Executive Summary: House W&M’s Committee Advances Broad Tax Bill

Article | May 16, 2025

Authored by Johnson & Sheldon, PLLC

Republicans on the U.S. House of Representative’s Ways and Means Committee on May 14 advanced a broad package of proposed tax benefits and revenue raisers, as their highly anticipated tax bill comes together. Key proposals would make permanent many provisions of the Tax Cuts and Jobs Act of 2017, restore favorable tax treatment of various business expenses, curb clean energy business tax incentives and respond to unfair foreign taxes.

The Joint Committee on Taxation estimated the tax package would add $3.8 trillion to the federal deficit over the next 10 years. All proposals are subject to change as the legislative process continues in the House, with Republicans seeking passage in the full House by Memorial Day and enactment by July Fourth.

Although the proposals are subject to change as the budget reconciliation process continues in the weeks to come, taxpayers may want to start working with their advisors especially business to understand how the legislation would affect their tax obligations, cash flows, and business or wealth objectives.

Here is a rundown of key proposals released so far, and an overview of the tax policy road ahead:

Business taxation

• 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%—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 currently in effect—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 terminate credit transferability within approximately two years and extend and modify the 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.

Individual taxation

• State and local tax deduction limitation (SALT cap): Increase the SALT cap to $30,000 ($15,000 for a married taxpayer filing a separate return). For taxpayers with modified adjusted gross income over $400,000 ($200,000 for a married taxpayer filing a separate return), the cap would phase down 20% of the excess until it reaches $10,000 ($5,000 for married taxpayers).
• Pass-through entity tax (PTET) elections: Disallow the ability of partnerships and S corporations not qualifying for the qualified business income deduction to utilize state PTET to avoid the SALT cap.
• 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.
• Money Accounts for Growth and Advancement (MAGA 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. Treasury would also make a one-time $1,000 deposit for qualifying children born between Dec. 31, 2024, and Jan. 1, 2029.  

Estate taxation

• Estate planning: Increase the estate, gift and generation-skipping exemption scheduled to expire at the end of 2025 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

• Three changes to the determination of unrelated business income (qualified parking, name and logo royalties, 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.
• Providing the secretary of the Department of the Treasury with authority to terminate the exempt status of organizations that support terrorism.

Other notable tax proposals

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 Ways and Means Committee approved

The package of tax proposals approved May 14 do not address the following areas:

• Corporate tax rate
• Tax rate for domestic manufacturers
• Carried interest
• Capital gains tax rate
• A higher tax rate for high income individuals

What’s next for the tax bill

While the proposed tax changes and revenue raisers provide businesses and individuals with some insight into how Republicans may reshape the tax landscape, the process is in its early stages. The proposals that the Ways and Means committee approved May 14 are subject to change as Republicans scrutinize these and other spending and taxation proposals and their estimated effect on the national debt.

House Republicans, with their narrow majority, hope to approve the tax bill by Memorial Day, but the process could linger into June or beyond. After House approval, the Senate will take up the legislation, and additional changes are anticipated. To become law, the House and the Senate need to approve an identical version of the bill. 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 and topical criteria. They have earmarked July Fourth as their working deadline.

In the meantime, there remains considerable uncertainty about the tax provisions in the final bill and the timing for potential enactment.