Tax Package Advances in the House

As expected, House Republicans released their long-awaited tax package late last Friday and promptly marked up and passed the measure out of the House Ways & Means Committee on Tuesday. The committee approved legislation that extends the 100 percent bonus depreciation (full expensing) for property placed in service after December 31, 2022 and before January 1, 2026. Extension of the full expensing benefit has been a high priority for ABMA and was an issue we discussed during Advocate Day in March.

Also included in the package is language extending the research and development (R&D) tax credit. Specifically, the legislation would permit companies to fully write off their R&D costs in the same year in which they were incurred. The provision extends this benefit from December 21, 2021 to January 1, 2026.

Finally, the measure includes language restoring the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) standard for calculating adjusted taxable income. That standard switched to EBIT under a provision of the Tax Cuts and Jobs Act (TCJA) and this move reduced a business’s ability to deduct interest expenses. This legislation would extend EBITDA retroactively to January 1, 2023 and forward to January 1, 2026.

What was not included in the measure is an extension of the Sec. 199A deduction for S-Corporations and other pass-through entities. Recall this is the 20 percent deduction that was included in the TCJA to attempt to level the playing field between traditional C Corporations and the S-Corporation community. While this provision does not expire until after 2025, small and medium sized business groups have been advocating that an extension of Sec. 199A be included in the package. We will continue our advocacy both in the House and Senate over the coming weeks and months.

We expect a floor vote on this measure later in June. ABMA is hopeful that this package will begin the process of fashioning a compromise bill that can make it to the President’s desk some time later this year.