenditures)” and inserting “deductions under section 174 or 174A”.
Small business stock— Section 1202(e)(2)(B) is amended by striking “research and experimental expenditures under section 174” and inserting “specified research or experimental expenditures under section 174 or domestic research or experimental expenditures under section 174A”.
Conforming amendments—
Section 13206 of Public Law 115–97 is amended by striking subsection (b) (relating to change in method of accounting).
The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 174 the following new item:
Effective date—
In general— Except as otherwise provided in this subsection, the amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2021.
Coordination with research credit— The amendment made by subsection (c)(1)(B) shall apply to taxable years beginning after December 31, 2022.
Repeal of superceded change in method of accounting rules— The amendment made by subsection (d)(1) shall take effect as if included in Public Law 115–97.
No inference with respect to coordination with research credit for prior periods— The amendment made by subsection (c)(1)(B) shall not be construed to create any inference with respect to the proper application of section 280C(c) of the Internal Revenue Code of 1986 with respect to taxable years beginning before January 1, 2023.
Transition rules—
In general— Except as otherwise provided by the Secretary, an election made under subsection (c) or (d) of section 174A of the Internal Revenue Code of 1986 (as added by this section) for the taxpayer’s first taxable year beginning after December 31, 2021, shall not fail to be treated as timely made (or as made on the return) if made during the 1-year period beginning on the date of the enactment of this Act on an amended return for the taxpayer’s first taxable year beginning after December 31, 2021, or in such other manner as the Secretary may provide.
Election regarding treatment as change in method of accounting— In the case of any taxpayer which (as of the date of the enactment of this Act) had adopted a method of accounting provided by section 174 of the Internal Revenue Code of 1986 (as in effect prior to the amendments made by this section) for the taxpayer’s first taxable year beginning after December 31, 2021, and elects the application of this paragraph—
the amendments made by this section shall be treated as a change in method of accounting for purposes of section 481 of such Code,
such change shall be treated as initiated by the taxpayer for the taxpayer’s immediately succeeding taxable year,
such change shall be treated as made with the consent of the Secretary,
such change shall be applied on a modified cut-off basis, taking into account for purposes of section 481(a) of such Code only the domestic research or experimental expenditures (as defined in section 174A(b) of such Code (as added by this section) and determined by applying the rules of section 174A(e) of such Code) paid or incurred in the taxpayer’s first taxable year beginning after December 31, 2021, and not allowed as a deduction in such taxable year, and
in the case of a taxpayer which elects the application of this subparagraph, the amount of such change (as determined under subparagraph (D)) shall be taken into account ratably over the 2-taxable-year period beginning with the taxable year referred to in subparagraph (B).
Election regarding 10-year writeoff—
In general— Except as otherwise provided by the Secretary, an eligible taxpayer which files, during the 1-year period beginning on the date of the enactment of this Act, an amended income tax return for the taxable year described in subparagraph (B)(ii) may elect the application of section 59(e) of the Internal Revenue Code of 1986 with respect to qualified expenditures described in section 59(e)(2)(B) of such Code (as amended by subsection (c)(3)) with respect to such taxable year. Such election shall be filed with such amended income tax return and shall be effective only to the extent that such election would have been effective if filed with the original income tax return for such taxable year (determined after taking into account the amendment made by subsection (c)(3)).
Eligible taxpayer— For purposes of subparagraph (A), the term eligible taxpayer means any taxpayer which—
does not elect the application of paragraph (2), and
filed an income tax return for such taxpayer’s first taxable year beginning after December 31, 2021, before the earlier of—
the due date for such return, and
the date of the enactment of this Act.
Election regarding coordination with research credit— Except as otherwise provided by the Secretary, an eligible taxpayer (as defined in paragraph (3)(B) without regard to clause (i) thereof) which files, during the 1-year period beginning on the date of the enactment of this Act, an amended income tax return for the taxpayer’s first taxable year beginning after December 31, 2021, may, notwithstanding subparagraph (C) of section 280C(c)(2) of the Internal Revenue Code of 1986 make, or revoke, on such amended return the election under such section for such taxable year.
Sec. 319 Authorization of subsequent tax agreements relative to Taiwan
In general— Subsequent to the enactment of approval legislation and implementing legislation pursuant to section 317—
the term “tax agreement” in section 313(a) shall be treated as including any tax agreement relative to Taiwan which supplements or supersedes the Agreement to which such approval legislation and implementing legislation relates, and
the term “Agreement” shall be treated as including such tax agreement.
changed
Requirements, etc., To to apply separately— The provisions of this subtitle (including section 314) shall be applied separately with respect to each tax agreement referred to in subsection (a).
Sec. 601 Increase in threshold for requiring information reporting with respect to certain payees
In general— Sections 6041(a) is amended by striking “$600” and inserting “$1,000”.
Inflation adjustment— Section 6041 is amended by adding at the end the following new subsection:
“(h) Inflation adjustment—In the case of any calendar year after 2024, the dollar amount in subsection (a) shall be increased by an amount equal to—
“(1) such dollar amount, multiplied by
“(2) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting “calendar year 2023” for “calendar year 2016” in subparagraph (A)(ii) thereof.”
Application to reporting on remuneration for services and direct sales— Section 6041A is amended—
in subsection (a)(2), by striking “is $600 or more” and inserting “equals or exceeds the dollar amount in effect for such calendar year under section 6041(a)”, and
in subsection (b)(1)(B), by striking “is $5,000 or more” and inserting “equals or exceeds the dollar amount in effect for such calendar year under section 6041(a)”.
changed
Application To to backup withholding— Section 3406(b)(6) is amended—
by striking “$600” in subparagraph (A) and inserting “the dollar amount in effect for such calendar year under section 6041(a)”, and
by striking “only where aggregate for calendar year is $600 or more” in the heading and inserting “only if in excess of threshold”.
Conforming amendments—
The heading of section 6041(a) is amended by striking “of $600 or more” and inserting “exceeding threshold”.
Section 6041(a) is amended by striking “taxable year” and inserting “calendar year”.
Effective date— The amendments made by this section shall apply with respect to payments made after December 31, 2023.
Sec. 602 Enforcement provisions with respect to COVID-related employee retention credits
added
Increase in assessable penalty on COVID–ERTC promoters for aiding and abetting understatements of tax liability—
added
In general— If any COVID–ERTC promoter is subject to penalty under section 6701(a) of the Internal Revenue Code of 1986 with respect to any COVID–ERTC document, notwithstanding paragraphs (1) and (2) of section 6701(b) of such Code, the amount of the penalty imposed under such section 6701(a) shall be the greater of—
removed
Increase in assessable penalty on COVID–ERTC promoters for aiding and abetting understatements of tax liability— If any COVID–ERTC promoter is subject to penalty under section 6701(a) of the Internal Revenue Code of 1986 with respect to any COVID–ERTC document, notwithstanding paragraphs (1) and (2) of section 6701(b) of such Code, the amount of the penalty imposed under such section 6701(a) shall be the greater of—
renumbered
was (2)(3)
$200,000 ($10,000, in the case of a natural person), or
renumbered
was (2)(4)
75 percent of the gross income derived (or to be derived) by such promoter with respect to the aid, assistance, or advice referred to in section 6701(a)(1) of such Code with respect to such document.
added
No inference— Paragraph (1) shall not be construed to create any inference with respect to the proper application of the knowledge requirement of section 6701(a)(3) of the Internal Revenue Code of 1986.
changed
Failure To to comply with due diligence requirements treated as knowledge for purposes of assessable penalty for aiding and abetting understatement of tax liability— In the case of any COVID–ERTC promoter, the knowledge requirement of section 6701(a)(3) of the Internal Revenue Code of 1986 shall be treated as satisfied with respect to any COVID–ERTC document with respect to which such promoter provided aid, assistance, or advice, if such promoter fails to comply with the due diligence requirements referred to in subsection (c)(1).
changed
Assessable penalty for failure To to comply with due diligence requirements—
In general— Any COVID–ERTC promoter which provides aid, assistance, or advice with respect to any COVID–ERTC document and which fails to comply with due diligence requirements imposed by the Secretary with respect to determining eligibility for, or the amount of, any COVID-related employee retention tax credit, shall pay a penalty of $1,000 for each such failure.
Due diligence requirements— Except as otherwise provided by the Secretary, the due diligence requirements referred to in paragraph (1) shall be similar to the due diligence requirements imposed under section 6695(g).
Restriction to documents used in connection with returns or claims for refund— Paragraph (1) shall not apply with respect to any COVID–ERTC document unless such document constitutes, or relates to, a return or claim for refund.
Treatment as assessable penalty, etc— For purposes of the Internal Revenue Code of 1986, the penalty imposed under paragraph (1) shall be treated in the same manner as a penalty imposed under section 6695(g).
Secretary— For purposes of this subsection, the term Secretary means the Secretary of the Treasury or the Secretary’s delegate.
changed
Assessable penalties for failure To to disclose information, maintain client lists, etc— For purposes of sections 6111, 6112, 6707 and 6708 of the Internal Revenue Code of 1986—
changed
any COVID-Related COVID-related employee retention tax credit (whether or not the taxpayer claims such COVID-Related COVID-related employee retention tax credit) shall be treated as a listed transaction (and as a reportable transaction) with respect to any COVID–ERTC promoter if such promoter provides any aid, assistance, or advice with respect to any COVID–ERTC document relating to such COVID-related employee retention tax credit, and
such COVID–ERTC promoter shall be treated as a material advisor with respect to such transaction.
COVID–ERTC promoter— For purposes of this section—
In general— The term COVID–ERTC promoter means, with respect to any COVID–ERTC document, any person which provides aid, assistance, or advice with respect to such document if—
changed
such person charges or receives a fee for such aid, assistance, or advice which is based on the amount of the refund or credit with respect to such document, document and, with respect to such person’s taxable year in which such person provided such assistance or the preceding taxable year, the aggregate gross receipts of such person for aid, assistance, and advice with respect to all COVID-ERTC documents exceeds 20 percent of the gross receipts of such person for such taxable year, or
with respect to such person’s taxable year in which such person provided such assistance or the preceding taxable year—
the aggregate gross receipts of such person for aid, assistance, and advice with respect to all COVID–ERTC documents exceeds 50 percent of the gross receipts of such person for such taxable year, or
both—
such aggregate gross receipts exceeds 20 percent of the gross receipts of such person for such taxable year, and
the aggregate gross receipts of such person for aid, assistance, and advice with respect to all COVID–ERTC documents (determined after application of paragraph (3)) exceeds $500,000.
Exception for certified professional employer organizations— The term COVID–ERTC promoter shall not include a certified professional employer organization (as defined in section 7705).
Aggregation rule— For purposes of paragraph (1)(B)(ii)(II), all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986, or subsection (m) or (o) of section 414 of such Code, shall be treated as 1 person.
Short taxable years— In the case of any taxable year of less than 12 months, paragraph (1) shall be applied with respect to the calendar year in which such taxable year begins (in addition to applying to such taxable year).
COVID–ERTC document— For purposes of this section, the term COVID–ERTC document means any return, affidavit, claim, or other document related to any COVID-related employee retention tax credit, including any document related to eligibility for, or the calculation or determination of any amount directly related to any COVID-related employee retention tax credit.
changed
COVID-Related COVID-related employee retention tax credit— For purposes of this section, the term COVID-related employee retention tax credit means—
any credit, or advance payment, under section 3134 of the Internal Revenue Code of 1986, and
any credit, or advance payment, under section 2301 of the CARES Act.
changed
Limitation on credit and refund of COVID-Related COVID-related employee retention tax credits— Notwithstanding section 6511 of the Internal Revenue Code of 1986 or any other provision of law, no credit or refund of any COVID-related employee retention tax credit shall be allowed or made after January 31, 2024, unless a claim for such credit or refund is filed by the taxpayer on or before such date.
changed
Amendments To to extend limitation on assessment—
In general— Section 3134(l) of the Internal Revenue Code of 1986 is amended to read as follows:
“(l) Extension of limitation on assessment
“(1) In general—Notwithstanding section 6501, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 6 years after the latest of—
“(A) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed,
“(B) the date on which such return is treated as filed under section 6501(b)(2), or
“(C) the date on which the claim for credit or refund with respect to such credit is made.
“(2) Deduction for wages taken into account in determining improperly claimed credit
“(A) In general—Notwithstanding section 6511, in the case of an assessment attributable to a credit claimed under this section, the limitation on the time period for credit or refund of any amount attributable to a deduction for improperly claimed ERTC wages shall not expire before the time period for such assessment expires under paragraph (1).
“(B) Improperly claimed ERTC wages—For purposes of this paragraph, the term improperly claimed ERTC wages means, with respect to an assessment attributable to a credit claimed under this section, the wages with respect to which a deduction would not have been allowed if the portion of the credit to which such assessment relates had been properly claimed.”
Application to CARES Act credit— Section 2301 of the CARES Act is amended by adding at the end the following new subsection:
“(o) Extension of limitation on assessment
“(1) In general—Notwithstanding section 6501 of the Internal Revenue Code of 1986, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 6 years after the latest of—
“(A) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed,
“(B) the date on which such return is treated as filed under section 6501(b)(2) of such Code, or
“(C) the date on which the claim for credit or refund with respect to such credit is made.
“(2) Deduction for wages taken into account in determining improperly claimed credit
“(A) In general—Notwithstanding section 6511 of such Code, in the case of an assessment attributable to a credit claimed under this section, the limitation on the time period for credit or refund of any amount attributable to a deduction for improperly claimed ERTC wages shall not expire before the time period for such assessment expires under paragraph (1).
“(B) Improperly claimed ERTC wages—For purposes of this paragraph, the term improperly claimed ERTC wages means, with respect to an assessment attributable to a credit claimed under this section, the wages with respect to which a deduction would not have been allowed if the portion of the credit to which such assessment relates had been properly claimed.”
Effective dates—
In general— Except as otherwise provided in this subsection, the provisions of this section shall apply to aid, assistance, and advice provided after March 12, 2020.
Due diligence requirements— Subsections (b) and (c) shall apply to aid, assistance, and advice provided after the date of the enactment of this Act.
Limitation on credit and refund of COVID-related employee retention tax credits— Subsection (h) shall apply to credits and refunds allowed or made after January 31, 2024.
Amendments to extend limitation on assessment— The amendments made by subsection (i) shall apply to assessments made after the date of the enactment of this Act.
changed
Transition rule with respect to requirements To to disclose information, maintain client lists, etc— Any return under section 6111 of the Internal Revenue Code of 1986, or list under section 6112 of such Code, required by reason of subsection (d) of this section to be filed or maintained, respectively, with respect to any aid, assistance, or advice provided by a COVID–ERTC promoter with respect to a COVID–ERTC document before the date of the enactment of this Act, shall not be required to be so filed or maintained (with respect to such aid, assistance or advice) before the date which is 90 days after such date.
changed
Provisions not To to be construed to create negative inferences—
changed
Knowledge requirement for purposes No inference with respect to application of penalty for aiding and abetting understatement knowledge requirement to pre-enactment conduct of tax liability—COVID-ERTC promoters, etc— Subsection (b) shall not be construed to create any inference with respect to the proper application of section 6701(a)(3) of the Internal Revenue Code of 1986 with respect to any aid, assistance, or advice other than provided by any COVID-ERTC promoter on or before the date of the enactment of this Act (or with respect to any other aid, assistance, or advice to which such subsection applies.does not apply).
Requirements to disclose information, maintain client lists, etc— Subsections (d) and (k) shall not be construed to create any inference with respect to whether any COVID-related employee retention tax credit is (without regard to subsection (d)) a listed transaction (or reportable transaction) with respect to any COVID–ERTC promoter; and, for purposes of subsection (j), a return or list shall not be treated as required (with respect to such aid, assistance, or advice) by reason of subsection (d) if such return or list would be so required without regard to subsection (d).
Regulations— The Secretary (as defined in subsection (c)(5)) shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section (and the amendments made by this section).