The Senate has been out of session since Wednesday and the House had a scheduled recess this week, but the dust continues to settle after the release of the tax and health sections of the Senate Republican version of the House-passed One Big, Beautiful Bill Act (OBBBA, H.R. 1). The focus is on the middle of next week for Senate consideration of the bill, with some indications that Wednesday night is the target for a "vote-a-rama," which is the rapid consideration of amendments to close debate on a budget reconciliation bill that is limitless and usually lasts all night.

Another feature of budget reconciliation bills is the "Byrd Bath" parliamentarian review with Republican and Democratic staff to determine whether a provision meets strict revenue parameters or may be considered extraneous, including if it: does not produce a change in outlays or revenue; produces a change in outlays or revenues which is merely incidental to the nonbudgetary components of the provision; or would increase the deficit for a fiscal year beyond the budget window. Morning Tax reported that "Democrats will start laying out their challenges to the Senate parliamentarian on tax issues starting today" and "a number of the Democratic challenges will delve into GOP senators' preference for a current policy baseline." Punchbowl News reported that the full Byrd Bath for the Finance Committee portion of the bill — with Republican and Democratic staff together — is set to begin on Sunday (June 22) and that "Democrats plan to challenge around 60 health and tax provisions." (A Congressional Research Service report on the Byrd Rule is available here.)

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 in April. But the approach, which hasn't really been used in prior reconciliation bills, is a focus again now that it will likely be challenged and ruled on by the parliamentarian. "Republicans are bracing for an answer to one consequential question they punted on earlier this year: whether they can use an accounting maneuver known as 'current policy baseline' to make it appear that extending Trump's 2017 tax cuts would cost nothing," Politico reported.

Senate Majority Leader John Thune (R-SD) said he's still hoping to send the bill to President Donald Trump's desk by the GOP's self-imposed Independence Day deadline, Bloomberg Government reported. While the White House and congressional Republicans continue to call for the bill to be sent to the President for his signature by July 4, that may more realistically be the date by which the bill may pass the Senate. Whether a Senate bill can be taken up and passed by the House, as-is, remains unclear, especially with unsettled issues including Medicaid and the approach to Inflation Reduction Act (IRA) energy tax credits.

"Thune told reporters today his plan is to bring the bill to the floor mid-next week, and they are 'making good headway' on ensuring key parts are approved by the parliamentarian and Byrd bath," Axios reported June 18. "But Thune is also facing early backlash from the House, where GOP leadership feels blindsided by the changes to Medicaid — and uncertain whether the new version could pass the chamber … "

There have been comparisons between the OBBBA and the Biden-era Build Back Better Act (BBBA), which like the current effort seemed to pour many priorities of the majority party in Washington into a vast bill. (The BBBA wasn't able to be enacted during its consideration in 2021 but led to the more narrow IRA in 2022.) "Instead of spending all their time selling the bill publicly, Hill Republicans remain locked in an internal struggle over its particulars, with the stakes enormously high — both politically and policy wise," Punchbowl reported June 19. "This is an extraordinarily complex legislative package that will impact virtually every American if it becomes law. There could still be weeks of GOP infighting left, ending with no one totally in love with the final outcome."

Energy tax — A story in today's Wall Street Journal, "Clean Energy Projects Hinge on Senate Showdown," reported, "Republican Sen. Thom Tillis, who backs the subsidies and is up for re-election next year in closely divided North Carolina, said the Senate language released Monday 'moved substantially' in the right direction from an earlier House version, and that he is still in negotiations with colleagues. [Leader Thune] said Wednesday that the energy credits language in the bill is 'not totally settled yet.'" The story said: "Solar and wind production and investment tax credits would wind down through 2026 and 2027 in the Senate proposal, instead of around 2032 in the current law. Battery storage avoided an early sunset. The House version included difficult-to-meet provisions that would have meant an immediate rollback of credits. The Senate extended the time that nuclear, hydropower and geothermal projects would be eligible for credits."

Leaders must consider not only the demands of Republican Senators but possibly GOP House members as well, given the goal to have the House approve the eventual Senate bill as-is, without further trading proposals between the chambers or a conference committee.

Politico reported Rep. Andrew Garbarino (R-NY) as saying the Senate didn't go far enough in changing the House bill and saving the tax credits, "The layered phase out of the technology neutral tax credits picks winners and losers at a time when our nation is in need of quickly dispatchable power sources." Other members want a more conservative approach to the credits. Rep. Chip Roy (R-TX), a Freedom Caucus member who has been vocal about several issues in relation to the bill, posted on social media June 19: "One of the most egregious provisions in the Inflation Reduction Act is the transferability of credits to third parties. Billions in credits getting traded for cash behind closed doors with little to no oversight. Foreign companies and hedge funds are gaming it, costs/debt explode."

Another report said, "House and Senate Republicans are divided over how hard a blow their megabill should strike against the clean energy tax credits at the heart of Joe Biden's climate law. Hundreds of projects — overwhelmingly in Republican districts — hang in the balance."

SALT — The state and local tax deduction cap was one of the final issues to be closed out prior to the House OBBBA vote back on May 22, and the issue still threatens support for the bill when it returns to the House because the Senate bill retains the current policy $10,000 instead of the $40,000 cap (provided fully only for households with less than $500,000 in annual income) in the House bill. The Senate provision was intended as a placeholder for negotiations given that no Senate Republicans represent states where the cap is a major issue and leaders in the chamber have said the extra relief provided would serve as a subsidy to Democratic-controlled states. Senator Markwayne Mullin (R-OK), a former House member himself, has reportedly held discussions with House members — some of whom have declared a bill that extends the $10,000 cap DOA in the House — over retaining the $40,000 cap but lowering the income threshold.

Treasury — On June 18, Leader Thune took a procedural step (filed cloture) in relation to the nomination of Ken Kies to be Treasury Assistant Secretary for Tax Policy, setting up a vote as soon as next week.

Bill intros — Rep. Val Hoyle (D-OR) and Senator Brian Schatz (D-HI) have introduced a bill (S. 2127, H.R. 4035) to impose a tax on certain trading transactions. The Wall Street Tax Act would establish a 0.1% tax, phased in over five years, on the sale of stocks, bonds, and derivatives.

An EY Alert, "Senate Finance Committee changes the excise tax proposed for remittance transfers," is available here.