Joint Tax Committee Proposal Retroactively Extends 100% Bonus Depreciation To 2023, Makes Permanent Through 2025

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Consulting Group

A joint proposal released by the chairmen of the Senate Finance Committee and the Ways & Means Committee on January 16, 2024 includes provisions to retroactively extend 100% bonus depreciation to all of the 2023 tax year, and makes it permanent through 2025 for most types of business assets.  The proposal is included as part of a larger tax and economic package released under the title The Tax Relief for American Families and Workers Act of 2024, and would cost an estimated $78 billion according to the Congressional Budget Office (CBO).   

While actual legislation for the proposal has yet to be drafted, this is encouraging news for the business community, which has benefited from full bonus expensing since the Tax Cuts and Jobs Act tax reform legislation was passed in 2017.  For many years prior to 2017, Congress enacted an annual ‘extenders’ package, often in December or January for the preceding year, to retroactively extend bonus depreciation which had, at the time, fully expired under the sunset provisions contained in the Bush Administration tax cuts from the early 2000s.

As 2023 wound to a close, concerns grew that similar sunset provisions in the Tax Cuts and Jobs Act (TCJA) would be allowed to set in.  These phaseouts on items like bonus depreciation began taking effect last year, and under TCJA are set to eventually bring about the same uncertainty that existed for taxpayers prior to 2017’s tax reform, unless Congress intervenes. 

This proposal is a good first step toward adding some certainty, temporarily at least. Acceptance for the proposal is not currently unanimous, however it is bipartisan, and if enough support grows, leaders in Congress will next have to decide when and how to move the legislation forward.  It is likely this bill will be part of a larger bill.  Many are hopeful this will occur prior to February 16 which begins a 17-day recess, but the path forward is still not yet clear. 

Key Takeaways Under the Proposal

  • 100% bonus depreciation extended retroactively to January 1, 2023 for most business assets 

  • 100% bonus depreciation made permanent through December 31, 2025 for most business assets 

  • Other items such as child tax credits addressed and expanded

Check back for updates.  We will keep you informed as we continue to monitor for new developments as they occur.