This week (June 16-20)

Congress: The Senate is in session, but the House has a scheduled recess.

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

Last Week (June 9-13)

OBBBA: 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 are expected to be released in coming days. Punchbowl News and Politico reported Friday evening that the tax portion of the package is expected to be released on Monday, June 16. 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, international tax provisions, 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. Senator Ron Johnson (R-WI) was cited in Tax Notes 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 that Senate Majority Leader John Thune (R-SD) 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). On the broader timeframe, there was 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.

TCJA pre-cliffs — Leader Thune and Finance Committee Chairman Mike Crapo (R-ID) have said they want to make permanent the TCJA pre-cliff provisions on bonus depreciation, IRC Section 163(j) interest deductibility, and IRC Section 174 R&D expensing that are temporarily extended under the House bill. Bloomberg Government reported on Monday: "To pay for the items, which most economists rank as the most pro-growth in the overall tax bill, senators may restrict temporary breaks on tips and overtime, which Trump campaigned on during last year's election in appeals to restaurant and hospitality workers. The White House wants to keep those provisions as is."

President's proposals — It has been reported that, even though the Senate has greater leeway with the Senate Finance Committee being given $1.5 trillion for additional tax cuts under the budget above the current policy baseline that ignores the cost of the TCJA extensions, the chamber may seek to trim the President's proposals included in the House bill, including no tax on tips and overtime income. Senator Thom Tillis (R-NC) previously suggested leaving the President's proposals out, and Senator Ron Johnson (R-WI) is doubtful of the growth prospects of the tips and overtime provisions. However, Leader Thune said following the regular Tuesday party lunches, "The President, as you know, campaigned hard on no tax on tips, no tax on overtime, Social Security, interest on car loans. Those are all things that are priorities for the administration. And they were addressed in the House version of the bill, and I expect they will be in the Senate as well." Ways and Means Chairman Jason Smith (R-MO) said on Bloomberg TV June 10 that any bill that doesn't include the President's proposals would be "dead on arrival" in the House. Senator Lindsey Graham (R-SC) said no tax on tips and overtime proposals may get cut and need to advance in follow-on legislation. "All this may be hard to fit in completely. So let's have as big a bill as the market will bear, but realize that more is coming," he said in a Semafor report.

IRA energy credits — 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."

SALT — 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 and that any cap above the current $10,000 will cost revenue using a current policy baseline, but some House Republicans from high-tax states are adamant that the House approach be retained.

Global tax - There continues to be attention on the House bill's new IRC Section 899, which would increase 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). Following reports of a possible one-year delay in IRC Section 899, Senator Kevin Cramer (R-ND) was cited by Bloomberg as saying Republicans are seeking to make the proposal 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 — global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) deductions, and base erosion and anti-abuse tax (BEAT) — possibly to include addressing expense allocation for GILTI and the GILTI foreign tax credit haircut.

House perspectives: Attention on the current policy baseline used by the Senate, which doesn't count the cost of TCJA extensions, waned as the House and Senate decided on separate reconciliation instructions for each chamber in the budget resolution, but House Budget Chairman Jodey Arrington (R-TX) has warned that use of the baseline could not pass in his chamber. Arrington and Budget Vice Chair Lloyd Smucker (R-PA), both members of the Ways and Means Committee, and 35 other members rekindled the debate in a June 10 letter to Leader Thune that said the House bill paired tax cuts with meaningful reductions in spending to ensure the bill will not add to the debt relative to current law. "As the Senate considers changes, we remain unequivocal in our position that any additional tax cuts must be matched dollar-for-dollar by real, enforceable spending reductions," they said.

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

Treasury: The House Ways and Means Committee June 11 held a hearing with Treasury Secretary Scott Bessent that largely focused on the potential economic effects of the House-passed One Big, Beautiful Bill Act (OBBBA, H.R. 1) and the bill's proposed new IRC Section 899 retaliatory tax proposal. Chairman Jason Smith (R-MO) said the OBBBA provides the President specific, targeted authorities to fight back against discriminatory taxes like the undertaxed profits rule (UTPR) and asked about the IRC Section 899 provision's importance to the Administration. Sec. Bessent said the previous Administration "chose to outsource American sovereignty on tax matters" and the OBBBA provisions will prevent corporate revenues from being drained into foreign treasuries. "Many other countries would seek to pull in revenues from US multinational corporations into their treasury, and rest assured that the provisions in the One Big Beautiful Bill to combat this are a staking out of our fiscal sovereignty," the Secretary said. "The US tax system will stand next to what is called pillar two and other countries are welcome to relinquish their fiscal and tax sovereignty to other nations, the United States will not." Also on IRC Section 899, Rep. Ron Estes (R-KS) said doing nothing would equal ceding tax authority to other countries. He said the Committee could have acted with more severity but took a measured approach. Estes asked about concerns from Wall Street and elsewhere. Sec. Bessent replied there is quite a bit of misinformation on 899. Rep. Kevin Hern (R-OK) said the tax sovereignty of the US is under attack and the global tax deal puts a target on those countries that don't comply. He asked whether Treasury would work to put a "nail in the coffin" of the deal. Sec. Bessent said, "My staff met with the OECD in Paris just last week and we are pushing back and working toward a solution as soon as possible. " Rep. Brad Schneider (D-IL) said IRC Section 899 would impact our allies and threatens to reduce foreign direct investment, which we should instead welcome. He noted that the JCT revenue estimate of the bill shows the provision losing money toward the end of the budget window. Bessent said we should not allow foreign countries to take US companies' tax revenue for their own treasuries. A WCEY Alert has details.

By contrast, the June 12 Senate Finance Committee hearing with Sec. 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." Senator Bill Cassidy (R-LA) did raise the tax issues of Historic Tax Credits and the Section 45V hydrogen credit. Senator Grassley said the Biden administration failed to meaningfully address the 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.

Bill intros: On June 12, Senator Pete Ricketts (R-NE) introduced a bill (S. 2045) to impose an excise tax on certain investments of private colleges and universities.

On June 11, Finance Ranking Member Wyden introduced a bill (S. 2021) to exclude round-tripped income for purposes of calculating GILTI. 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.

On June 9, Senator Bill Cassidy (R-LA) introduced a bill (S. 1987) to provide special rules for purposes of determining if financial guaranty insurance companies are qualifying insurance corporations under the passive foreign investment company rules.

Rep. Tony Gonzales (R-TX) introduced a bill (H.R. 3844) to extend bonus depreciation for qualified film and television productions and to require minimum in-state spending thresholds for such productions.