Senate tax bill summary

This afternoon, the Senate Finance Committee released its version of the tax bill. As with the House, we expect additional changes and clarifications as the bill moves to the Senate floor. For example, the Senate bill keeps the cap on deductibility of state and local taxes at $10,000, which we know won’t fly in the House. The Senate SALT provision is widely seen as a placeholder and in fact the section-by-section summary says that the SALT cap is the subject of continuing negotiations. I’ve attached the section-by-section.

Key provisions of interest in the bill include:

• Permanent extension of Section 199A at 20%.

• Permanent restoration of R&D deductibility starting in 2025. In addition, there is retroactive relief for 2022-2024 for firms with $31 million or less in gross receipts. Larger firms will have the option to accelerate the remaining deductions from 2022-2024.

• Permanent restoration of interest deductibility and full expensing for certain capital investments.

• Permanent extension of the Section 127 provision allowing employers to assist employees with student loan repayment and indexes the $5,250 cap going forward.

Problematic provisions include:

• Limits on the use of state workarounds of the SALT cap for passthrough business owners. I’m continuing to analyze exactly how this would work and what the impacts would be. This is different from the House bill, which only placed these limits on specified services (the category we got engineering and architecture out of in 2017 so that our members would have full access to Section 199A).

• Phaseout of the Inflation Reduction Act renewable energy tax credits. Although the language is marginally better than the House bill, it’s still not what we’re looking for.

• Repeal of the Section 179D energy-efficient commercial buildings tax deduction. This was a disappointing surprise – the House bill does not touch Section 179D.

Now that the initial text has been released, the SFC will work through the Byrd Rule process with the Senate Parliamentarian to determine if any of the provisions do not meet the parameters of the budget reconciliation process established by the late Senator Robert Byrd from West Virginia. Anything that violates the many provisions of the Byrd Rule can be challenged and removed from the bill.

Senate Majority Leader Thune intends to bring the bill to the Senate floor next week. We won’t know until we see the final version approved by the Senate if the House can accept it or will make further changes. Overlaying this back and forth is the President’s strong desire to sign the bill into law on July 4th. That will be a challenging deadline to meet.