Here's a look at recent tax-related happenings on the Hill, including the Senate anticipating a vote on the reconciliation bill this week and Democrats raising issues during the bill's “Byrd Bath.”
Lately on the Hill
Senate Vote May Happen This Week
It is anticipated this week that the Senate will vote on its massive tax legislation in an effort to wrap up the bill in preparation for an Independence Day signing by President Donald Trump. The tax provisions released by the Senate Finance Committee (SFC) last week by and large were as promised, with permanent extensions of full bonus depreciation and immediate deductibility of domestic research and experimental expenditures, while not shying away from more controversial items such as a smaller cap on state and local tax (SALT) deductions and a more liberal approach to clean energy tax credits.
House Republicans already provided ample warning to their Senate counterparts against tweaking hard-won compromises, especially related to the SALT cap. The SFC hedged its proposal on extending the current $10,000 SALT cap by including in its summary of the proposals, “Notwithstanding this extension, the amount of the individual SALT cap is subject to continuing negotiations.” The House-passed legislation would have increased the cap to $40,000. U.S. Rep. Mike Lawler (R-NY) said he’s sticking firm to that number: “we’re not going to fold here.”1 “Senate Republicans are considering a $40,000 cap on the state and local tax deduction but may decrease the income phaseout threshold from the current House level of $500,000.”2
The Joint Committee on Taxation released its score of the bill (JCX 29-25), estimating more than $440 billion would be added to the deficit over the next 10 years. The estimate assumes a current policy baseline to score the bill’s Tax Cuts and Jobs Act extenders at essentially zero cost.
For a more in-depth description of proposals contained within the House and Senate bills, navigate to our Tax Legislation Tracker.
Democrats Raise Issues During Byrd Bath
While congressional Republicans are in the driver’s seat when it comes to the tax legislation, Democrats are getting the opportunity to have their voices heard as the bill washes through its so-called “Byrd Bath.” The saying is derived from the “Byrd Rule,” a set of requirements the bill must fulfill for it to be passed under the budget reconciliation process. During the Byrd Bath, the minority party has the opportunity to bring points of order against the bill to Senate Parliamentarian Elizabeth MacDonough. In turn, the parliamentarian may rule on whether a provision of the bill fits within the parameters of the Byrd Rule. Although her rulings are not binding, proceeding against them could prove politically toxic.
Likely most significant would be a ruling on whether the current policy baseline would be in violation of the rules.
Canadian Trade Deal Forthcoming
On the heels of the trade deal we reported on last week between the U.S. and the United Kingdom, the U.S. and Canada are poised to strike a deal within the next month, according to Prime Minister Mark Carney. Trump agreed with the sentiment. The two leaders met during the G7 Summit last week.3
The Judicial Report
AbbVie, Inc. v. Commissioner, T.C., No. 2597-23, June 17, 2025
Judge Emin Toro of the U.S. Tax Court ruled in favor of AbbVie, Inc., deciding that a $1.6 billion breakup fee paid to Shire PLC could be deducted as an ordinary expense rather than a capital loss. The payment was made after AbbVie’s board of directors rescinded its recommendation to shareholders that the two companies merge.
The court determined the application of Internal Revenue Code (IRC) Section 1234(A)(1) did not apply as AbbVie “did not have a ‘right or obligation … with respect to property’” considering the shareholders had yet to approve of the merger. Rather, the fee was attributable to an agreement between the parties that were “willing to implement the [proposed combination].”
From the Treasury & IRS
Kies Nomination Receives Motion to Move Forward
On June 18, 2025, Senate Majority Leader John Thune (R-SD) filed a motion to advance Kenneth Kies’ nomination as Treasury assistant secretary for tax policy. The Senate vote could take place as soon as this week.4
Tax Division of Justice Department Pegged for Elimination
The U.S. Department of Justice has designated its tax division for potential elimination in its 2026 budget request. According to the proposal, the organization’s Civil Division and Criminal Division would assume the work and resources of the defunct division.5
Released Guidance
Revenue Ruling 2025-13 provides the July 2025 applicable federal rates (AFR), adjusted AFR, adjusted federal long-term rate and long-term exempt rate, percentages for determining the low-income housing credit, and the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest.
PLR 202522001 rules that a real estate investment trust (REIT) may exclude a deposit and legal fee settlement from the taxpayer’s gross income for purposes of the gross income tests under IRC §856(c)(2) and (3). According to the analysis, the deposit and legal fee settlement obtained through litigation were derived from an attempted sale of real estate from which the gain would have otherwise been considered qualifying gross income under the statute.
IR-2025-69 announces improvements to the IRS’ Pre-Filing Agreement (PFA) program, which provides taxpayers under the Large Business and International Division jurisdiction to resolve tax issues before filing their tax returns. Enhancements include a redesigned landing page, step-by-step instructions for submitting a PFA request, and updated program guidelines.
Tackling Tax
Be sure to catch this week’s installment of our new show “Tackling Tax,” where we’ll bring you the latest on tax policy and strategies. In our fourth episode, we’ll explore tax legislation related to digital assets, specifically stablecoin, with Nik Fahrer, leader of the digital assets practice at Forvis Mazars, along with Bobby Bean, regulatory managing director in our consulting practice.
