With the Senate now considering the One Big Beautiful Bill Act, policy experts expect several hiccups as Republicans work toward their self-imposed July 4th deadline for passage.
The House passed OBBBA (H.R. 1) on Speaker Mike Johnson’s (R-LA) timeline — just before Memorial Day. Lawmakers returned to Washington, D.C., earlier this week and are slated to be in session for most of June. Senate Republicans likely will spend much of that time hashing out their version of OBBBA.
Senate Republicans will face two tasks during the first weeks of June, Rohit Kumar, PwC’s National Tax Office co-leader, explained during a June 2 policy briefing. His broad advice is to “pay very close attention to what Republican senators are saying out loud in terms of what changes they’re going to need to see in order to support the bill.”
With a 53-47 seat majority, Senate Republicans can afford to lose a few votes but need most members on board to pass OBBBA.
Byrd rule.
One task is “walking the Senate parliamentarian through the major features of the bill, places where there might be potential points of order, so-called Byrd rule violations,” said Kumar.
Under the Senate’s Byrd rule, provisions that do not produce a change in outlays or revenues, or where such a change is “merely incidental,” are barred in a reconciliation bill. Also prohibited are provisions that increase the deficit outside of the 10-year budget window. (More about reconciliation procedures here.)
“There are some things that have no revenue effect or no budget effect,” said Kumar, and those provisions are “immediately suspect” for purposes of a Senate Byrd rule analysis.
The Joint Committee on Taxation’s analysis of the House-passed OBBBA shows several tax-related items as having “negligible revenue effect.” Those include terminating the Direct File task force and provisions that would increase penalties for unlawful disclosure of taxpayer information and restrict regulation of tax preparer contingency fees. Also on the list are provisions to limit the research income exclusion to publicly available research and disregard certain employee-owned stock purchases for purposes of foundation tax on excess business holdings.
“If something violates the Byrd rule, it is subject to a 60-vote point of order,” said Kumar. But the Byrd rule analysis is “section-by-section,” he added. If a portion of the bill “can’t overcome that hurdle” of 60 votes, “just the offending measure is stripped for the bill.”
Possible roadblocks.
The second task for Senate Republican leadership will be “to figure out what version of the bill would have 51 votes in the Senate,” said Kumar. He expects that task to be “perhaps a bit more complicated.”
Clean energy credits. The Inflation Reduction Act clean energy provisions is one area where the Senate may revise OBBBA.
Earlier this year, several Senate Republicans urged their colleagues to maintain portions of the credits and cautioned against a “full-scale repeal.” Before rolling back a particular credit, said the lawmakers, Congress should consider its ability to “spur new domestic manufacturing and investment,” reduce consumer utility bills, and “ensure certainty for businesses” that already made investments based on current credits.
Among the Senators calling for a cautious approach to clean energy credit rollbacks is Thom Tillis (R-NC), who sits on the Senate Finance Committee — the chamber’s taxwriting committee.
“I don’t think the Senate would be able to pass the House version without some modification— perhaps being slightly less aggressive in the scale of phase out and repeal,” said Kumar.
Business provision permanency. Another Finance member, Senator Steve Daines (R-MT), has been vocal about the need for permanency for business provisions slated to expire after four years in the House-passed bill. Those include 100% first-year depreciation deduction for certain property under Code Sec. 168(k), immediate deduction of domestic research or experimental expenditures under Code Sec. 174, and reinstatement of EBITDA (earnings before interest, taxes, depreciation, and amortization) under Code Sec. 163(j).
“Why do we want to have a four-year cliff?” Daines asked during a recent Fox Business interview. “We need to take the capital and R&D provisions that allow for immediate expensing that currently are just for four years in the House bill and make those permanent.”
Daines told an audience at the Tax Council Policy Institute’s conference on May 15, “I think one most important we can do at this moment is make sure we’ve got permanence in the tax code.”
Senate Majority Leader John Thune (R-SD) gave a nod to permanency at a June 3 press conference. Thune noted that modeling shows “[t]he changes that are being made in the tax policy, particularly making permanent bonus depreciation, interest deductibility, R&D expensing, are going to lead to significant growth.”
SALT cap. Another area to watch is the state and local tax (SALT) deduction cap. The House-passed bill would raise the current $10,000 cap to $40,000 for those making under $500,000.
According to Kumar, “there are no Republican senators that think that the cap should be any higher than $10,000 and there are probably several … who think the cap should be zero.”
Fiscal impacts. Senator Ron Johnson (R-WI), another Finance member, has called out OBBBA’s projected impacts on the national debt. “[B]y repealing the automatic tax increase, adding $1.5 trillion in additional tax cuts, pumping around $340 billion into additional border and defense spending, and reducing other spending by at most $1.5 trillion, the One Big Beautiful Bill will almost certainly add to our deficits and debt,” Johnson said in a May 12 Wall Street Journal op-ed.
Johnson is certainly not the only one worried about OBBBA’s cost. And policy groups across the political spectrum have offered ideas on how to lessen OBBBA’s deficit impacts.
The Committee for a Responsible Federal Budget suggested in a May 29 post that the Senate consider several budget-conscious revisions, including lowering the SALT cap, “prioritizing” permanent policies, and reforming Medicaid and Medicare. CRFB also points to its extensive budget offsets bank, urging Congress to take a more thoughtful approach to tax reform.
On other options for Senate changes to the House-passed OBBBA, Thune shared on June 2 that “there are areas in the federal government — areas of waste, fraud, and abuse — that we can further identify that would make that a more robust package.”
Thune said Senate Republicans intend to “work through these next couple 2-3 weeks to be prepared to be able to put that bill on the floor the last week before the 4th of July.” Despite all the “moving parts,” he added, “at the end of the day, failure is not an option.”
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