On January 16th, House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) announced agreement on The Tax Relief for American Families and Workers Act of 2024. They hope to get the bill enacted by January 29th, perhaps attaching it to a continuing resolution needed to fund government programs. The tax package agreement contains items of particular interest to aging services providers:
Low Income Housing Tax Credits: The package includes a restoration of the 12.5% LIHTC ceiling, in place from 2018 to 2021, allowing states to allocate more credits for affordable housing projects. This increase would be effective for calendar years 2023 through 2025. The tax package would also lower the bond-financing threshold to 30%, from the current 50%, for projects financed by bonds with an issue date before 2026.
- “The improvements this plan makes to the Low Income Housing Tax Credit will build more than 200,000 new affordable housing units,” Chair Wyden said in a statement. LeadingAge has advocated for these Housing Credit improvements and supports their inclusion in the tax package.
Employee Retention Credits: Most notably, the proposed revisions in this package terminate the submission period for all ERC claims on January 31, 2024. In addition, the statute of limitations for the IRS to investigate ERC claims is extended from five years to six years from the date of submission, but also extends the timeframe for taxpayers to claim valid deductions for wages if an ERC claim is deemed invalid. Also, the proposal clarifies definitions and significantly amplifies monetary enforcement penalties for ‘bad actor’ firms and/or persons who attempt to fraudulently file an ERC claim, either on behalf of a client or themselves. These increased penalties include:
- Significantly increasing the monetary penalty for intentionally understating a tax liability for financial gain, specifically from the ERC, from $1000 penalty to the greater of $200,000 or 75% of the gross income of the ERC promoter derived from their ERC activities for an organization, or $10,000 for an individual.
- Increasing the monetary penalty for not meeting due diligence requirements for filing an ERC claim from $500 to $1,000 per infraction for a paid tax preparer. In addition, this revision to the original law automatically implicates that paid tax preparer in the intentional understatement liability as described above and it appears that the promoter would be subject to both penalties.
- This proposed revision requires, similarly to other parts of the tax code, that any material advisor involved in an ERC claim is required to disclose information on certain essential transactions, along with a client list, to the IRS. These disclosures will be due 90 days after this proposed revision is enacted.
This proposed revision offers detailed definition of an ERC “promoter” firm, which appears to exclude accounting firms who typically charge an hourly rate to assist clients with this work.
