The House Ways and Means Committee passed its 2025 reconciliation bill (the W&M bill) by a 29 to 16 vote on May 14, 2025. For a detailed listing and expanded explanations of the proposals within this version of the reconciliation package, see our legislative tracker. Coming in at around 400 pages, the W&M bill has many proposals within it—ranging from items affecting international entities to individuals to those investing in clean energy. While undoubtedly subject to change, as of May 15, 2025, some of the W&M bill’s most high-impact proposals are detailed below:
Business Tax Items
“The Big Three”: 100% Bonus Depreciation, R&D Immediate Expensing, Section 163(j) EBITDA Change
Colloquially dubbed “the big three” given the history in Congress over the past few years, the W&M bill addressed 100% bonus depreciation, immediate expensing for research and development (R&D), and the earnings before interest, taxes, depreciation, and amortization (EBITDA) calculation change for §163(j). Although currently scheduled to fully phase out after 2026, the W&M bill would temporarily implement 100% bonus depreciation for property placed in service beginning on or after January 20, 2025 (President Donald Trump’s inauguration day) and before January 1, 2030. The W&M bill also provides for 100% bonus depreciation for real estate used in manufacturing, production, or refining.
The W&M bill overturns a Tax Cuts and Jobs Act of 2017 (TCJA) provision that requires taxpayers to capitalize all research and experimentation (R&E) expenditures. The W&M bill ends capitalization and again allows an immediate deduction for domestic R&E expenditures incurred in tax years beginning after December 31, 2024 and before January 1, 2030. Foreign R&E expenditures remain subject to capitalization.
For tax years beginning after December 31, 2024, the §163(j) limitation would once again be calculated based on tax basis EBITDA rather than EBIT. The addback of depreciation and amortization would likely increase the interest deduction for taxpayers.
199A—Qualified Business Income Deduction
The W&M bill would not only make the §199A deduction permanent, but it would also increase the deduction percentage from 20% to 23% for tax years beginning after December 31, 2025. Other modifications to phase-in limitations and calculations were also included in the proposed bill.
Benefits for Small Manufacturing Businesses
Currently, most businesses with gross receipts in excess of $25 million are required to use the accrual method, maintain inventories for tax purposes, and are generally subject to the §163(j) limitation on interest expense. The W&M bill would raise this threshold from $25 million to $80 million for qualifying manufacturing businesses for tax years beginning after December 31, 2025.
PTE Taxes & Allocations—SSTBs Prohibited From SALT Workaround
Since the TCJA capped individuals at $10,000 of state and local tax (SALT) deductions, many states have implemented pass-through entity (PTE) tax regimes. The W&M bill would prohibit partnerships and S corporations treated as “specified service trades or businesses” (SSTBs) from paying state income taxes on behalf of owners in an attempt to bypass the SALT cap for individual owners.
Employee Retention Tax Credit (ERTC)—No Credit or Refund for Claims Filed After January 31, 2024
In addition to defining ERTC promoter and implementing promoter penalties, the W&M bill would disallow credits and refunds for claims filed after January 31, 2024.
International Tax Topics—FDII, GILTI, & BEAT
The current global intangible low-taxed income (GILTI) rate of 10.5% and foreign-derived intangible income (FDII) rate of 13.125% would be maintained, and the scheduled rate increases for 2026 are canceled. Similarly, for the base erosion and anti-abuse minimum tax (BEAT), the current 10% rate would be maintained, and the scheduled rate increase for 2026 is canceled.
Individual Tax Items
The laundry list of items impacting individuals is long given the TCJA’s impact to these taxpayers. Notably, the W&M bill would permanently extend the TCJA changes to tax rates and brackets for individuals, estates, and trusts. Further, the $15 million exemption for estate and gift tax would be made permanent, avoiding a return to lower exemptions that many have been planning for over the past years. The increased standard deduction would be made permanent, though personal exemptions would be made permanently unavailable. The TCJA increases to the alternative minimum tax (AMT) exemption and phaseout thresholds would also be made permanent. Other topics like moving expenses, wagering losses, casualty losses, bicycle commuting, ABLE accounts, and more were addressed in the W&M bill. A fairly unforeseen inclusion in the W&M bill is the creation of what is titled a “MAGA account,” a new type of tax-preferred savings account for those under eight years old.
One of the hot-button topics in the current debate is the SALT cap. Currently, the W&M bill raises the cap to $15,000 for married persons filing separately earning up to $200,000, or $30,000 for all filers earning up to $400,000. The $15,000 and $30,000 caps would be reduced by 20% of the amount that adjusted gross income exceeds $200,000 or $400,000, respectively. The reduction would not result in the cap being less than $5,000 for married persons filing separately or $10,000 for all other filers.
There would be a federal income tax deduction for “qualified tips” (with specific definitions and requirements), and there would also be a federal income tax deduction for “qualified overtime.” To accomplish Trump’s goal of “no tax on social security,” the W&M bill provides an “enhanced deduction for seniors.” This would add a $4,000 deduction for those 65 or older temporarily from 2025 to 2028. Phase-outs and AGI limitations would apply.
Tax-Exempt Entity Tax Items
There are a number of items targeted at tax-exempt organizations, including:
- For certain private foundations, a new rate structure would apply. Instead of the flat 1.39% currently in place, for those with more than $50 million in assets this rate would gradually increase to 10% for those with assets in excess of $5 billion.
- Certain private colleges and universities would have a new rate structure implemented for their excise tax on net investment income. This graduated rate system would top out at 21% for those in excess of $2 million.
- Unrelated business taxable income (UBTI) increased by qualified transportation fringe or certain parking facility expenses for which the disallowed deduction provides no tax impact.
- The 21% tax on excess compensation (for amounts exceeding $1 million) is expanded by redefining “covered employee.”
- The W&M bill would terminate the tax-exempt status of terrorist-supporting organizations, as defined by the Secretary of State (after having mailed written notice of the designation).
Clean Energy Credits
One of the big question marks prior to the W&M text release was to what extent clean energy credits would be affected. The Inflation Reduction Act of 2022 (IRA) modified and introduced new clean energy credits—though to be clear, many clean energy credits were already established prior to the IRA.
The W&M bill would adjust or repeal many clean energy credits. The themes throughout all of the proposals were:
- Full repeal of the credit
- Adjustments or accelerations of phase-outs
- Disallowance of the credit for taxpayers deemed specified foreign entities or foreign-influenced entities (or those involved with them in specific ways)
- Repeal of transferability (the ability to “sell”) certain credits
The following credits would be fully terminated in the short term, per the W&M bill:
- Previously Owned Clean Vehicle Credit
- Alternative Fuel Vehicle Refueling Property Credit
- Clean Vehicle Credit
- Qualified Commercial Clean Vehicles Credit (with exceptions)
- New Energy Efficient Home Credit (generally)
- Energy Efficient Home Improvement Credit
- Residential Clean Energy Credit
- Clean Hydrogen Production Credit
Note that while no amendments were incorporated into the passed version of the W&M bill, there were numerous amendments proposed. Next in the process is the House Budget Committee, to be shortly followed by the Rules Committee and then finally the House floor.
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