House Approves Bipartisan, Bicameral Tax Package
February 1, 2024
This week, the House overwhelmingly approved a tax package (H.R. 7024) that would expand the Child Tax Credit (CTC) in exchange for a handful of business tax benefits. Specifically, the measure, known as the Tax Relief for American Families and Workers Act, would increase the maximum refundable amount per child from $1,600 under current law to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, with the value of the credit adjusted for inflation in the final two years. The bill also includes a flexible income lookback allowing taxpayers to choose either current or prior-year income for calculating the credit in 2024 and 2025.
On the housing front, H.R. 7024 would increase the state housing credits under the Low-Income Housing Tax Credit (LIHTC) program, which is an important resource for creating affordable housing. Pursuant to the legislation, funding for LIHTC would increase by 12.5 percent (up from nine percent) through fiscal year 2025, allowing states to allocate more credits for affordable housing projects. Finally, the measure includes a provision that would exempt all wildfire relief payments (since 2020) from federal income taxes. This includes a tax exemption for emotional distress, lost wages, legal fees, and additional living expenses.
It should be noted that a group of lawmakers from New York criticized the measure for not including an increase in the state and local tax (SALT) deduction. To appease those members and others from high-cost states, House leaders agreed to hold a vote on a separate bill to address the SALT issue. That proposal (H.R. 7160), which could be considered on the House floor in the coming days, would allow married couples to claim a deduction of up to $20,000 (up from $10,000) for 2023, as long as their adjusted gross income is under $500,000.
Looking ahead, and while the broader tax measure was approved by the House on a wide margin, its fate in the Senate is less certain. A combination of election-year politics, policy concerns, and a packed legislative agenda could delay, or even derail, consideration in the upper chamber.
Meanwhile, negotiations on a border security and immigration package continued in the Senate this week. It should be noted that these talks are linked to efforts to advance the Biden administration’s foreign-aid package for Ukraine, Israel, Taiwan, and others. While the two are unrelated, Republican lawmakers have insisted that the supplemental spending request be paired with border security reforms. With a potential bipartisan proposal expected to be unveiled in the coming days, Majority Leader Chuck Schumer (D-NY) has promised a vote on the agreement next week.
Looking ahead, the yet-to-be-released measure is expected to face close scrutiny from House and Senate conservatives. While Senate Minority Leader Mitch McConnell (R-KY) has expressed optimism that the legislation will have enough support within his caucus, House Speaker Mike Johnson (R-LA) has warned that the bill could be dead on arrival in the lower chamber. Further complicating matters, former President Trump recently declared that he could not support any immigration-related agreement that comes out of the Senate. The expected changes to immigration policy will draw some Democratic opposition as well, particularly from progressives.
Rep. Garamendi Introduces Bill to Reauthorize, Improve HUD’s HOME Investment Partnerships Program
Congressman John Garamendi (D-CA) recently introduced legislation (H.R. 7075) that seeks to address the affordable housing crisis by reauthorizing and increasing funding for the HOME Investment Partnerships Program. HOME is the largest federal affordable housing block grant. It helps state and local housing agencies to support a wide variety of housing needs, from financing new construction and home repairs to funding down payment and rental assistance. The program also provides funding to housing developments financed by the Low-Income Housing Tax Credit. Specifically, H.R. 7075 would authorize $5 billion for the HOME program in fiscal year 2024, with a five percent annual increase through 2028. The bill also would enhance the program’s capacity to provide down payment and home repair assistance, support Community Land Trusts, and increase funding access for nonprofits.
House Panel Approves Bill to Improve Wildfire Response
Earlier this week, the House Transportation and Infrastructure Committee approved legislation – the Wildfire Response Improvement Act (H.R. 7070) – that would update FEMA’s Fire Management Assistance Program to better address pre- and post-wildfire mitigation efforts. Pursuant to the bill, FEMA would be directed to update its Public Assistance Program to include guidance on wildfire-specific recovery challenges, including debris removal, emergency protective measures, and the resulting toxicity of drinking water resources. The measure also would improve FEMA’s benefit-cost analysis for wildfire mitigation projects to help them be more competitive for federal funding.