Many taxpayers have been closely monitoring Congress to see if tax extenders could provide much needed federal income tax relief regarding the 2021 and 2022 Tax Cuts and Jobs Act sunset provisions, including R&E capitalization and the tightening of the interest expense limitation rules. On Friday June 9th, the House of Representatives introduced three bills in the House Ways and Means Committee that could alleviate burdens placed on privately owned businesses. Learning Objectives • Analyze the Tax Cuts and Jobs Act sunset provisions for the 2022 and 2023 taxable years. • Assess the new tax law proposed in the Build It In America, Small Business Jobs, and Tax Cuts and Working Families Acts. • Evaluate the US budgetary impact of the proposals.

1. Congressional Update on Potential Tax
Legislation For You and Your Business
June 22, 2023

2. withum.com
Speaker Bio
Lynn Mucenski-Keck, CPA, MST
Withum National Lead, Federal Tax Policy
Forbes Contributor
S Corporation Association Advisor
Testified as an expert witness for the House Committee
on Small Business in April 2023
Contact Information:
lmucenskikeck@withum.com
(929) 379-4543

3. withum.com
1. Identify income tax provisions that sunset in the 2022 or 2023
taxable year & beyond
2. Review Congressional Make-Up
3. Discuss highlights included in proposals
 Build It In America (H.R. 3938)
 Small Business Jobs (H.R. 3937)
 Tax Cuts and Working Families Act (H.R. 3936)
4. Discuss how you can make an impact
Agenda

4. withum.com
Effective January 1,
2022
Effective January 1,
2023
Effective January 1,
2026
R&E Capitalization X
Interest Expense Limitation Based on EBIT X
Bonus Depreciation Phase out by 20% until
zero in 2027
Increased individual income tax bracket to 39.6% X
Qualified Business Income Deduction (aka 199A,
20% Pass-through deduction)
X
Increased AMT Exemption Amount (Currently $ 1
million MFJ , $500,000 single)
X
Increase in standard deduction of individuals X
Increase in Estate Tax Exemption (Currently
$25.84 million MFJ or $12.91 single)
X
Sunsetting Income Tax Provisions

5. withum.com
• Budget Reconciliation Process
• Generally, need 60 Senate votes (three-fifths majority) to pass a law
• Budget reconciliation is a special parliamentary procedure to expedite the passage of
certain budgetary legislation; only need a simply majority
• Budget reconciliation legislation isn’t’ subject to filibuster
• Congressional Budget Act permits using reconciliation for legislation that changes spending,
revenues, and/or the federal debt limit
• To start the reconciliation process, the House and Senate must agree on a budget resolution
that includes “reconciliation directives” for specified committee
• As part of the Tax Cuts and Jobs Act (“TCJA”) passed in December 2017, the instructions
required the House and Senate tax-writing committees to propose legislation increasing
the deficit by no more than $1.5 trillion over ten years
• Obama Administration utilized for the ACA, the George W Bush Administration utilized
for tax cuts, Clinton Administration utilized for an increase in certain taxes
Why are income tax provisions
sunsetting?

6. Congressiona
l Budget
Office Cost
Estimate

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R&E Capitalization
Research and experimental expenditures
were immediately deductible prior to the
2022 taxable year
Research and experimental expenditures
are required to be capitalized over a 5 or
15-year period

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Interest Expense Limitation
Prior to the 2022 taxable year, the
30% limitation on net business
interest expense was applied to
EBITDA
Starting in the 2022 taxable year, 30%
limitation on net business interest
expense is applied on EBIT

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Bonus Depreciation
100% bonus depreciation is allowed
for qualified property placed in service
after September 27, 2017, but before
January 1, 2023
Bonus depreciation is reduced by 20%
starting in 2023
2023: 80%
2024: 60%
2025: 40%
2026: 20%
2027: 0%

10. Cash Impact
(Private
Businesses
Reach Their
Tipping Point
Over Increased
Tax Bills)

11. Polling Question #1

12. Senate Democrats
Majority Leader Chuck Schumer (D-NY)
Whip Dick Durbin (D-IL)
Senate Finance
Committee Chair
Ron Wyden (D-OR)
Senate Republicans
Minority Leader Mitch McConnell
(R-KY)
Whip John Thune (R-SD)
Senate Finance
Committee Ranking
Member
Mike Carpo (R-ID)
Senate

13. House Democrats
Minority Leader Hakeem Jeffries (D-NY)
Whip Katherine Clark (D-MA)
House Ways and
Means Committee
Ranking Member
Richard Neal (D-MA)
House Republicans
Speaker Kevin McCarthy (R-CA)
Majority Leader Steve Scalise (R-LA)
Whip Tom Emmer (R-MN)
House Ways and Means
Committee Chair
Jason Smith (R-MO)
House of Representatives

14. Polling Question #2

15. Build It in America Act (H.R. 3938)
Section 101: Deduction for Research and Experimental (R&E) Expenditures
• Provides for an immediate deduction for any research or experimental expenditures which are
paid or incurred by the taxpayer during the taxable year in connection with the taxpayer’s trade
or business
• At the election of the taxpayer, R&E expenditures can be deducted ratably over 60 months
• Any amount paid or incurred in connection with the development of any software shall be treated
as a research or experimental expenditure
• Section 280C elections would again be available
• Section 59(e) (Write off of R&E expenses over 10 years) would be allowed to be made if an
amended return is filed
• For taxpayers who already filed their 2022 tax returns to capitalize R&E expenditures, they can
elect to forgo amending their 2022 tax return and instead make an automatic change in method
of accounting immediately expensing R&E capitalized costs in the succeeding taxable year
• Requirement to capitalize R&E expenditures would apply to taxable year beginning after
December 31, 2025

16. Build It in America Act (H.R. 3938)
Section 102: Extension of allowance for depreciation, amortization or depletion in
determining the limitation on business interest
• When calculating the interest expense limitation for the taxable year after
December 31, 2022, depreciation, amortization, and depletion are allowed to be
added back when determining adjusted taxable income
• Taxpayers can elect to apply the utilized of EBITDA retroactively to tax years being
after December 31, 2021
• Requirement to utilize earnings before income tax after depreciation and
amortization would start again beginning after December 31, 2025

17. Build It in America Act (H.R. 3938)
Section 103: Extension of 100 percent bonus depreciation
• For qualified property placed in service between December 31, 2022 and
December 31, 2025
• Bonus depreciation would decrease to 20% for property placed in service
After December 31, 2025, through January 1, 2027
• Bonus depreciation would be zero for property placed in service after
January 1, 2027

18. Build It in America Act (H.R. 3938)
Supply Chain Security
Section 201: Termination of Hazardous Substance Superfund Financing Rate
• Repeals the Hazardous Substance Superfund excise tax rate for crude oil and
petroleum products
Section 202: Election to Determine Foreign Income Taxes Paid or Accrued to
Certain Western Hemisphere Countries Without Regard to Certain Regulations
• Western hemisphere includes possessions of the United States, foreign
countries located in North, Central, or South America (excluding Cuba and
Venezuela)

19. Build It in America Act (H.R. 3938)
Supply Chain Security
Section 203: Imposition of a 60% excise tax on the purchase of US farm and
ranch lands by entities form a “country of concern”
• Countries of concern include People’s Republic of China, the Russian
Federation, Iran, North Korea, Cuba, and the regime of Nicolas Maduro in
Venezuela

20. Build It in America Act (H.R. 3938)
Repeal of Special Interest Tax Provisions
• Clean electricity production credit effective for facilities placed in service
after December 31, 2024 (IRC §45Y)
• Clean electricity investment credit effective for property placed in service
after December 31, 2024 (IRC §48E)
• Previously owned clean vehicle credit effective for vehicles acquired after
December 31, 2022 (IRC §25E)*
• Qualified commercial clean vehicles effective for vehicles acquired after
December 31, 2022 (IRC §45W)*
*A transition rule is provided wherein the repeal would not apply to any vehicle acquired by a taxpayer
pursuant to a binding contract prior to the date of introduction of the Act and placed in service within a year
of the date of introduction.

21. Build It in America Act (H.R. 3938)
Modify Clean Vehicle Credit
• The Act proposes a 200,000 vehicle per manufacturer limitation, including
new qualified plug-in elective drive motor vehicles manufactured and sold in
the United States after December 31, 2009
• No credit is allowed unless at least 80% of the battery consists of critical
minerals extracted or processed in the United States or in any country in
which the United States has a free trade agreement
• No credit is allowed unless all the components contained in the battery were
manufactured or assembled in North America
• Base credit of $2,500 is provided, which is increased by $417 for each
kilowatt hour of capacity in excess of 5-kilowatt hours. The additional credit
received for kilowatt hours cannot exceed $5,000. Therefore, the maximum
credit would not exceed $7,500

22. Build It in America Act (H.R. 3938)
Budget Impact
Proposals Revenue
TCJA Cliffs -$47.4 billion
Supply Chain Security -$11.5 billion
Clean Energy Repeal and Modifications +216.1 billion
Total Estimated Budget Impact +$156.9 billion

23. Small Business Jobs Act (H.R. 3937)
• Section 2: Increase in Threshold for requiring information reporting with
respect to certain payees
• Increase the independent contractor information reporting threshold from $600 to
$5,000
• Section 3: Restoration of reporting rule for third-party network
transactions
• Third-party settlement organization would be required to report information of a
payee if the amount of the transactions exceed $20,000 and the number of
transactions exceeds 200

24. Small Business Jobs Act (H.R. 3937)
• Section 4: Modification to Qualified Small Business Stock
• Adjust the holding period requirement to be at least 3 years with the exclusion
being 50% for 3 years, 75% for 4 years and 100% for 5 years or more
• Extends exclusion for Section 1202 gains to stock in S corporations
• Section 5: Increase In Limitations of 179 Expensing
• Increase maximum 179 expenses to $2.5 million (currently $1,160,000) and the
phase-out threshold amount to $4 million (currently $2,890,000)
• Section 6: Establishment of special Rules for Capital Gains Invested in Rural
Opportunity Zones

25. Tax Cuts and Working Families Act (H.R. 3936)
Section 2: Rename the Standard Deduction To Guaranteed Deduction
Section 3: Bonus Guaranteed Deduction for 2024 and 2025
• $4,000 for MFJ and SS
• $3,000 in the case of head of household and
• $2,000 for all others
Bonus guaranteed deduction is reduced by 5% for taxpayers with modified adjusted gross
income of
• $400,000 for MFJ and SS
• $300,000 in the case of head of household and
• $200,000 for all others

26. Budget Impact For All Three Bills
Proposals Revenue
TCJA Cliffs -$47.4 billion
Supply Chain Security -$11.5 billion
Clean Energy Repeal and Modifications +216.1 billion
Building In In America +$156.9 billion
Small Business Jobs Act -$81billion
Tax Cuts and Working Families Act -$96.7 billion
Total of All Bills -$21 billion

27. Polling Question #3

28. All roads point to 2026 for major tax reform….
• Even with the House bills proposed, the impact of the legislation will generally only
extend through the 2025 taxable year
• 2023 taxable year will be focus on extenders
• 2024 and 2025 focus on expiring provisions
• CBO Report (Phil Swagel, Director):
 Revenue is smaller than this year than expected, but unclear as California has been delayed
 Noted that they already have budget issues when projecting 2025 rules to sunset
 Increase in interest rates-net interest outlays outweigh additional
funding/programming. The impact of the interest expense on federal debt is
delayed. Normally a 6 year cycle, so more impactful in the next few years.
 Expressed the fiscal budget crisis is no longer on the horizon, but that it is here; need a
savings of $5 trillion over the next 10 years to hold debt/GDP ratio
 The Social Security trust fund is projected to be exhausted in 2033 based on CBO.
 Realized he was pessimistic, but did still note that capital and people still wanted to come to
the U.S., which remains to be a strength

29. What can I do?
• Talk to your Representatives and Senators
• This doesn’t have to be a trip to D.C. Consider setting up a conference call or
emailing your representatives with your “story”
• Work with your national and state association groups to ensure they are
lobbying on your behalf, understand the issues, and have the right talking
points
• Tax Planning will be a must. Reach out to your tax advisers to ensure your
understanding and the cash impact that tax legislation is having on your
business.

30. Fiscal Responsibility Act of 2023 (Debt Limit)
Discretionary Spending Limtis
Defense Non-Defense Total
FY 2024 886,349 703,651 $1,590,000
FY 2025 895,212 710,688 (only 1% growth) $1,605,900
• CBO projects 2023 federal outlays of $6.2 trillion, $1.7 million discretionary
• Under the Fiscal Responsibility Act, discretionary spending for FY 24 cannot
exceed $1.59 trillion
• Top-line numbers approved on a party-line vote in the Appropriations
Committee last week only add up to $1.47 trillion
• The defense allotment is unchanged, however, meaning Republicans plan to
cut $120 billion from other areas, such as agriculture and human services
• Could this lead to a potential governmental shutdown this fall?

31. Fiscal Responsibility Act of 2023 (Debt Limit)
• Rescinds $1.4 billion (of the originally $80 billion provided in the Inflation Reduction Act)
in funding provided for IRS in the Inflation Reduction Act
• Allows the IRS to cut the funding from any portion of the IRA appropriation, with the exception of
the $8 billion designated explicitly for taxpayer services and business-systems modernization
• White House informed lawmakers of its “handshake agreement” with House Republicans
to redesignate an additional $20 billion of the IRS’s pot of IRA funding for “other non-
defense priorities

32. Polling Question #4

33. withum.com
Questions?