The "big beautiful bill" touted by President Trump is getting closer, though the timeline remains imprecise.
"There's been some public reporting on tougher questions of spending cuts, but the difference between the tax bill this year and the Tax Cuts and Jobs Act in 2017 is that the inclusion of a lot of spending cuts in the same bill makes it more challenging this year. From the bill itself several categories are apparent," said Stephen Eckert, a partner in the National Tax Office of Top 25 Firm Plante Moran. "There's the extension of the TCJA extension, campaign promises and a catch-all category. In some ways we would expect an extension of the vast majority of TCJA provisions, plus the campaign promises as well as potentially all the other things that get thrown in that we didn't expect."
For example, he cited S.711, the Transportation Freedom Act, sponsored by Sen. Bernie Moreno, R-Ohio, which would give a 200% deduction for wages paid to auto workers. "There is a broader category of things that could be coming to support certain industries," Eckert added.
One looming question regarding campaign promises is the potential modification of the Inflation Reduction Act and green energy incentives, Ecker noted: "There has been opposition to certain changes there from Republicans — we're watching to see what happens to the fate of energy efficient credits and incentives and to what extent they are modified under the bill."
The House and the Senate are working in parallel, waiting for legislative text, he observed. "The non-tax portions of the bill will be worked on earlier, but until we get the actual text from the House Ways and Means Committee, there will be questions. For example, there are multiple versions of some of the Trump proposals, such as the proposal to exclude tips and Social Security benefits from income. Each one is a little bit different. We expect changes, but it's unclear what the changes will be."
Principles or tactics?
For Eckert, the real questions are about where the red lines are for certain members. For example, there have been statements by some House members that they won't vote for the bill if it includes a cap on state and local tax deductions.
But are those actual red lines, or negotiating positions that will be softened?
"At this point, businesses would just like some degree of certainty going forward," he said. "Until then, it's hard to engage in longer-term planning. Hopefully, the bill will advance relatively soon so businesses will know what will be the law for the next couple of years and have a chance to plan for the future."
The House and Senate are both actively working on their versions, and they are constantly interacting with each other, according to Miklos Ringbauer, founder of MiklosCPA in Southern California. "So instead of having A and B and then trying to figure out what they can create out of it, they are now jointly working on it, so it has a greater chance of passing across the board," he explained.
However, there's a bit of a gap in the size of the budget cuts in each bill, with the Senate version pegged at less of a cut than the House. And some want to double the SALT limitation, while others would prefer to see it go away altogether.
"Likewise, the estate tax exemption," he continued. "There are some that would like to see the entire estate qualify as exempt from tax. Those are some of the ideas floating around, but until it's voted on by both chambers and the president signs it, there's no law. Everything can change until the very last minute."
Ringbauer noted that the TCJA required technical corrections and extensive guidance when it was passed in 2017, and he anticipates the same with this year's bill: "There's a very short overall window because the 2017 laws are expiring at the end of this year. Between May and December, we have just a few months."
"It looks like everyone is on board with expanding the availability of the Child Tax Credit on the individual side," he noted. "It helped a lot of families at that time. It helped a number of families to get out of poverty."
The reenactment of 100% bonus depreciation and the opportunity to fully expense R&D will be boons to business if they are, as expected, part of the legislation.
"It's an exciting year for tax accountants," Ringbauer said. "We are seeing a huge transformation of tax laws all over again. What could happen is, they simply reenact every part of the 2017 tax law legislation, or they could figure out what really worked and what didn't work, and start adjusting some things and letting other ones expire."
