U.S. House Approves Tax Bill, But The Senate Is Likely To Change It

The U.S. House Ways and Means Committee approved a massive tax bill on May 12 on a party-line 26-19 vote. The House Budget Committee also signed off on the legislation and, early last Wednesday morning, the full U.S. House of Representatives approved the bill, which also includes major spending reductions, by a one-vote margin.

The legislation now heads to the U.S. Senate where it is likely to be altered. Indeed, even Republican lawmakers in that chamber have voiced opposition to the bill. For example, fiscal conservatives want even larger spending reductions while moderate GOP lawmakers are concerned about provisions that would make cuts to Medicaid, energy tax credits, and federal food assistance programs. Sen. Ron Johnson (R-Wis.) said he would block the bill unless it delivers on $6.5 trillion in spending cuts while Sen. Rand Paul (R-Ky.) said he will oppose the bill because it would increase the federal government’s statutory borrowing limit.

On the tax side, GOP senators have said they want to reduce the amount of state and local taxes that Americans may deduct from their federal tax burden.

The Metals Service Center Institute (MSCI) supports the legislation. In advance of the Ways and Means Committee vote, MSCI joined dozens of other business trade associations in sending a letter to committee members asking that they vote for the legislation. Read that letter at this link. MSCI also signed onto a letter supporting inclusion of immediate research and development expensing, full expensing for capital equipment purchases, and interest deductibility. Read that letter at this link. As approved by the U.S. House, the bill:

• Makes permanent existing individual tax brackets (37 percent, 35 percent, 32 percent, 24 percent, 22 percent, 12 percent, and 10 percent);
• Makes permanent the Section 199A deduction for pass-through entities and increases the maximum deduction to 23 percent of qualified business income (MSCI joined a letter, available at this link, that supported this provision);
• Enhances and makes permanent the estate and gift tax exemption, increasing the exemption amount to $15 million for 2026 and then indexing it annually for inflation;
• Extends 100 percent bonus depreciation through 2029 and makes the provision retroactive to Jan. 1, 2025;
• Allows full expensing of research and development expenses through 2029 and makes the provision retroactive to Jan. 1, 2025;
• Returns to full EBITDA standard for 163(j) business interest loan deductions through 2029 and retroactive to Jan. 1, 2025 and increases gross receipts limitation from $31 million to $100 million;
• Allows 100 percent depreciation for qualified production property for construction started between Jan. 20, 2025, and through Dec. 31, 2028, and placed into service by Dec. 31, 2032;
• Increases dollar limitations for Section 179 deduction so the maximum expense amount is now $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million;
• Increases small business gross receipts test from $25 million to $80 million;
• Eliminates the tax on overtime pay; and
• Raises the cap on state and local tax (SALT) deductions to $40,000 with a phase out level beginning at $500,000 adjusted gross income.

You can find several fact sheets discussing these provisions, and others, at this link. Individuals interested in weighing in with their representatives in the U.S. House and Senate can use this link to send a letter supporting the bill.