By the SEMA Washington, D.C., office
The U.S. House of Representatives passed H.R. 7024, the Tax Relief for American Families and Workers Act of 2024, with strong bipartisan support. The SEMA-supported bill passed by a margin of 357-70 and now awaits consideration in the U.S. Senate's Finance Committee.
The bipartisan $78 billion tax bill allows for the reinstatement of the expensing of research and development (R&D) and investments in equipment, reduces reporting for small businesses using subcontractors, increases the small business expensing cap by nearly 30% and expands the Child Tax Credit through 2025.
SEMA member companies can benefit from the following provisions in the bill:
Restores immediate expensing for R&D for tax years 2021 through 2025:
- Currently, businesses must deduct R&D expenses for research done in the United States over five years and over 15 years for research outside the United States.
- Allows businesses of all sizes to deduct the cost of their United States-based R&D investments during the year they were made--encouraging American innovation and improving our competitive position versus China and the rest of the world.
- The provision delays the date when taxpayers must begin deducting their research or experimental costs over five- and 15-year periods until tax year 2026.
Interest deductibility:
- Provides flexibility for businesses forced to borrow at higher interest rates to meet their payroll obligations and expand their operations.
- Starting in 2022, employers faced a more restrictive limit on the amount of business interest that they can deduct each year. Instead of using "earnings before interest, taxes, depreciation and amortization," companies can deduct interest expenses only up to 30% of their "earnings before interest and taxes" currently.
100% expensing:
- Restores full and immediate expensing for investments in machines, equipment and vehicles.
- Currently, businesses can only deduct 80% of the cost of equipment, machinery and vehicles, with the rest of the deduction claimed over the life of each asset.
Expand small business expensing cap:
- Increases the amount of investment that a small business can immediately write off to $1.29 million, a $290,000 increase above the current $1 million cap.
- Allows a taxpayer to expense the cost of qualifying property rather than recover such costs through tax depreciation deductions, subject to limitation. Qualifying property is defined as tangible personal property, off-the-shelf computer software and qualified real property that is purchased for use in the active conduct of a trade or business.
Cut red tape for small businesses:
- Adjusts the reporting threshold for businesses that use subcontract labor from $600 to $1,000 and indexes it for inflation, making the first update to the threshold since the '50s.
The Tax Relief for American Families and Workers Act is the product of bipartisan negotiations by House Ways and Means Committee Chair Jason Smith (R-MO) and Senate Finance Committee Chair Ron Wyden (D-OR). SEMA continues to advocate for legislative measures that benefit our 7,000 member companies that make up the automotive specialty-equipment industry, which supports over 1.3 million jobs across the United States and contributes more than $336 billion to the American economy each year.
For more information, contact Tiffany Cipoletti, SEMA's manager of federal government affairs, at tiffanyc@sema.org.