A powerful bipartisan duo announced a significant tax deal Tuesday that would combine a temporary expansion of the child tax credit with long-sought provisions for the business world.

It’s a deal that faces uncertain prospects of being enacted. But if it can find its way into law quickly, it could even be felt during the upcoming tax filing season.

The pact is the culmination of months of talks that have long centered around an idea of pairing a Republican priority to renew three expired business world deductions from the 2017 Trump tax cuts with a keen Democratic focus on the pandemic-era enhanced child tax credit.

Read more: Tax credit vs. tax deduction: What's the difference and which is better?

"Fifteen million kids from low-income families will be better off as a result of this plan," said Senate Finance Committee Chair Ron Wyden in a statement Tuesday, adding, "given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy."

The plan from Wyden and House Ways and Means chair Jason Smith is being dubbed the "Tax Relief for American Families and Workers Act of 2024" and would allow larger families greater access to the child tax credit while also phasing in an incremental increase to the refundable portion of the credit to allow poorer families to access.

The deal includes another significant change by adjusting the maximum tax credit of $2,000 based on inflation for 2024 and 2025.

The deal marks a possible return of sorts for the landmark credit that temporarily helped to cut child poverty in half. That one-year measure was signed into law in 2021 by President Biden and was structured differently by temporarily raising the credit to a maximum of $3,600 per child. It also made the credit refundable and paid out as monthly benefits.

One last-minute addition to the package announced Tuesday was another measure designed to increase the supply of low-income housing through an enhanced low-income housing tax credit. The housing portion of the deal would also lessen an existing bond financing requirement.

The deal now faces a difficult challenge in actually being passed and signed into law but boasts powerful backers who will push it in the weeks ahead.

The significant bipartisan breakthrough also comes ahead of a 2025 that is expected to be heavily focused on tax debates in Washington with a host of additional provisions in the 2017 Trump tax cuts set to expire on Dec. 31, 2025.

This week's deal — if enacted — would serve as a stopgap of sorts. Many of its changes both around the child tax credit and the business world would be extended only to that same end-of-2025 date, raising the stakes of that negotiation even higher.

Changes for the business world

The deal also includes the restoration of three tax changes for the corporate world that began to expire at the end of 2021. The bill would allow companies to deduct more for things like research and development, equipment investments, and interest costs.

The deal "strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs," said Rep. Smith in his statement, adding an estimate that the provisions would support over 21 million jobs.

The research and development provisions would allow companies to again access up-front deductions for their domestic research and development expenses. They would get an immediate break, rather than the current five-year window.

Another provision around equipment investments would allow a 100% write-off in the coming years for businesses that invest in machines or new production facilities. The 2017 tax law had set the level at 100% but with a gradual phase-out, including a drop to 60% in 2024.

The deal immediately gained business world backing, with Business Roundtable CEO Joshua Bolten saying Tuesday morning that "all three of these tax policies have a long history of bipartisan support and are critical to strengthening America’s global competitiveness."

The deal also includes a provision to permanently remove a long-bemoaned quirk that led companies with a footprint in both the United States and Taiwan to face double taxation. The deal also includes small business provisions and additional assistance for disaster-struck communities.

Nancy McLernon, the CEO of the Global Business Alliance, added her praise of the overall deal, noting the Taiwan provisions "will make the US that much more attractive for Taiwanese companies to invest here and create more American jobs."

An uncertain political landscape

The costs of the bill have not yet been formally scored by the Congressional Budget Office, but it is expected to have a total cost of between $70-80 billion, split equally between the child tax credit and business provisions.

The plan is to pay for it by implementing changes to the pandemic-era employee retention credit by accelerating the deadline for filing backdated claims.

That program had been designed to help certain businesses keep employees on the books during the pandemic. But it has been the subject of controversy after revelations that tens of thousands of filers tried to access the program in 2020 and 2021 using either entities that did not exist or businesses with no paid employees.

The child tax credit provisions would not immediately increase the maximum credit itself but would make more portions refundable, meaning the benefits could open to the poorest families who don’t make enough to trigger the credit currently.

Still, it could run into some resistance from the left.

On the child tax credit, "this falls far short of the reforms that Congress enacted for 2021," said Steve Wamhoff of the left-leaning Institute on Taxation and Economic Policy shortly after the deal was announced. He added that corporations "seem scarcely in need of more favors."

Nevertheless, he didn’t announce opposition to the deal, saying, "the fact that this legislation is a compromise does not mean that it is not worth enacting."

The credit has long been a Democratic priority but gained some notable allies across the aisle. In one memorable 2022 letter, figures like Newt Gingrich and Mike Huckabee argued for an expansion of the credit.

The hope now is to pass something quickly, even by the end of this month, to make the changes retroactive to 2023. But it faces uncertainty with some lawmakers potentially resistant to the deal and a packed congressional agenda before leadership for the weeks ahead, most notably a possible partial government shutdown at the end of this week.

Still, "my goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done," says Wyden.

This post has been updated with additional details.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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