House Ways and Means Committee Chairman Jason Smith's (R-MO) preliminary version of the Ways and Means portion of a budget reconciliation bill to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 released on Friday mostly addressed TCJA extensions with some modifications. The Chairman is set to brief Republican House members today at 1 p.m. on additional provisions and revenue offsets that will be included in a substitute amendment that is expected to be released as soon as this afternoon. On Tuesday, May 13 at 2 p.m., the Ways and Means Committee will hold a legislative markup of the budget reconciliation legislative recommendations related to tax that could go late into the night or all night.

"Pro-family, pro-worker tax provisions are the heart of President Trump's economic agenda that puts working families ahead of Washington and will create jobs, grow wages and investment, and help usher in a new golden age of prosperity," Chairman Smith said of the package.

Much of the press coverage has focused on the economic arguments to be made in favor of the first tranche of the bill, which is structured to boost the economy with a higher standard deduction and Child Tax Credit for 2025—2028 and inflation relief for rates below the 37% rate that could put more money in taxpayers' pockets in early 2026. Preserving the IRC Section 199A pass-through deduction has been a priority for Chairman Smith, Rep. Vern Buchanan (R-FL), and others, and it is increased from 20% to 22% under the bill in addition to being made permanent.

Politico reported of committee Republicans, "They'd temporarily increase the child credit by $500 while also hiking the standard deduction by $2,000 for couples, to $32,000. Together, those two provisions, aimed squarely at average Americans, may help them rebut complaints from Democrats that their plans give too much to the wealthy. And Republicans would have them take effect this tax year, so that people could receive bigger refunds when they file their returns next year, ahead of the midterm elections."

The preliminary version of the mark includes the extension of some TCJA revenue offsets, but among tax issues unresolved is the extent to which the current $10,000 state and local tax (SALT) deduction cap enacted in the TCJA can continue to provide offsetting revenue. Republicans from high-tax states have been seeking relief from the cap and say they are serious about not letting a tax bill pass without significant change to the provision. The focus has been on a $30,000 cap, which some members involved support and others don't. There is a meeting with SALT-focused members, House GOP leadership, and Ways and Means Republicans today.

A Joint Committee on Taxation estimate said the Friday package costs $4.9 trillion over 10 years:

There has long been a tension between Republicans who want deep spending cuts in exchange for tax cut extensions and those who don't, especially if they reduce Medicaid benefits, and at the end of last week there were indications the House would aim for $4 trillion in tax cuts and $1.5 trillion in mandatory savings cuts. That is the low end of the range set in the budget resolution and reflects the difficulty Republicans have had in agreeing to spending cuts. With TCJA extensions costing roughly $4 trillion, there is a focus on revenue offsets to provide room for additional tax provisions like the pre-cliffs on IRC Section 174 R&D expensing and the EBITDA-based 163(j) calculation, plus President Trump's proposals.

Speculation has focused on potential tax increases addressing issues like the higher education endowment tax, executive compensation under IRC Section 162(m), the tax treatment of carried interest — which President Trump has pushed to be included — and the rollback of Inflation Reduction Act (IRA) energy tax credits.

Ways and Means member Claudia Tenney (R-NY) said on Sunday Morning Futures yesterday, "Some of the parts of the bill aren't in. They're going to be coming in as amendments. So, this is going to be a long, arduous process. Everybody knows that … the most important thing is, we need to get immediate results for the American people and growth, so that President Trump's agenda starts working."

A story in the May 10 Wall Street Journal said the IRA incentives "for renewable energy, electric vehicles and battery production are an attractive target for GOP lawmakers" given their long history of criticism of the provisions. While the rollback of IRA credits may not be as clearcut of a dealbreaker as the SALT cap, some GOP members have concerns because "the breaks generate jobs and investment, particularly in rural Republican regions where it is easier to locate wind turbines, solar farms and factories." There have been multiple letters to congressional leaders penned by groups of Republicans concerned about a broad rollback, and some members are urging a more surgical approach.

Whatever may eventually pass the House is likely to be modified in the Senate, which could be a backstop for revenue increases and other proposals, raising questions about how differences will be resolved and if House members could be voting on some policies that won't ultimately be enacted. Senate Majority Leader John Thune (R-SD) said on Fox May 11 regarding upcoming business in Congress, "The most immediate thing is this budget reconciliation bill, which will incorporate the issue of … energy dominance, energy independence … tax relief. There are some priorities the President wants included in addition to extending the 2017 tax policy. We've got to get serious about spending reduction, and so we're having a very, very vigorous conversation about how to accomplish that within the construct of the reconciliation bill."

Last night, House Energy and Commerce Chairman Brett Guthrie (R-KY) released committee prints that will be considered at that committee's budget reconciliation markup on Tuesday, May 13 at 2 p.m.

Debt limit — The Trump administration is targeting July 4 for completion of the reconciliation bill, but the August congressional recess is looking more like the official deadline with Treasury Secretary Scott Bessent's May 9 letter to House Speaker Mike Johnson (R-LA) saying that "the federal government's cash and extraordinary measures will be exhausted in August." Republicans plan to address the debt limit in the reconciliation bill.

Congress — The Senate is back in session today with a vote at 5:30 related to the nomination of Monica Crowley to be Chief of Protocol, a State Department post.

On Wednesday, May 14 at 10 a.m., the Senate Finance Committee has set a hearing on Trade in Critical Supply Chains.

The House is out today and back in session on Tuesday with suspension votes on items including bills under the jurisdiction of the Natural Resources Committee. Later in the week are votes on law enforcement bills under the jurisdiction of the Judiciary Committee.

Wednesday, May 14 (at 2 p.m.) is the EY Webcast, “What’s in the House W&M Committee tax bill and what it means for businesses.”