07/02/25

Where things stand:

Yesterday, the US Senate passed its updated reconciliation bill by a vote of 51-50. All Senate Republicans voted for the measure except Sens. Collins (R-ME), Tillis (R-NC), and Paul (R-KY). Vice President J.D. Vance cast the tiebreaking vote to advance the legislation.

The bill now moves back to the House, and they have scheduled votes for later today. Several House Republicans have voiced concerns over changes the Senate made to the House-passed bill, though the White House and congressional leadership are putting immense pressure on the House to pass the updated Senate-passed bill before July 4^th. Some of the many potential complications in the House include: moderate House Republicans’ concerns about Medicaid cuts (the Senate approved more cuts than the House) and fiscal hawks (e.g., some members of the House Freedom Caucus) wanting the reconciliation package to cut more spending.

Below are some key highlights on the tax provisions included in the Senate-passed legislation.

OBL Priorities in the Senate-Passed Legislation

• ACRE 
• The Senate-passed bill retains language permitting banks to exclude from gross income 25% of interest income derived from certain Farm real estate loans.
• Remittance Tax 
• The bill adds thrifts to the exempt banks list—meaning remittances sent from accounts held in/by essentially all banks are excluded from the remittance tax regime.
• Specifically, remittances sent from accounts held in/by insured banks, commercial banks or trust companies, private bankers, agencies or branches of a foreign bank in the U.S., thrift institutions, broker/dealers (and/or broker/dealers in securities or commodities)—as defined in 31 U.S.C. 5312(a)(2)(A) through (H)—would be exempt from the tax.
• The exemption for transfers funded with a debit card or a credit card issued in the United States remains.
• An additional limitation on the tax was added, stating the tax will only apply “to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider.”
• Banks could still face certain tax or information-collection responsibilities under the amended provision.
• Section 199A Pass-through Deduction
• The bill would maintain the current Section 199A deduction rate of 20% and make the deduction permanent.
• Proposals to limit the state and local tax deduction for certain passthrough businesses (PTE regimes) were removed from updated text.
• Prior proposals to extend the Section 199A deduction to dividends of business development companies (BDCs) were not included in Senate-passed legislation.
• Low-Income Housing Tax Credits (LIHTCs)
• The bill would permanently increase the state housing credit ceiling and generally lower the bond-financing threshold to 25% for projects financed by bonds starting in 2026.
• New Markets Tax Credits (NMTCs)
• The bill would permanently extend the NMTC program.
• Estate and Gift Tax Exemption
• The bill would permanently extend increased estate tax and gift tax exemption amounts, with an increase in unified estate and gift tax exemption to an inflation-adjusted $15 million effective for tax years beginning after Dec. 31, 2025.
• Bonus Depreciation (IRC 168(k))
• The bill would generally make 100% bonus depreciation permanent effective for property placed in service on or after Jan. 19, 2025.
• Interest Expense Calculation (IRC 163(j))
• The bill would permanently reinstate the EBITDA limitation under Section 163(j) for tax years beginning after Dec. 31, 2024.
• Opportunity Zones (p.397)
• The bill would make permanent (and make various enhancements to) the Opportunity Zone program.
• Health Savings Accounts
• Updated text adds changes to the HSA landscape: bronze and catastrophic plans would be treated as high-deductible health plans.

Additional Proposals of Note

• Individual rates (other than the individual SALT cap)
• The bill would permanently extend current individual tax rates effective for tax years beginning after Dec. 31, 2025.
• Individual State and Local Tax (SALT) Deduction
• The bill retroactively boosts the individual SALT deduction limitation from $10,000 to $40,000 for 2025 and $40,400 for 2026, followed by 1% increases for 2027, 2028, and 2029.
• Beginning in 2030, the SALT cap would revert to $10,000.
• The ability to claim the full SALT amount would phase out for those making more than $500,000 per year.
• Standard Deduction
• The bill would permanently extend the increased standard deduction enacted under the 2017 Tax Cuts and Jobs Act, and increase the amounts to $15,750 for a single filer, $23,625 for a head of household and $31,500 for married individuals filing jointly. These amounts would be indexed for inflation.
• Charitable Contributions
• Floor on Corporate Deductions: The bill retains the proposal that a deduction for corporate charitable contributions is only permitted to the extent that aggregate corporate charitable contributions exceed 1% of a taxpayer’s taxable income and not exceeding 10% of the taxpayer’s taxable income for tax years beginning after Dec. 31, 2025.
• Floor for Individuals Itemizing: The bill would impose a 0.5% floor on charitable contributions for taxpayers who elect to itemize for tax years beginning after Dec. 31, 2025.
• Deduction for Individuals Not Itemizing: The bill would create a permanent deduction for charitable contributions for taxpayers who do not elect to itemize. Specifically, for tax years after Dec. 31, 2025, non-itemizers can claim a deduction of up to $1,000 for single filers ($2,000 for married filing jointly) for certain charitable contributions.
• Child Tax Credit
• The bill would permanently increase the Child Tax Credit (CTC) from its current rate of $2,000 to $2,200.
• No Tax on Car Loan Interest 
• The bill exempts interest on car loans only if the original use of the vehicle commences with the taxpayer (i.e., new cars) through 2028. Various limitations and exceptions apply.
• Information reporting rules apply re: applicable passenger vehicle loan interest received in a trade or business. See p. 273 for additional information.
• No tax on tips
• Max deduction of $25,000 for qualified tips effective tax years beginning after Dec. 31, 2024, and expires Dec. 31, 2028.
• Income and occupation limitations apply.
• No tax on overtime
• Max deduction of $12,500 ($25,000 if married filing jointly) effective tax years beginning after Dec. 31, 2024, and expires Dec. 31, 2028.
• Bonus deduction for seniors 
• The bill would enact a $6,000 credit for individuals who have aged 65 or older for tax years beginning after Dec. 31, 2024, and before Jan. 1, 2029.
• The credit phases out when modified adjusted gross income exceeds $75,000.
• Debt Limit
• The legislation would raise the debt limit by $5 trillion.
• IRS Direct File (beginning p.580))
• The revised bill drops the requirement that the Treasury secretary terminate the IRS’s Direct File program within 30 days of enactment.
• The text keeps the special appropriation of $15 million for a report on enhancing and establishing public-private partnerships to provide for free tax filing for up to 70% of taxpayers.




What is Still OUT of the Bill?

• Any proposal to limit the deduction for state and local taxes (SALT) paid by businesses/corporations (BSALT/CSALT)
• Any form of tax on bank assets
• Any changes to top marginal income tax rates on individuals
• Any changes to the treatment of carried interest
• Any changes to the rate on the excise tax for share repurchases (i.e., “stock buybacks”)