Taxation & Representation: Budget Committee Document Detailing Potential Tax Bill Provisions Circulated

Budget Committee Document Detailing Potential Tax Bill Provisions Circulated: A leaked list  of policy options purported to have been developed by the House Budget Committee details potential revenue and policy options for a 2025 tax bill. The document includes limited descriptions for proposals as well as budgetary estimates from a range of sources, in some cases with no source identified. The document contains several provisions that Republicans have discussed as potential provisions to include in tax legislation, including lowering the corporate tax rate from 21% to 15%, ending the Employee Retention Tax Credit, and repealing many of the clean energy tax credits in the Inflation Reduction Act (IRA, Pub. L. 117-169 ). However, the document previews other novel ideas that would modify or eliminate certain tax credits or deductions for individuals and businesses as a way to limit the revenue effects of the expected tax bill later this year. Stakeholders immediately pushed back against various portions of the document, although the list does not include any indication as to the viability of each proposal. Overall, the list appears to have been part of House leaders’ efforts to inform members, many of whom were not in Congress during the enactment of the Tax Cuts and Jobs Act of 2017 (Pub. L. 115-97 ), and illustrate the range of politically challenging revenue provisions that would be needed to offset some or all of the cost of extending or making permanent the expiring TCJA provisions, as well as new provisions President Donald Trump advocated for during his presidential campaign.

Senate Finance Committee Holds Bessent Nomination Hearing: On Thursday, Jan. 16, the Senate Finance Committee held a hearing titled “Hearing to Consider the Anticipated Nomination of Scott Bessent, of South Carolina, to be Secretary of the Treasury.” Committee members asked Bessent, the then-nominee-designate for secretary of the treasury, about several issues under the Treasury Department’s jurisdiction, including international tax issues, aspects of trade policy and regulation of financial institutions. Bessent was also asked about his views on the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97 ) and the Inflation Reduction Act (Pub. L. 117-169 ) and several of their provisions, with Bessent saying that not extending the TCJA would be “devastating” for American taxpayers and businesses. Overall, Bessent expressed approval for many of President Trump’s policy priorities, including his economic, tax and trade agenda, indicating that he would follow Trump’s lead as treasury secretary. His advocacy included a defense of Trump’s tariff policies, a desire to impose economic sanctions on Russia and opposition to the Organisation of Economic Co-operation and Development (OECD) Pillar Two tax regime (discussed below). However, he bucked Republican opposition to the IRS Direct File program, saying that he would keep it operational for the 2025 tax-filing season (discussed below). On Jan. 21, the Committee held an Executive Session to report Bessent’s nomination to the full Senate. His nomination was favorably reported 16-11, with Sens. Mark Warner (D-VA) and Maggie Hassan (D-NH) voting with all Republicans.

Ways and Means Committee Holds Hearing on TCJA Extension Considerations: On Jan. 14, the House Ways and Means Committee held its first policy hearing of the 119th Congress titled “The Need to Make Permanent the Trump Tax Cuts for Working Families.” The hearing discussed several expiring provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97 ) and whether they should be extended as part of a tax bill in 2025, including the Section 199A deduction for pass-through entities, the threshold increase for the estate tax, the doubled child tax credit and the full-and-immediate expensing of research and development costs for manufacturers. Republicans on the committee, including Chairman Jason Smith (R-MO), praised many of the TCJA’s provisions as providing economic stimulation following perceived “economic stagnation” through the Obama administration, saying that the TCJA contributed to higher worker salaries and lower unemployment and poverty rates. He also outlined numerous consequences of letting the TCJA expire for individuals of all income levels and businesses of all sizes. Meanwhile, committee Democrats, including Ranking Member Richard Neal, criticized the TCJA as disproportionately benefiting wealthy taxpayers and warned against passing an extension that would add to the national debt.

SALT Trade – Republicans Consider Limiting Business SALT Deduction in Exchange for Individual SALT Relief: Members of the House Freedom Caucus have proposed limiting the state and local tax (SALT) deduction for businesses in exchange for increasing the current limitation on individuals and families. House Republicans from high-tax states, informally known as the “SALT Caucus,” have criticized the SALT deduction limitation as uniquely disadvantageous to their constituents and have consulted with President Trump and House leadership on the possibility of raising or eliminating the limitation. The Freedom Caucus members’ proposal is the latest in a series of options to provide SALT relief for individuals. SALT advocates, however, have reportedly rejected the option, saying that they do not want to “trad[e] one blue-state penalty for another.” Neither the Freedom Caucus proposal nor the related leaked list of reconciliation options (see above) provide any detail as to the scope of business state and local taxes that would be included (e.g., income, property, special industry taxes) or any indication as to whether the deductibility of business SALT would be partially or fully denied.

Werfel Resigns as IRS Commissioner: On Jan. 20, IRS Commissioner Daniel Werfel formally resigned as commissioner of the Internal Revenue Service (IRS) after announcing his intention to step down on Jan. 17. While he had previously said he was optimistic that he would continue to serve out the rest of his term under the Trump administration, Werfel later stated that he would resign “[a]fter significant introspection and consultation with others” and as an effort “to support a successful transition” from the Biden administration to the Trump administration. President Trump nominated former Rep. Billy Long to replace Werfel as IRS commissioner on Dec. 4, 2024. Werfel’s resignation marked the first time since 2007 that an IRS commissioner departed the agency before the end of their term.

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