The US House of Representatives, early on 22 May, approved the budget reconciliation bill (H.R. 1) to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025. The bill, which also provides border security funding and cuts to certain mandatory spending programs, passed 215-214 with near-unanimous Republican support. The bill will now go to the Senate for consideration where it is expected to be amended.

A manager's amendment, unveiled late on 21 May and included in the final bill, made changes to certain international tax rates as well as provided Inflation Reduction Act energy tax credit rollbacks and changes to Medicaid provisions. International tax changes reflected in the manager's amendment and passed by the House include:

• Global intangible low-taxed income (GILTI) deduction reduced from 50% (10.5% rate) to 49.2% (10.668% rate)
• Foreign-derived intangible income (FDII) deduction reduced from 37.5% (13.125% rate) to 36.5% (13.335% rate)
• Base erosion and anti-abuse tax (BEAT) rate increased from 10% to 10.1%

The final reconciliation bill includes a new IRC Section 899, which would increase applicable tax rates and expand BEAT rules on certain foreign persons tax resident in, or controlled by tax residents of, "discriminatory foreign countries. "If enacted, new IRC Section 899 would apply to inbound investors, including certain individuals, foreign governments, private foundations, certain trusts and certain foreign partnerships of discriminatory foreign countries. More specifically, it would apply to residents of countries with certain "unfair foreign taxes," including the undertaxed profits rule (UTPR), digital services tax, and diverted profits tax, along with other taxes as determined by the US Treasury Department and IRS.

The House-passed legislation also includes extension of TCJA pre-cliffs on bonus depreciation, IRC Section 163(j) interest deductibility, and IRC Section 174 research and development expensing, which are generally extended for the period 2025–2029. Among many other provisions, the House delivered on President Trump's proposals on no tax on tips, no tax on overtime, no tax on car loan interest, a special higher deduction for seniors and accelerated depreciation for factories.

A senior Treasury official recently provided the Trump Administration's position on a proposed BEPS Pillar Two permanent safe harbor, saying it is imperative that agreement be reached before the end of 2025. The official, Rebecca Burch, Treasury deputy assistant secretary for international tax affairs, repeated earlier comments that the United States will not implement Pillar Two. She expressed the position that the US system has sufficient ability to monitor and prevent base erosion and profit shifting without the BEPS Pillar Two rules. The Treasury official spoke on 16 May at a Washington, DC conference.

Under a side-by-side system, Burch said, Pillar Two rules should not apply to income if the US is already applying its own international tax rules.