What’s included in the recently passed tax bill?
House Resolution 1 (often referred to as the “One Big Beautiful Bill,” or “the Act”) is lengthy and includes provisions that impact businesses, individuals, nonprofit organizations, clean energy investors, and international trade. In general, the Act’s changes can be grouped into three “buckets”:
- Tax Cuts and Jobs Act (TCJA) extenders
- President Donald Trump’s campaign promises
- Funding provisions to “pay for” the bill
You can find a detailed listing of the changes on our legislative tracker, which includes information on applicability dates of certain provisions. However, some of the most significant changes can be summarized here:
| Provisions | Description |
|---|---|
“The Big Three”:
| Part of President Trump’s platform, these provisions impact a broad base of entities and are made permanent.
|
International Rate Changes |
|
Measures focused on promoting domestic manufacturing | To promote domestic manufacturing, 100% bonus depreciation is available for certain nonresidential real property used for manufacturing, production, or refining. |
No tax on tips, overtime, and Social Security | Deductions were introduced targeted to accomplish these goals. Note that there are requirements for which occupations qualify for the “tips” deduction. There is new temporary $6,000 deduction for those age 65 and older. |
TCJA expiring provisions made permanent, some with adjustments | Highlights include:
|
SALT Cap and Passthrough Entity (PTE) tax workarounds | The SALT cap is increased to $40,000 for most taxpayers in 2025, and increases by 1% through 2029, after which the cap drops to $10,000 in 2030. Phaseouts apply based on modified AGI. SALT cap workarounds were not affected by the Act. |
Revenue Raisers | In the effort to meet the scoring requirements of the budget resolution, the Act includes the following measures:
|
Other Changes | Other changes also are included in the Act include:
|
What provisions will help taxpayers in 2025?
For businesses, the changes to bonus depreciation, §163(j), and domestic research expenses are effective for the 2025 tax year.
There is also a refund or deduction opportunity for domestic R&E expenses that were previously capitalized due to TCJA rules. Taxpayers can deduct the unamortized balance as deductions either:
- In the first tax year beginning after December 31, 2024, or
- Ratably over a two-year tax year period beginning with the first tax year beginning after December 31, 2024.
Small taxpayers (determined based on gross receipts for the first taxable year beginning after December 31, 2024) would also be able to amend prior returns to claim deductions where they otherwise capitalized expenses, subject to some conditions. Note that foreign R&E must still be capitalized and amortized.
What are some action items or planning considerations to take now that the Act has passed?
Applicable action items and considerations could vary widely depending on the industry, entity type, and type of activity pursued by the taxpayer. However, a few items could be:
- Analyze whether any new or planned buildings would qualify as being used for “manufacturing, production, or refining.” Based on past law, there could be some surprising answers as to what types of activities could qualify.
- Given changes to the SALT cap, PTE elections should be reconsidered.
- The increased estate and gift exemption could warrant a shift in estate planning.
- Consider the best method for a deduction for previously capitalized (and unamortized) R&E expenses.
- Consider modeling BEAT, GILTI and FDII implications given the current tariff landscape and rate changes.
What were some items that were discussed but did not make it into the bill?
Along the way there were various topics unofficially floated (and some officially) that did not make it into the final version of the bill. These include:
- Section 899, Remedies against “Unfair Taxes”: One of the more concerning proposals to international taxpayers, this provision was made irrelevant due to other external negotiations and agreements.
- “Business SALT”: Otherwise known as C-SALT, this would have been a SALT cap for entities including corporations and pass-throughs.
- Carried interest repeal: This benefit to private equity owners was brought up as a possible funding mechanism for the bill.
- Legislating reciprocal tariffs: Without inclusion in the bill, any tariffs levied are not included in the bill’s “scoring.”
- “Millionaire’s Tax”: An idea floated that would levy additional taxes on those above a certain income or asset threshold.
What were the main points of contention during debate of the bill?
The foundational issue was how to fund the bill within the constraints of the reconciliation process. Given the projected impact to the deficit, and the 10-year budgetary projections, some Republicans made the bill’s cost their primary concern. Therefore, they pushed for provisions that would lessen the bill’s price tag, such as more severe clean energy repeals and Medicaid adjustments.
Heading into the debate was a question about whether the Senate could leverage a “current policy baseline” for the bill, which would effectively allow TCJA provision permanence at “no” cost. Ultimately, this current policy baseline was allowed and leveraged for the Act.
Is there a chance that this legislation gets changed after mid-term elections?
Not likely. Even if Democrats were able to gain control of both houses of Congress, with Trump in the White House legislation changing or overturning the Act would likely be met with a presidential veto.
Will there be regulations issued to interpret the bill? How does Loper Bright affect this (if at all)?
Yes, as with all bills, regulations will be issued for certain provisions in the Act. There are places in the Act that specifically prescribe for the Secretary to issue guidance, but it is also possible that legislative clarifications will be needed depending on the situation. That being said, Loper Bright overturned the requirement for the courts to defer to regulations. Therefore, it’s possible that taxpayers may be looking more heavily to case law or legislative histories on interpretations and guidance on applying the changes from the Act.
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