The inability of Congress to include key tax extenders in the Consolidated Appropriations Act of 2023, signed into law on December 29, 2022, will increase the federal income tax bill for the majority of U.S. businesses. Coming into the new year, business owners likely breathed a sigh of relief that no major tax legislation was passed. However, significant tax law changes embedded in the Tax Cuts and Jobs Act (TCJA) are impacting the 2022 and 2023 taxable year, leaving many business owners scratching their heads trying to understand why their cash tax payments are so high.
Due to the limited majority of Republicans at the time the TCJA passed in December of 2017, the tax legislation could only be passed via a budget reconciliation process, which requires only a simple majority. Under the budget reconciliation process a bill cannot increase the deficit beyond a 10-year budget window. Therefore, the TCJA includes various sunset provisions or set expiration dates for many of the individual income tax legislation benefits.
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