Last Tuesday, Congress unveiled the $78 billion Tax Relief for American Families and Workers Act. This bipartisan proposal aims to address critical economic challenges while promoting the financial well-being of working families, stimulating economic growth, bolstering American competitiveness, and strengthening communities, with a particular focus on small businesses.
The legislation, which represents a compromise between House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), includes several provisions supported by the PA Chamber.
Specifically, the bill would restore immediate Research and Development (R&D) expensing, return to a pro-growth interest deductibility standard, and reinstate full expensing for businesses’ capital investments.
Immediate R&D expensing allows employers to instantly deduct research and development investments from their tax liability, while the pro-growth interest deductibility standard offers flexibility for employers dealing with higher interest rates.
Additionally, the reinstatement of full expensing for capital investments would allow Pennsylvania businesses to immediately deduct the entire cost of machinery and equipment, which provides an incentive for businesses to upgrade and modernize their infrastructure.
Significant limitations went into effect for R&D expensing and interest deductibility in 2022, and full expensing of capital equipment purchases began to phase out in 2023. In November, the PA Chamber joined a broad coalition in urging Congress to restore these pro-growth tax policies.
By restoring these provisions, the Tax Relief for American Families and Workers Act would empower employers to more easily navigate challenges, foster growth, and stay competitive, which would contribute to Pennsylvania’s (and the nation’s) economic resilience and prosperity.
A section-by-section breakdown of this legislation is available here.
On Friday, the House Ways and Means Committee voted 40-3 to advance the legislation. It now awaits consideration by the full House.