In a razor-thin 215-214 vote, the House passed a sweeping $4 trillion tax package on May 22, marking a significant step in the GOP’s reconciliation effort. But the path to enactment remains far from clear, with Senate negotiations and budget rules posing major hurdles ahead of the July 4 target date.

After weeks of internal negotiations, the House of Representatives advanced a nearly $4 trillion tax bill in the early hours of May 22. The passage followed a marathon session in the House Rules Committee and intense floor debate. The final vote—215 to 214—highlighted just how divided Congress remains on tax policy, with all Democrats opposing the bill and a handful of Republicans breaking ranks.

Key Tax Provisions Amended Before Passage

To secure enough votes, House Republicans made several eleventh-hour changes, including:

• Raising the SALT deduction cap
• Accelerating the phaseout of energy credits
• Slightly increasing rates on GILTI, FDII, and BEAT
• Easing REIT asset test restrictions
• Lowering AMT exemption thresholds
• Introducing new caps on itemized deductions for high earners
• Removing certain tax increases for tax-exempt entities

These changes reflect a careful balancing act between competing priorities—extending key Tax Cuts and Jobs Act (TCJA) provisions, introducing new tax relief, and maintaining fiscal targets under the reconciliation framework.

The Road Ahead: Senate Considerations

The bill now heads to the Senate, where procedural and political challenges loom large. While both chambers align on many core principles, Senate Republicans may push for:

• Restoring energy incentives
• Making bonus depreciation permanent
• Refining international tax rules, including reciprocal taxes on foreign levies

Fast-tracking the bill by skipping committee review is under discussion, but that strategy may raise procedural flags—especially under reconciliation rules requiring that all provisions produce more than “incidental” revenue effects.

Timing Pressure

With the debt ceiling deadline fast approaching, Republicans are pushing for enactment by July 4. However, the more likely scenario is completion before the August recess. The reconciliation window closes on September 30, at the end of the fiscal year, putting added pressure on lawmakers to find consensus quickly.

What’s Next?
The Senate will begin shaping its version of the bill in the coming weeks. Businesses, tax-exempt entities, and high-net-worth individuals should closely monitor developments, as significant changes to deductions, credits, and international tax provisions remain on the table.

Stay tuned for updates as the legislation evolves—and reach out to our team to discuss how these changes may impact your tax planning strategy.