Tax & Assurance Guidance

Insights from Washington: Build Back Better Act Stalled

Posted on December 21, 2021 by

Sarah Russell

Sarah Russell

Share This

Share on facebook
Share on twitter
Share on linkedin
Share on email

Tax practitioners across the U.S. can enjoy the holiday season and maybe have that extra glass of eggnog this year knowing we will not have a massive legislation to digest before the new year begins! Last weekend Congress conceded that there are not enough votes to pass the massive Build Back Better Act (BBBA). Senate Majority Leader Chuck Schumer announced the Senate will vote on the Act in January despite Senator Joe Manchin’s opposition to the bill. Staffers continue to meet with the Senate parliamentarian to determine which portions of the bill they may have to drop so the legislation can pass under the reconciliation process.

Manchin has said he wants a new bill that goes through Senate committees and focuses on rolling back the 2017 Trump tax cuts. He could not support the temporary nature of some of the social programs and has said the real cost of the bill is much larger than advertised if the programs were permanent.

Without this legislation there are two items of particular importance to many people.

1. Research and Development Expenses

The Tax Cuts and Jobs Act required taxpayers to capitalize qualified research expenses and amortize those costs over five years beginning in 2022. The BBBA would have pushed that requirement out until 2026.

This requirement is especially impactful for taxpayers taking advantage of the research and development credit, as costs that are qualified for credit purposes will now be required to be capitalized rather than expensed as incurred.

Below is an example of the estimated tax impact in year one for a C Corporation with $1 million in qualified research expenditures.

  Before Change After Change
Taxable Income $1,000,000 $1,800,000
Tax Before Credits $   210,000 $   378,000
R&D Credit Generated $     65,000 $     65,000
Tax Liability After Credits $   145,000 $   313,000

In this example, the taxpayer would be required to pay an additional $168,000 of taxes in the first year.

Little guidance has been issued on this specific piece of legislation to date, however as the example indicates, the credit becomes a less useful cash planning tool than what it has been in years’ past. It is possible a stand-alone piece of legislation could be passed to fix this issue; however, taxpayers should not plan for that as we head into 2022.

2. Child Tax Credit Payments

The IRS sent the last advance child tax credit payments on December 15. The BBBA would have extended those payments through December 2022.  Even if Congress comes back after the new year and can quickly pass legislation, it will take the IRS time to reinstate those payments.

We will update you with any new developments in next week’s blog. If you have any questions, please contact us.

Sarah Russell


Sarah leads the firm’s domestic and international tax practice and is known for the practical & passionate way she advocates for clients.

Related Insights

Tax & Assurance Guidance

Foreign Tax Withholding: What You Need to Know

Posted on April 26, 2022 by

Rob Cheyne
Making service payments to a foreign person is a common cross-border transaction. U.S. taxpayers need to be aware of the applicability of withholding tax and related reporting requirements to ensure they comply and avoid unintended consequences. A U.S. payor must collect withholding tax and remit it to the IRS in the case it is applicable.

Tax & Assurance Guidance

SALT Relief for Partners and S Corps

Posted on February 23, 2022 by

Miroslav Georgiev
With small businesses supporting nearly 47% of U.S. employees, states have been advocating for pass-through entities, operating partnerships and S corporations that have been harshly impacted by the Tax Cuts and Job Act ‘s state and local taxes deduction limit. Recent legislative activity is finally providing relief for many of these businesses. 

Tax & Assurance Guidance

IRS Provides Relief on K-2 and K-3

Posted on February 17, 2022 by

Margaret Amsden
In an attempt to provide more transparency with regard to reporting of foreign activity and/or information to foreign owners, the IRS came out with two new forms: Schedule K-2 (an addendum to the Schedule K) and Schedule K-3 (an addendum to the Schedule K-1). Learn about the latest K-2 and K-3 reporting requirements issued by the IRS.

Sign up for our newsletters

Get general business and industry-specific news and knowledge straight from our accounting specialists.

The Sound of Automation Podcast

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Insights & Perspectives

Data-driven decision making: 3 key insights for business owners

What does it take to build a data-driven business? For self-reliant leaders who feel they’ve hit a plateau when it comes to scaling a business, adopting a data-driven approach can be a breakthrough success strategy. Using data in a more focused way helps good engineers become good entrepreneurs. It’s about creating balance. Here we take a look at key insights for business owners when using data in decision making.

Read More

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content