The reconciliation process for Senate Republicans to pass their version of the House-passed One Big, Beautiful Bill Act (OBBBA, H.R. 1) to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 and cut mandatory spending is already underway, with some committees releasing draft text to meet their instructions, but not yet for tax and health care provisions. Senator Thom Tillis (R-NC), a Finance Committee member, said GOP Senators could present President Trump with a draft of tax and Medicaid revisions by the weekend, but acknowledged the process could take much longer, Bloomberg Government reported. Other Senate Republicans said that would likely come next week. Many meetings are planned with the Parliamentarian over the Byrd Rule that sets strict revenue parameters for budget reconciliation bills.

Senate Republicans are meeting to discuss reconciliation issues today (Wednesday, June 4) and Senate Finance Committee Republicans have been invited to the White House. Senate Majority Leader John Thune (R-SD) remains committed to adhering to the Administration's goal for completing the bill by July 4, with a Senate vote the last week of June, though some of his members say that deadline may slip. He said in a Politico interview that the Finance Committee portion of the bill will likely be released next week and that some committees may hold markups and others may not, at the discretion of the chairmen. (It has long been speculated that a regular order committee process for the bill would be bypassed in the Senate.) Multiple reports cited Thune as saying June 2, when asked about concerns over the House IRC Section 899 retaliatory tax proposal against other nations that impose discriminatory taxes on the United States, that there are multiple provisions of the bill that Senators are discussing with the House.

"It'll have to track fairly closely, obviously, with the House bill because they've got a fragile majority and struck a very delicate balance in getting it passed in the House in the first place," Thune said in Punchbowl News. "But there are some things that senators want added to the bill or things that we'd do slightly differently." He and Senate Finance Committee Chairman Mike Crapo (R-ID) have said they want to make permanent the House bill's temporary, five-year extensions of TCJA pre-cliffs on bonus depreciation, IRC Section 163(j) interest deductibility, and IRC Section 174 R&D expensing.

The Senate bill text rollout mirrors the House process, by which committees with less controversial areas of jurisdiction acted first and the contentious tax and health packages were added last. Republican leaders in the House struck a delicate balance to pass the OBBBA that Senate Republicans are cognizant of and that likely needs to be generally preserved, especially if the plan is for the House to vote on and pass the eventual Senate-amended bill within the desired timeframe. They are pledging to include state and local tax (SALT) deduction cap relief despite the absence of GOP Senators invested in that issue, though Leader Thune suggested the House provision to increase the cap to $40,000 could change. "We'll probably land someplace, hopefully, that we'll be able to ensure that we can keep the House support for it but also do some things to accommodate the concerns that senators have about that," he said in the Politico interview.

Outlook — There are pockets of Republican senators with objections to broad aspects of the House bill:

• Inflation Reduction Act (IRA) energy tax credit concerns have been expressed by members including Senators Lisa Murkowski (R-AK), John Curtis (R-UT), Tillis, and Jerry Moran (R-KS)
• Medicaid concerns have been cited by Senators Murkowski, Susan Collins (R-ME), Shelley Moore Capito (R-WV), Jim Justice (R-WV), and Josh Hawley (R-MO), who objects to Medicaid provider tax and cost sharing provisions in the House bill
• Wariness over the overall spending level and insufficient deficit reduction, plus the debt limit increase, have been expressed by Senators Ron Johnson (R-WI), Rand Paul (R-KY), Mike Lee (R-UT), and Rick Scott (R-FL)

President Trump met with Leader Thune and Senator Rick Scott June 2, and spoke with Senators Hawley, Paul, and Ron Johnson, who continues to call for achieving greater deficit reduction. Senator Hawley posted on social media, "Just had a great talk with President Trump about the Big, Beautiful Bill. He said again, NO MEDICAID BENEFIT CUTS." The President posted on social media, in part, "I call on all of my Republican friends in the Senate and House to work as fast as they can to get this Bill to MY DESK before the Fourth of JULY. Thank you for your attention to this matter!"

A June 3 Politico article reported on possible changes to the House bill's energy tax credit rollbacks, which could include longer timelines: "Senate Republicans could look to link the phaseout timelines so that developers can access tax credits when they begin construction on a project, rather than attaching them to when a project begins producing energy, as the House Republican bill does." Senator Tillis was quoted in the article as saying, "What we're trying to focus on is to make sure that if businesses have invested and have projects in progress, that we do everything we can to hold them harmless … I do believe that investment tax credits, production tax credits have to have a beginning, middle and an end."

A separate Politico article said Tillis wants a different approach to the "no tax on tips" proposal that would treat people with similar earnings more equally or to potentially drop it from the bill.

Global tax — There continues to be attention on the House bill's new IRC Section 899, which would increase income tax and withholding tax rates and expand the application of the BEAT rules on foreign-parented groups, applicable to residents of countries with certain "unfair foreign taxes," including the undertaxed profits rule (UTPR), digital services tax (DST), and diverted profits tax (DPT). Concerns over foreign investment in the US have been reported in newspapers and the issue even rose to the level of the Sunday political shows, as National Economic Council Director Kevin Hassett said on This Week June 1 that the proposal "is a reasonable response to what other countries have done to our big companies."

Bloomberg Government reported, of Leader Thune's comments: "Thune sidestepped a question on whether he favored the provision. The Senate is planning to release a new draft of the bill in the coming weeks. House Ways and Means Committee spokesman JP Freire said the retaliatory tax wouldn't cover portfolio interest such as on Treasuries."

IRS — The Senate Finance Committee June 3 approved the nomination of former Rep. Billy Long (R-MO) to be IRS Commissioner 14-13, along party lines. Ranking Member Ron Wyden (D-OR) continued to cite concerns about his personal business dealings with tribal tax credits and Employee Retention Tax Credits and his use of campaign funds.

Health care — Asked after the regular Tuesday party lunches about the potential for further cuts to Medicaid coming in the Senate bill, Leader Thune said, "I think the House made good headway on a number of fronts, but we think there are areas in the federal government, areas of waste, fraud and abuse that we can further identify that would make that a more robust package. And obviously we have members, as you point out, who have their own opinions about how to do this."

A story in the June 3 Washington Post, "Republicans are trying to repeal Obamacare again. Sort of," said: "the GOP plan making its way through Congress would sharply increase the number of people without health insurance, largely by narrowing the path for poor Americans to gain coverage and making it easier for them to be booted off it. It would target the twin pillars of Medicaid expansion and federally subsidized insurance marketplaces, with new rules Republicans say will reduce waste, fraud and abuse."

The story said, "States would face new mandates and restrictions under the GOP bill. They would need to verify Medicaid expansion eligibility every six months instead of once a year. They could no longer sign up the lowest-income marketplace enrollees throughout the year. They would have to collect more paperwork from certain marketplace applicants. The open enrollment period would be shortened by a month. The bill would also delay two Biden-era regulations aimed at easing and streamlining enrollment by helping people more easily transition between Medicaid and Children's Health Insurance Program and private marketplace plans."

An EY Alert, "House-passed HR 1 contains new information reporting and withholding provisions," is available here.