Last week, the House Committee on Ways and Means approved its "One, Big, Beautiful Bill," keeping it on course to be passed by the full House by Memorial Day, after which it will be considered by the Senate. 

• Ways and Means legislative text
• Section-by-section
• Joint Committee on Taxation (JCT) explanation
• JCT revenue estimate
• Unified bill with non-text provisions

With a different budget baseline and different reconciliation instructions, the Senate is certain to take an eraser and red pen to the House bill. Here are a number of changes that the Senate may consider as it prepares to work its will:

Spending Cuts. Moderate Senate Republicans may seek to temper steep spending cuts to Medicaid and Supplemental Nutrition Assistance Program (SNAP) that were demanded by fiscal hawks in the House.

Inflation Reduction Act (IRA) Clean Energy Credits. The House bill contains terminations, phase outs and/or restrictions on most of the clean energy credits enacted by the IRA. Several Republican senators are already on record in defense of these credits, suggesting changes to the House provisions will be made.

The Big Three. The House bill contains temporary extensions of the "Big Three" already expired business tax relief provisions – 100% bonus depreciation, research and development (R&D) expensing, and the more favorable interest expense deduction limitation computation. The Senate may seek to make these provisions permanent and apply them on a retroactive basis.

International Retaliation Provisions. The House bill contains retaliation legislation based on legislation introduced by Chairman Jason Smith (R-MO) and Representative Ron Estes (R-KS). With no companion Senate legislation to the underlying House bills, it will be interesting to see the Senate's reaction, particularly given the significant revenue ($116 billion) it raises.

The Debt Limit. The House bill contains a $4 trillion increase in the debt limit, whereas the Senate reconciliation instructions provide for a $5 trillion increase. The time sensitivity surrounding the issue – with the so-called "X date" estimated in August – may drive a compromise or force consideration of moving the debt limit separately.

Member Priorities. Beyond the permanency and extension of the expiring and expired Tax Cuts and Jobs Act (TCJA) provisions, additional tax relief in the House bill was limited to a number of campaign tax proposals put forth by President Trump. Senate Committee on Finance Chairman Mike Crapo (R-ID) indicated some receptivity to including member priorities in the Senate bill. For example, the International Competition for American Jobs Act, recently introduced by Senator Thom Tillis (R-NC), could serve as a menu of potential international tax provisions to be considered for inclusion in the bill.

The Byrd Bath. The Senate will need to make changes to ensure that the bill complies with Senate budget reconciliation rules which means at a minimum, the "One, Big, Beautiful Bill" title of the legislation, and even its table of contents, are subject to removal, as every provision needs to have a nonincidental budgetary impact under the Byrd Rule. In 2017, Senator Bernie Sanders (I-VT) led a successful effort to strike the title of the TCJA, whereupon it became the colloquial, but not official, title of the bill.

A Dash of SALT. House negotiations over an increase in the individual state and local tax (SALT) deduction cap are continuing as this Tax Take was drafted. It is reasonable to assume the Senate will have its own view on this controversial issue which pitches Republicans from high-tax states against fiscal conservatives.

Extenders. Aside from the TCJA provisions expiring at the end of 2025, there are a host of other important tax relief provisions – including the new markets tax credit, the work opportunity tax credit, and the controlled foreign corporation (CFC) "look-through" rule – that are set to expire at the end of the year. Although Chairman Smith expressed interest in pursuing extension of these provisions as part of a year-end bipartisan bill, there is hope that the Senate will include the extensions as part of the reconciliation bill. 

No matter what changes the Senate makes to the bill, the House will ultimately need to approve them. But first, we'll find out this week if House Republicans can muster the 218 votes needed to pass the bill and send it to the Senate. #TaxTake

In the News

Marc commented in CFO DIVE on the revival of the Big Three in the House's reconciliation bill, cautioning that "it's still got to get through the House floor and then through the Senate. So there's still opportunities and risks as the legislative process is far from over."

Upcoming Speaking Engagements

Jorge and Marc will moderate the "Tax Legislative Outlook" panel at the Federal Bar Association's Insurance Tax Seminar on May 29.

Marc will present a legal and regulatory outlook at the CalCPA 2025 Entertainment Industry Conference on June 26.  
 

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