The president signed into law a sweeping reconciliation tax bill in a July 4 signing ceremony, capping a furious sprint to finish the legislation before the self-imposed holiday deadline. The Senate approved the bill in a 51-50 vote on July 1 after making a number of last-minute changes following intense bicameral negotiations. The House voted 218- 214 on July 3 to send the bill to the president’s desk.
Notable late changes to the version of the tax title released by the Senate Finance Committee on June 16 include:
- Cutting Section 899 from the bill after reaching an agreement on Pillar Two with G-7 countries;
- Significantly amending the provisions on global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), and the base erosion and anti-abuse tax (BEAT);
- Modifying the energy credits provisions;
- Removing the shutdown of state pass-through entity workarounds to the cap on deducting state and local tax (SALT);
- Removing an unfavorable expansion of the loss limit under Section 461(l);
- Reducing the new tax on remittances;
- Changing the opportunity zone provisions;
- Expanding to all residential construction an exception to the long-term contract rules; and
- Removing a new excise tax on litigation financing.
Also, President Donald Trump reportedly promised House conservatives that he would strictly enforce the beginning of construction rules for wind and solar projects and potentially make the permitting process more difficult.
With the legislation now final, taxpayers should focus on assessing its impact and identifying planning opportunities and challenges. The bill offers both tax cuts and increases that would affect nearly all businesses and investors. The Joint Committee on Taxation (JCT) scored the bill as a net tax cut of $4.5 trillion over 10 years using traditional scoring. Under the current policy baseline the Senate used for purposes of the reconciliation rules, that cost drops to just $715 billion. The Senate scored the provisions against a baseline that assumes temporary provisions have already been extended, essentially wiping out the cost of extending the tax cuts in the Tax Cuts and Jobs Act (TCJA).
The bill not only makes the TCJA tax cuts permanent but amends them in important ways. The legislation also offers a mix of favorable and unfavorable new provisions. Key aspects of the bill include:
- Making 100% bonus depreciation permanent while temporarily adding production facilities;
- Permanently restoring domestic research expensing with optional transition rules;
- Permanently restoring amortization and depreciation to the calculation of adjusted taxable income (ATI) under Section 163(j) while shutting down interest capitalization planning;
- Increasing the FDII effective rate while changing the deduction allocations and other rules;
- Increasing the GILTI effective rate while changing the foreign tax credit (FTC) haircut and expense allocation rules;
- Increasing the effective rate on BEAT;
- Phasing out many Inflation Reduction Act energy credits early and imposing new sourcing restrictions;
- Creating new deductions for overtime, tips, seniors, and auto loan interest;
- Imposing a 1% excise tax on remittances;
- Increasing filing thresholds for Forms 1099-K, 1099-NEC, and 1099-MISC;
- Extending opportunity zones with modifications;
- Increasing transfer tax exemption thresholds; and
- Increasing the endowment tax to a top rate of 8%.
Now that the legislation is final, taxpayers should assess its impact carefully and consider planning opportunities. Several key provisions offer different options for implementation. The effective dates will be important, and there may be time-sensitive planning considerations.
To read further description of the bill and its provisions, click here.
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***Published by our partners at BDO USA, July 2025.
