House, Senate tax chiefs announce deal on business deductions, low-income credits

Congress' top tax officials announced an agreement Tuesday morning that would strengthen the Child Tax Credit (CTC) and reinstate a business deduction stripped away as part of the 2017 Tax Cuts and Jobs Act to pay for lower corporate tax rates.

The CTC expansion would increase the maximum loan amount per child from $1,600 to $2,000 until 2025, while restoring business deductions for research and development expenses, interest payments and capital investments.

The agreement also includes provisions for increased low-income housing tax credits and a carve-out for Taiwanese companies in response to the United States' efforts to bring some of its high-end semiconductor industry to the country.

Tax officials want to eliminate the job retention tax credit to pay for the $80 billion deal. They argue that the Job Retention Tax Credit is being aggressively touted within the tax industry and has become a hub for fraudulent corporate activity.

House Ways and Means Committee Chairman Jason Smith (R-Missouri) said Tuesday morning that “American families need more tax relief, stronger Main Street businesses, more competitiveness with China, and more jobs.” “We will benefit from this bipartisan agreement that creates the following.” statement.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) said the proposal could help as many as 15 million children near the poverty line and increase the nation's low-income housing stock. He said it would be.

“At a time when so many people in Oregon and across the country are struggling with soaring rents and home prices, this plan's improvements to the Low Income Housing Tax Credit will create 200,000 new affordable housing units. “More than that will be built,” he said. In a statement.

“By encouraging research and development, the plan will also help foster innovation and strengthen economic competitiveness with China.”

It remains to be seen what the final legislative package for this tax deal will be, and whether it will be passed by the start of tax season on January 29th.

But some rank-and-file senators are already expressing enthusiasm about the prospect of a deal.

“Since I first introduced bipartisan legislation to restore the research and development credit in 2020, I have pushed hard to encourage American research and development, with bipartisan support in both the Senate and House of Representatives. I will continue to work with my colleagues and the business community to “close this deal,'' Sen. Maggie Hassan (D.N.H.) said in a statement, as it is clearly growing.

Some policy experts welcomed news of the agreement, which emerged in various forms at the end of 2023 and 2022.

“If this proposal takes full effect in 2025, it would lift approximately 500,000 children above the poverty line and alleviate poverty for an additional 5 million children,” the left-wing nonprofit group said. The Center on Budget and Policy Priorities wrote in a paper. analysis.

“This proposal would benefit more than 80% of the 19 million children who receive partial credit or no credit at all because their family income is too low.”