Senate Taxwriters Weigh in on House Reconciliation Bill Cliffs, Timing

Senate Finance Committee Chair Mike Crapo (R-ID) and member Senator Steve Daines (R-MT) shared their thoughts on House reconciliation efforts — emphasizing that the Senate will retool the bill to introduce more “permanence.”

Daines told an audience at the Tax Council Policy Institute’s annual conference on May 15 that “much of what the House has written” is “in pretty good shape.” He expects that the House will ultimately pass the bill, noting that Speaker Mike Johnson (R-LA) is “three for three” — having already orchestrated the passage of two budget resolutions and a continuing resolution funding the federal government through September 30.

Failing to extend the 2017 Tax Cuts and Jobs Act “is simply not an option,” said Crapo. But his desire is “not only to extend it, but to make it permanent.” To Crapo, “permanence will help businesses make long term investments that drive growth, accelerate productivity, and attract international capital.”

But once the House reconciliation bill reaches the Senate, said Daines, that chamber will “impose” its “thoughts and will” on the legislation.

Section 199A.

Crapo cited an EY study on the macroeconomic effects of extending the Code Sec. 199A pass-through deduction. That study concluded that permanently extending Section 199A would create 1.2 million jobs in each of the first 10 years, and 2.4 million jobs per year thereafter.

Daines, too, discussed the importance of making pro-business tax provisions permanent. “Permanence leads to certainty,” said Daines. “Certainty leads to confidence, and confidence leads to growth and investment,” he added.

On Section 199A, Daines noted the House raised the deduction from 20% to 23% in its draft. To him, that “came as a little bit of a surprise.” And while he supports additional tax breaks for pass-throughs, he noted that some of the offsets for the increased deduction in the House bill “actually were some tax increases.”

“We’ll see where that lands on the Senate side,” said Daines of Section 199A. More important for him is making the current pass-through deduction permanent.

Other pro-business provisions.

Daines also “believes strongly” in taking the House provisions on research and development expensing and capital expenditure and making them permanent. The House “has a four-year shot clock” on those provisions, said Daines. But to him, it’s important to avoid “the uncertainty of a cliff coming up.”

The House bill also would permanently increase the unified estate and gift tax exemption to an inflation-indexed $15 million beginning in 2026. Daines said this change is critical for agricultural states like Montana. A permanently boosted exemption would “make sure that farmers and ranchers can pass on their multi-generational operation to the next generation,” he explained.

Timing.

With the House Budget Committee set to mark up the full reconciliation bill on Friday, May 16, Speaker Johnson’s Memorial Day timeline for House bill passage could stick.

As far as a Senate timeline, Daines posited that “realistically, it will be something that the Senate will take the month of June for consideration.” But the “backstop,” said Daines, is the debt ceiling.

Treasury Secretary Scott Bessent said on May 9 that “there is a reasonable probability that the federal government’s cash and extraordinary measures will be exhausted in August” while Congress is typically in recess.

The debt ceiling, however, is “numeric-certain, not date-certain,” Daines explained. “Ideally, I’d love to see something by the Fourth of July,” said Daines, reiterating the reconciliation bill deadline Bessent has suggested.