Status of Pending Tax Legislation

Posted by Lee Reams Sr., BSME, EA on

As Congress struggles working across the aisles and passing legislation, this article looks at the status of certain legislation.

As of June 5, 2024 

Proposed Employer Childcare Assistance Credit Increase

An increase in the amount of the tax credit that businesses can claim for investing in childcare services for their employees is the substance of bipartisan legislation introduced in the House on 05/23/2024.

The Child Care for American Families Act ( HR 8540 ), would amend Code Sec. 45F to increase both the percentage of a business' expenses eligible for the credit and the maximum credit value.

The legislation would generally increase the current credit amount of 25% to 40% of qualified childcare expenditures. For small businesses, with 500 or fewer employees, the credit would be 50% of expenditures. For businesses located in eligible census tracts the credit would be 60%. The annual amount of qualified expenses would be capped at $2 million and the total credit at $1.2 million (60% of $2 million).   Businesses may also qualify for an annual childcare resource and referral costs credit of 10%, capped at $150,000.  

22 States Challenge the Corporate Transparency Act

If you recall, a federal district court in Alabama declared the Corporate Transparency Act (CTA), a piece of legislation aimed at combating money laundering, unconstitutional. Federal Court Judge Liles C. Burke found the act to exceed the constitutional boundaries of legislative power. The court's opinion highlighted that while the goals of the CTA might be "sensible and praiseworthy," how Congress sought to achieve these ends—by regulating millions of entities and their stakeholders based solely on their corporate status—lacked precedent and a sufficient nexus to any enumerated power. In essence, in the court’s view the act overreached, infringing on the rights and freedoms of businesses by imposing undue federal oversight and reporting requirements.

Because the Court’s ruling only applies to the plaintiffs who brought the suit, the National Small Business United (NSBA members) and Isaac Winkle, a member of NSBA, others must still abide by the CTA. Thus, for the time being others are still subject to the beneficial ownership information (BOI) reporting requirements as developed by FinCEN.

However, now 22 states joined forces and lobbied the Eleventh Circuit Court to uphold the lower court’s decision enjoining enforcement of the Corporate Transparency Act's reporting requirements for plaintiffs in the Alabama lawsuit, but based upon federalism principles. Federalism refers to the federal government usurping states’ rights referring to the stated purpose of the CTA - to "set a clear, Federal standard for incorporation practices."

Stay tuned, as oral arguments are set to begin in September. 

Also, the House Small Business Committee discussed the challenges with implementing the CTA, with some calling for a revamped roll-out process and others calling for repeal.

BUT, in the meantime, the conservative approach is to follow FinCEN’s requirements. 

 Disaster Tax Relief Bill Passes the House

You may remember that the House passed the bipartisan Tax Relief for American Families and Workers Act ( HR 7024 ) last January, but it has been stalled in the Senate ever since.  Included in that stalled legislation were disaster relief provisions. 

Becoming concerned about disaster victims, Representative Greg Steube (R-FL), sponsored the Federal Disaster Tax Relief Act ( HR 5863 ) which essentially includes the disaster relief provisions included in HR 7024 but in a stand-alone bill. That bill was passed by the House by a 382 to 7 vote and now goes to the Senate. 

If passed, the legislation will exclude compensation received for losses, damages, and expenses incurred in a federal disaster. It also includes a provision excluding compensation received by the victims of the East Palestine, Ohio train derailment.