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May 10, 2024

What to expect in Washington (May 10)

The cost of extending TCJA individual and passthrough provisions at the end of 2025 has increased from last year's Congressional Budget Office (CBO) estimate, to roughly $4 trillion over 10 years. The higher price tag, in this year's version of the report on Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues, comes as President Biden and Congress are already talking about how to address next year's tax cliff amid increasing concerns about the deficit, which has been forecast upward by CBO to $2 trillion for 2024 from $1.6 trillion projected in February, attributable to the national security supplemental, student loan forgiveness, and other factors.

CBO said, if extended over the 2025—2034 period:

  • TCJA individual provisions would increase deficits $3.3 trillion
  • estate and gift tax changes would increase deficits by $167 billion
  • bonus depreciation would increase deficits by $378 billion
  • other business tax provisions would increase deficits by $172 billion

CBO also said extending:

  • other tax provisions, including IRA energy tax credits, would increase deficits by $199 billion
  • expanded Affordable Care Act premium tax credits would increase deficits by $335 billion

Major TCJA provisions in CBO "Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues"

10%, 12%, 22%, 24%, 32%, 35%, 37% income tax rate brackets


Child Tax Credit (CTC) modification


AMT exemption


Standard deduction


199A passthrough deduction


Estate and gift taxes


Opportunity Zones


Repeal of most itemized deductions


Suspension of deductions for personal exemptions


Bonus depreciation






In floor remarks, Senate Majority Leader Chuck Schumer (D-NY) said: "This report should come as no surprise: we all saw what happened when Donald Trump and Republicans first pushed their tax cuts a few years ago. They blew a nearly $2 trillion hole in our deficit. They left American families out to dry, with no trickle-down stemming from the benefits for the very wealthy and corporations. The Trump tax cuts were a dud for our economy and a political loser at the same time for the Republican party. So, I ask my Republican colleagues: are they really willing to double down on the disastrous Trump tax law and blow a $4.6 trillion hole in our deficit?"

There is disparity among Republicans over the need for revenue offsets in 2025. Some Senate Finance Republicans appear inclined to rely, at least in part, on the economic growth potential for tax cuts, while Ways & Means members are more open to offsets. At an off-Hill policy conference May 8, House Ways & Means Committee Chairman Jason Smith (R-MO) acknowledged tensions within the party, that even some Republicans want to increase the 21% corporate tax rate, and that other offsets beyond that may be necessary. "Whether it's Democrat or Republican, there's people on both sides of the aisle that believe that the corporate tax rate is not enough," Chairman Smith said, according to the Bloomberg Daily Tax Report.

Of course, how lawmakers approach the 2025 tax cliff largely depends on who controls the White House, House, and Senate, and all are seen as up for grabs in this year's elections. Budget reconciliation has been used in times of single-party control, and both parties would be expected to attempt to use the process to advance their vision for tax and other issues. Some members are talking about it publicly, including Rep. Andy Barr (R-KY) saying Wednesday that Republicans would use reconciliation for tax and other issues if they sweep in the elections. There has also been plenty of discussion about a potential divided government scenario in which, with narrow margins in each chamber, the House is won by Democrats, with the focus on New York and California GOP seats in Biden-won districts; and the Senate flips to Republican control, with a focus on Democratic seats in Trump-won West Virginia, Ohio, and Montana.

Outside groups have begun to propose revenue offsets. The Tax Foundation May 7 provided two options: (1) make the TCJA's increase in the estate tax exemption permanent, switch the limitation on interest back to EBITDA but at a lower percentage (17% instead of 30%), and allow the IRC Section 199A pass-through deduction and non-corporate loss limitation to expire; and (2) the aforementioned changes plus "ending the income tax exclusion for employer-provided fringe benefits, most notably health insurance."

Chairman Smith also expressed some disbelief over Senate Republican intransigence against consideration of the Tax Relief for American Families and Workers Act (H.R. 7024). "I'm confused about the decision of Senate Republicans to not support it," he said. Tax Notes reported Senate Finance Committee Chairman Ron Wyden (D-OR), at another off-Hill event, as lauding Chairman Smith's comments — the two worked together to develop the bill. Wyden recognized Smith's suggestion that the Senate has the votes to pass the tax bill. "I think we're going to be in a position to get a vote on this … I believe we have the votes," he said.

FAA — The Senate on May 9 passed a $105 billion, five-year reauthorization of the Federal Aviation Administration (FAA), sending the bill over to the House, which has already adjourned for the week. The vote on HR 3935 was 88-4. After a week of failed talks on which of many proposed amendments to bring to the floor for votes — including the House-passed Wyden-Smith tax bill, a data privacy bill for children and the Durbin-Marshall Credit Card Competition Act - the Senate passed the bill without considering any amendments at all. The FAA's authorities were set to expire today (May 10), but the Senate cleared a House-passed, one-week extension of the FAA's authorities and ability to collect taxes, moving the deadline for action to May 17. The Senate acted after the vote on the long-term bill, clearing the extension for the president's signature.

The bill's status as one of the last remaining "must pass" vehicles in this Congress attracted dozens of amendments from senators. But after days of haggling over whether to consider amendments that were not germane to aviation policy, and which aviation-related measures to consider, the sense among senators was that if one person's amendment was chosen for the floor, many others would insist on theirs as well. The most expeditious path as the clock ticked to Friday was to simply pass the bill, as modified by a bipartisan, bicameral manager's amendment assembled by Commerce Committee Chairman Maria Cantwell (D-WA), Ranking Member Ted Cruz (R-TX) and their House counterparts, which was released April 29.

The FAA bill — which would set aviation policy for years ahead, including provisions to boost hiring of air traffic controllers, address flight disruptions and adopt new technology — includes a controversial provision to add five additional round-trip flight slots at Ronald Reagan Washington National Airport. The proposal generated friction among airlines and sparked a conflict between Virginia's senators and those from states that would benefit from the new flights, including Sen. Cruz. On Thursday, Leader Schumer sought unanimous consent to allow a vote on a single amendment, a compromise offered by Virginia Sens. Tim Kaine (D) and Mark Warner (D) that would authorize the Transportation secretary to decide the National Airport issue based on how the new slots would impact flight delays and safety. "There are very strong feelings on both sides of this issue. It is not partisan but rather different people have different opinions," Schumer said on the floor, Punchbowl reported. "The proper and fair and only right thing to do is have a vote and let the body decide." But Schumer's request was blocked by Sen. Cruz, and shortly afterward Sens. Kaine and Warner agreed to expedite the vote.

On Wednesday, the Senate had voted 85-12 to reject a procedural maneuver by Roger Marshall (R-KS) that would have tabled the slated amendments and allowed senators to offer changes. Marshall made the move after Sen. Cantwell objected to his request to consider the Durbin-Marshall credit card amendment (S. 1838), which would require the largest banks to allow at least two credit card networks (including one other than Visa or Mastercard) to be used on their cards. "The leadership of both the House and Senate have decided, to best move forward to meet that [May 10] deadline, the best thing we can do is to keep the subject of this debate to germane amendments," Sen. Cantwell said on the floor. Marshall said on the floor that he has "jumped through every hoop asked of us by leadership to try to advance this [credit card] legislation for a vote."

Health — On May 8, the House Ways and Means Committee advanced six bills to extend Medicare telehealth flexibilities, extend the Acute Hospital Care at Home Program, and support access to care in rural areas, paid for in part by provisions to reform Pharmacy Benefit Manager (PBM) practices.

Congress — House Ways & Means Committee Republicans May 8 introduced a series of bills on tax-exempt issues and disclosure of taxpayer information:

  • H.R. 8290, to require the public disclosure of grants made by certain tax-exempt organizations to foreign entities, by Rep. Lloyd Smucker (R-PA)
  • H.R. 8291, to prohibit certain tax-exempt organizations from providing funding for election administration, by Rep. Claudia Tenney (R-NY)
  • H.R. 8292, to increase penalties for unauthorized disclosure of taxpayer information, by Chairman Jason Smith (R-MO) and others
  • H.R. 8293, to provide for the public reporting of data on certain contributions received by tax-exempt organizations from foreign sources, by Rep. Dave Schweikert (R-AZ)
  • H.R. 8314, to impose penalties with respect to contributions to political committees from certain tax-exempt organizations that receive contributions from foreign nationals, by Rep. Nicole Malliotakis (R-NY)

Committee Republicans said H.R. 8292 would increase the maximum penalty for the unauthorized disclosure of tax information to a fine in any amount up to $250,000, or imprisonment up to 10 years, or both; and would clarify that each taxpayer impacted by disclosed tax information counts as a distinct violation of the law. Morning Tax reported the Committee could take up the bill next week.

Today, May 10, is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments."

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young