The timeline for Senate consideration of the chamber's version of the House-passed One Big, Beautiful Bill Act (OBBBA, H.R. 1) to extend Tax Cuts & Jobs Act (TCJA) provisions beyond 2025 and cut mandatory spending is slipping after the parliamentarian ruled that the bill's approach to Medicaid provider taxes would violate reconciliation rules. There had already been discussion of delaying the provision due to concerns from Republican members, and now it is being reworked to fit within the rules. Votes on the reconciliation bill are not expected today (Friday, June 27) but work on the bill is set to continue through the weekend. When debate on the bill and the "vote-a-rama" amendment votes to cap the process will occur is unknown at this point.

Punchbowl News reported June 26 that while Senate Republican leaders have confidence in the reconciliation bill, "they don't yet have 50 votes to begin the floor process on their massive tax and spending cut bill" and fixing the procedural problem with the Medicaid provision "could still take a lot of time." Some Republican Senators, including Bernie Moreno (R-OH), who unseated a Democrat in the last election, are arguing for adopting the House bill's less-drastic limits on Medicaid, which President Trump is reportedly advocating.

Politico reported on the timeline for the bill June 26: "Senate Republicans emerged from a closed-door lunch meeting Thursday putting on a brave face about the megabill's progress. Yet this time last week, members were expecting revised text of the sprawling bill Monday with votes starting a couple of days later. In other words, they thought they'd be close to done by now. Instead, Majority Leader John Thune refrained from giving his members a specific timeline during a closed-door lunch Thursday … "

The Senate "Byrd bath" parliamentarian review with Republican and Democratic staff to determine if Finance Committee tax and health provisions meet revenue parameters required of reconciliation bills has been ongoing. This morning, it was announced by Senate Budget Committee Democrats that some tax provisions had been ruled in violation of the Byrd rule and would be subject to a 60-vote point of order:

• Private school vouchers
• Religious college carve-out from the endowments tax
• Deregulation of gun silencers and easily concealable guns
• Mandatory pre-certification for Earned Income Tax Credit (EITC) claimants
• Increasing penalties for disclosures of taxpayer information

Still under review are:

• Trump accounts
• Making the Opportunity Zones program permanent
• Tax on third-party litigation funders
• Social Security Number requirement
• Foreign entity of concern restrictions on the clean electricity production credit

The parliamentarian's ruling striking the Medicaid provisions "results in more than $250 billion in health care cuts removed from the Republicans' big bad bill," Finance Ranking Member Ron Wyden (D-OR) said in a statement.

Beyond Medicaid and Byrd rule violations, other issues remain unsettled, including the state and local tax (SALT) deduction cap and Inflation Reduction Act (IRA) energy tax credit changes. There have been meetings with House members invested in the SALT issue and Senator Markwayne Mullin (R-OK), over a proposal to retain the House bill's $40,000 cap with an as-yet-unannounced lower income threshold, and with Treasury Secretary Scott Bessent. Reps. Mike Lawler (R-NY), Young Kim (R-CA) and Nick LaLota (R-NY) reportedly rejected the latest proposed SALT compromise offered by Treasury. There has long been the expectation that a SALT deal would be one of the last issues resolved before a Senate vote, as it was before the May 22 House vote. And House Majority Leader Steve Scalise (R-LA) said yesterday that the House approach to IRA energy tax credits needs to be preserved, and that the President supports their version.

There is the possibility that the Senate could begin debate on the bill without all outstanding issues resolved and make final adjustments toward appeasing the concerns of Senators — and House members who are expected to clear an eventual Senate measure as-is — through a 'wraparound amendment' prior to Senate passage.

Global tax — Another issue is being jettisoned from the reconciliation bill not from a parliamentary ruling or members' objections, but because of Treasury negotiations with other countries. Secretary Bessent said June 26 that "we will announce a joint understanding among G7 countries that defends American interests" related to the OECD-led global tax agreement, and therefore he has asked the House and the Senate to remove the new IRC Section 899 retaliatory tax proposal included in the House-passed and Senate-proposed reconciliation package.

The Secretary posted on social media, "OECD Pillar 2 taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months … Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill."

The House and Senate included different versions of the IRC Section 899 proposal, which were rooted in bills introduced earlier this year by Ways and Means Committee Chairman Jason Smith (R-MO) and Rep. Ron Estes (R-KS). The House version of the proposal that would cap the additional tax at 20% over the statutory rate or treaty rate was estimated to raise $116 billion. The Senate version, with the increase in withholding tax rates of 5 percentage points per year capped at 15 percentage points and all the IRC Section 899 penalty provisions delayed until 2027, was estimated to raise $52 billion.

Senate Finance Committee Chairman Mike Crapo (R-ID) and House Ways and Means Committee Chairman Smith praised the deal and confirmed that "we will remove proposed tax code Section 899."

Congress — The Senate June 26 confirmed 53-45 Ken Kies to be Treasury Assistant Secretary for Tax Policy. Kies is a former Chief of Staff of the Joint Committee on Taxation and Republican Tax Counsel to the Ways and Means Committee and, after those roles, a long-time lobbyist.

An EY Alert, "Senate Finance Committee's bill could significantly affect high-income taxpayers," is available here.