The Missing Pieces from the Omnibus Bill

• December 28, 2022
• Nathan Logan

Congress passed a $1.7 trillion dollar spending bill at the tail end of last week. In likely the last major piece of legislation Congress will pass before Republicans take control in the new year, many initiatives were included as lawmakers pushed to avert a government shut down and get home for the holidays before winter storms took hold across much of the U.S. In fairness, there is too much in the bill to cover in one post. Look for a CLA article soon to cover the bill in more detail. The bill includes $858 billion in defense funding and $772.5 billion for non-defense discretionary programs. Increases respectively of roughly 8% and 5%. Factoring in inflation, one could say non-defense discretionary programs actually received a decrease in funding.

Rather than focus on what is in the bill, let’s point out the major items that weren’t. Notably, a few items that we feel our readers may care deeply about.

• Bonus depreciation will start to phase out in 2023. There was some discussion among those in Congress of extending 100% bonus through the end of 2025.
• Section 174 research expenditures will need to be capitalized and amortized over 5 years for expenditures incurred in the U.S. Though support exists on both sides of the aisle to remove this requirement and continue to allow full expensing, like many things in Washington, it appears to be an issue of “this” for “that”. If something can get done, it may take extending the enhanced child tax credit which expired at the end of 2021 to give reprieve to individuals as well as businesses.
• Section 163(j) business interest expense limitations will no longer addback depreciation when calculating the allowable interest expense beginning in 2022. For many large businesses this will impact their current year deductibility of interest expense as depreciation, especially for transportation companies, is usually a significant amount.
• As mentioned above, the enhanced child tax credit which provided qualifying individuals $3,600 per child under age 6, and up to $3,000 per child ages 6 through 17, expired at the end of the 2021 tax year. The amounts reverts back to $2,000 for qualifying children under the age of 17 for 2022.

For businesses, the lack of any law changes on bonus depreciation, Section 174 and Section 163(j) could have a large impact on taxable income. Be prepared, talk to your advisor and reach out to a CLA tax professional if you have questions.

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