This article, originally published May 12, has been updated several times, the latest to reflect that the full House of Representatives on May 22 passed the full taxation-and-spending bill.
House Republicans pass tax bill containing extensive package of tax changes and revenue raisers.
The U.S. House of Representatives on May 22 passed a broad taxation-and-spending package that includes new and extended tax benefits for businesses and individuals, as well as some revenue raisers. The One Big Beautiful Bill Act—a 1,082-page bill and a slew of modifications—contains tax proposals that are subject to change in the Senate. Republican leadership aspires for the Senate to approve the bill by the end of June and for President Donald Trump to sign it into law July Fourth.
Key tax proposals in the House tax bill would:
- Make permanent many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) before they are scheduled to expire at the end of 2025.
- Restore more favorable tax treatment of various business expenses, including those for qualified property, research and development, and business interest.
- Accelerate the phaseout of most clean energy business tax incentives that have been enacted in recent years, terminate most energy credits for individuals, and phase out credit transferability.
- Respond to certain unfair taxes, which include discriminatory and extraterritorial taxes that a foreign government imposes on U.S. persons or certain foreign entities owned by U.S. persons.
The proposals are subject to change as the budget reconciliation process continues in the Senate, where it will be subject to budgetary, topical and parliamentary criteria in order for Republicans to pass it without bipartisan support. Taxpayers may work with their advisors to understand how the legislation would affect their tax obligations, cash flows, and business or wealth objectives.
Here is a rundown of key tax provisions in the House tax bill, and an overview of the tax policy road ahead.
Business taxation in the One Big Beautiful Bill Act
Republicans in the House approved proposed tax changes with wide-ranging business implications. Areas of focus and the corresponding proposals include:
- Capital expenditures and investments: Reinstate 100% expensing of qualified assets in the year they were put into service—also known as bonus depreciation—for property acquired between Jan. 20, 2025, and 2029. The proposals would expand the scope of qualified assets to cover manufacturing buildings.
- Business interest: Restore TCJA’s original, more favorable EBITDA-type calculation of the business interest deduction limit for tax years 2025 through 2029.
- Innovation and research and development: Reinstate immediate expensing for domestic R&D expenditures incurred in tax years 2025 through 2029. The proposal would not provide full expensing for foreign R&D expenditures but would provide some relief.
- Pass-through businesses: Increase the qualified business income (QBI) deduction from 20% to 23%, effective for tax years beginning after Dec. 31, 2025—and make it permanent, with restructured changes to the income limitations and thresholds. The proposal would also extend eligibility for the deduction to certain interest dividends paid by qualified business development companies.
- International taxation: Make permanent certain U.S. international tax rates—specifically, the global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII) and base erosion and anti-abuse tax (BEAT) rates.
- Clean energy tax credits and incentives: Accelerate the phaseout for most clean energy tax incentives that have been enacted in recent years, with most energy credits for individuals terminated. The proposal also would extend and section 45Z clean fuel producer credit through 2031.
- Charitable contribution deduction: Instate a 1% floor on corporate charitable contribution deductions while retaining the 10% ceiling.
- Employer-provided meals: Amend the TCJA rule, effective for 2026, that will disallow deductions for various expenses related to on-premises employer-provided meals, so that certain businesses would be exempt from the disallowance.
- Moving expenses: Permanently repeal the income exclusion and deduction, except for certain members of the Armed Forces.
- Taxable real estate investment trust subsidiaries (TRS): Increase the percentage of a REIT’s total assets that may be represented by securities of one or more TRSs from 20% to 25% effective for taxable years beginning after Dec. 31, 2025.
Individual taxation in the One Big Beautiful Bill Act
The proposals would modify and/or make permanent several individual tax provisions that the TCJA established. Areas of focus and the corresponding tax proposals include:
- State and local tax deduction limitation (SALT cap): Increase the SALT cap to $40,400 ($20,200 for a married taxpayer filing a separate return). For taxpayers with modified adjusted gross income over $505,000 ($252,500 for a married taxpayer filing a separate return), the cap would phase down 30% of the excess until it reaches $10,000 ($5,000 for married taxpayers). Additionally, the cap and phase out amounts would increase by 1% each year from 2026-2033, staying permanent after 2033.
- Pass-through entity tax (PTET) elections: Disallow the ability of partnerships and S corporations not qualifying for the QBI deduction to treat state PTET elections as deductions of the entity beginning in tax year 2026. Nonqualifying businesses include specified service trades or businesses (SSTBs), under which many professional services, financial services and health care businesses are classified.
- Excess business loss limitations: Make permanent the limitations on business losses allowed to offset other income and require any amount not allowed in the current year to continue to be subject to the limits instead of being allowed as a net operating loss in future years.
- Personal income tax: Make permanent the tax rates and brackets enacted by the TCJA. Taxpayers in all brackets except the 37% bracket would be provided with a tax reduction through an inflation adjustment.
- Standard deduction: Make permanent the standard deduction enacted by the TCJA and increase it by $1,500 for 2025 through 2028.
- Itemized deductions: New overall limitation on itemized deductions; permanently eliminate miscellaneous itemized deductions.
- Personal exemptions: Eliminate personal exemptions.
- Alternative minimum tax (AMT): Make permanent the increased AMT exemption and phase-out thresholds.
- Child tax credit: Increase the child tax credit to $2,500 for 2025 through 2028; make permanent the additional child tax credit ($1,700 in 2025). After 2028, the child credit would revert to $2,000.
- Charitable deductions: Reinstate a partial nonitemizer charitable deduction for calendar years 2025 through 2029.
- Tips and overtime pay: Introduce income tax deductions equal to tips and overtime compensation received.
- Individual trust accounts: Create a new type of tax-favored account designed to benefit children under age 8 for education, small business investments and first home purchases. The annual contribution limitation to the accounts would be $5,000. Treasury would also make a one-time $1,000 deposit for qualifying children born between Dec. 31, 2024, and Jan. 1, 2029.
Estate taxation in the One Big Beautiful Bill Act
The proposals address estate tax provisions that were established by the TCJA and are scheduled to expire at the end of 2025.
- Estate planning: Increase the estate, gift, and generation-skipping tax exemption amounts to $15 million, adjusted for inflation, and make them permanent, compared to the TCJA's temporary $10 million exemption that was adjusted for inflation to $13.99 million in 2025.
Taxation of exempt organizations in the One Big Beautiful Bill Act
Proposals that would directly affect exempt organizations include:
- Two changes to the determination of unrelated business income (qualified parking and research in the public interest).
- Increasing the section 4960 excise tax on executive compensation by including all employees as covered employees.
- Increasing the private foundation excise tax on net investment income to 2.78%, 5%, or 10% for foundations with assets of $50 million or more.
- Increasing the private college and university endowment tax to 7%, 14%, or 21% if the per student endowment is over $750,000.
Other notable tax proposals in the One Big Beautiful Bill Act
The package of tax proposals addresses a variety of issues, including enforcement, economic development, disaster relief and more. Specifically, those areas and proposals include:
- Countering unfair foreign taxes: Respond to certain unfair taxes, which include discriminatory and extraterritorial taxes that a foreign government imposes on U.S. persons or certain foreign entities owned by U.S. persons.
- Employee retention tax credits (ERTC): Expand the scope of existing penalties to address ERTC-specific misconduct, and bar allowance of refunds claimed after Jan. 31, 2024. The proposals would extend the statute of limitations giving the IRS significant additional time to make adjustments to ERTC claims and related income tax deductions.
- Disaster relief and casualty losses: Make permanent the TCJA rules related to casualty loss. Designate any federally-declared disasters through date of enactment as “qualified disaster losses” for personal property.
- Opportunity zones: Renew and modify the opportunity zone program, including modified definitions, criteria, investment incentives and reporting requirements.
Notable omissions from the tax proposals that the House of Representatives approved May 22
The package of tax proposals approved May 22 do not address the following areas:
What’s next for the tax bill?
The proposed tax changes and revenue raisers in the House bill provide businesses and individuals with some insight into how Republicans may reshape the tax landscape. However, the legislative process is ongoing. To become law, the House and the Senate need to approve an identical version of the bill.
The tax proposals the House approved May 22 are subject to change as Republicans in the Senate scrutinize these and other spending and taxation proposals and their estimated effect on the national debt. The extent to which the Senate will use the House-approved legislation as a starting point for its version remains to be seen.
Senate Republicans hope to pass their version of the bill with a simple majority through the budget reconciliation process, which requires the legislation to meet strict budgetary, topical and parliamentary criteria—another factor that could result in changes to tax proposals that the House approved.
Republicans have earmarked July Fourth as their working deadline for the president to sign the bill into law.
In the meantime, there remains considerable uncertainty about the tax provisions in the final bill and the timing for potential enactment. Work with your tax advisor to stay up to date on legislative developments and to understand how proposals would affect your tax profile.
We invite you to attend our webinar at 1 p.m. Eastern on Thursday, May 29, as members of our Washington National Tax and tax policy teams provide insights into how the tax proposals would affect businesses and individuals, the legislative timeline, likelihood of passage and actions you can take now.
