With mere weeks left in the working year, the current lame-duck Congress is under pressure to negotiate on taxes. Republicans want to see extensions of tax breaks for businesses, while Democrats are pushing to extend the amplified child tax credits that were available in 2021.
But will either side win?
It is difficult to say what, if any, compromise will be met. Both parties have been staunchly against the other side’s agendas since the beginning of the year, which is why we see so many provisions sunset.
If you missed our Tax Practice News webinar, check out the recording on our YouTube channel, for which tax changes are set to expire on 2022 returns and may impact planning and strategy for clients. Check out the record here.
The key to any tax provisions changed before year-end is that they will likely be some of the last major changes for the next few years. The incoming Republican-controlled House will be unlikely to negotiate on the Biden administration agenda.
The Democratic-controlled Senate is likely to shut down any measures passed through the House before the President can even veto them. The only future changes we will see will require deep negotiations and compromises to have any hope of passing.
Key Republican provisions seeking extension include extended research and development credits and a commitment to bonus depreciation extending past 2021 as well. Republicans hope to negotiate on these terms in exchange for some version of the expanded child tax credit but currently feel that the Democratic request of $3,600 per qualifying child puts the country into too much long-term debt.
How can accountants respond? As of now, tax planning based on the assumption that provisions will expire is the best bet for conservative tax estimates. We will see in the coming weeks what changes may await the upcoming filing season.
