The Senate Finance Committee tax and health sections of Senate Republicans' 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 could be released as soon as today. Already, there are expectations of significant potential tax changes to the House approach on TCJA pre-cliffs (making them permanent), Inflation Reduction Act (IRA) energy credit terminations, President Trump's tax proposals, and possibly a TBD blank space for the state and local tax (SALT) deduction cap or a reduction in the House bill's $40,000 limit for household incomes under $500,000.

Tax Notes June 11 reported Senate Finance Committee members as saying they expected the tax language to be released today, in a report that preceded Finance Committee Chairman Mike Crapo (R-ID) and Senate Majority Leader John Thune (R-SD) meeting with the President at the White House June 12, prior to the congressional picnic. Senator Ron Johnson (R-WI) was cited as saying "it is a 'foregone conclusion' that the committee won't hold a markup on the legislation, instead replacing it with a substitute amendment."

Politico reported, "Some senators have indicated the Finance Committee text will be released Friday; others have said it will be out Monday." The story said Majority Leader Thune and other leaders plan to spend next week (the week of June 16) negotiating changes to the broader bill before floor consideration and a vote the following week (of June 23). Following speculation earlier this week that the Finance Committee's section could be released in pieces, Punchbowl News reported this morning that there could be two parts of the package: "The first portion could come today, and if so, the second would come Monday."

On the broader timeframe, there has been significant attention on comments by Senator Ted Cruz (R-TX) at an event June 11 that, while the Senate may vote on the bill by July 4, it will only match up 60%-70% with the House bill, suggesting there will be significant differences to sort through. "I think it is likely that we will spend the month of July in conference and trying to reconcile the two," he said.

The President and GOP congressional leaders would ideally like to see the House accept and vote on any eventual Senate-passed bill so that the President could sign the legislation in early July, rather than go to conference either formally or informally to reconcile different House and Senate products. White House officials have been suggesting that there will be no ping-pong of the bill between chambers or conference committee. But there has long been the dynamic that there will need to be a careful calculation about what changes can be made to appease Senators and still clear another House vote, and it's unclear if the concerns of House members can be sufficiently addressed in the measure before a Senate vote.

Punchbowl News reported that Chairman Crapo told Senators Wednesday "that Finance's plan for IRA credits involves accelerating some repeals and allowing gentler phase-outs for others based on energy type." The report said, "IRA cuts could get close to the more than $500 billion that the House included, but may tally somewhat lower." Conservative members of the House Freedom Caucus, who were convinced to vote for the House bill in part by late-stage changes to make the IRA terminations more stringent, have "been pressing senators to hold the line on the House version," the report said, adding that "House Republicans like Rep. Chip Roy (R-Texas) want nothing short of gutting the IRA to its core."

Following reports of a possible delay in 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) and digital services taxes (DSTs) — Senator Kevin Cramer (R-ND) was cited by Bloomberg as saying Republicans are seeking to make Sec. 899 less "blunt" but keep it as a tool at President Trump's disposal. The Senate package may also make additional significant changes to TCJA international tax provisions.

There have been conflicting reports about Republican senators either considering a $30,000 cap on the SALT deduction or, as Senator Chuck Grassley (R-IA) said in a Semafor report, leaving the deduction cap amount blank in the Senate package, with the level of relief to be determined later. There is interest in dialing back the relief given that there are no Republican senators from heavily impacted states, but some House Republicans from high-tax states are adamant that the House approach be retained.

Treasury — The June 12 Senate Finance Committee hearing with Treasury Secretary Scott Bessent had a greater emphasis on health care and nutrition assistance cuts in the OBBBA over tax issues, which mainly came up as Republicans and the Secretary affirmed the importance of passing the reconciliation bill. "If these tax cuts expire, all Americans will be hit with the largest tax hike in U.S. history. The majority of the increase will fall on those making less than $400,000 per year. The average family will see a $1,700 tax increase," Chairman Crapo said. "Small business owners will lose both their lower rates and the Small Business Deduction, facing rates up to 43%." Sec. Bessent said, "I believe that the full expensing was one of the most powerful aspects of TCJA … [and] that going back to 100% expensing for equipment, and what we have added to the bill, that I think will be very powerful is the full expensing of factory structures."

Ranking Member Ron Wyden (D-OR) said because of OBBBA cuts, "Working-class and middle-class Americans will be ensnared in a thicket of red tape-costing them their Medicaid and ACA benefits and making health coverage entirely unaffordable … These cuts will shutter rural hospitals and take nurses out of nursing homes." Responding to Senator Elizabeth Warren's (D-MA) comment that the OBBBA will "kick 16 million people off their health insurance," Sec. Bessent said that figure is overstated by 5.1 million "not attributable to provisions in this bill," but rather "the Democrats' scheduled expiration of Obamacare subsidies, and you should have extended that when you were in control."

Senator Bill Cassidy (R-LA) did raise the tax issues of Historic Tax Credits and the IRC Section 45V hydrogen credit. Senator Grassley said the Biden administration failed to meaningfully address the IRC Section 45Z Clean Fuel Production Credit in regulations. "Prior to issuing rules governing 45Z we need everybody in the Trump administration to take the time to learn a thing or two about farming; how farming works," he said.

The Finance hearing was a departure from Sec. Bessent's appearance before the Ways and Means Committee June 11, which had an international tax focus. Chairman Jason Smith (R-MO) and Reps. Ron Estes (R-KS) and Kevin Hern (R-OK) defended the IRC Section 899 provision, while Democrat Brad Schneider (D-IL) said the proposal threatens to reduce foreign direct investment. And rather than the focus on the potential effects of health care changes under the OBBBA, Ways and Means Democrats concentrated their questioning on the bill's impact on the deficit and debt. Under questioning from Rep. Terri Sewell (D-AL), Sec. Bessent said "it remains to be seen" whether the OBBBA will add to the debt. A WCEY Alert on the hearing is available here.

IRS — The Senate confirmed former Rep. Billy Long (R-MO) to be IRS Commissioner 53-44 on June 12.

Bill intros — On June 11, Finance Ranking Member Wyden introduced a bill (S. 2021) to exclude round-tripped income for purposes of calculating global intangible low-taxed income. The Close the Round-Tripping Loophole Act would deny round-tripped corporate income the benefit of the lower GILTI tax rate and apply the full 21% US corporate income tax rate instead.

Senator Eric Schmitt (R-MO) has introduced a bill (S. 2002) to establish a tax on remittance transfers.

The latest Washington Council EY DC Dynamics podcast is Episode 21, "Solving the Tax Bill Puzzle."