Legislative Lowdown
Ways and Means Committee Releases Full Text and Marks Up Tax Package: On May 12, House Ways and Means Committee Chairman Jason Smith (R-MO) released text of the committee’s tax title for the fiscal year (FY) 2025 budget reconciliation bill—the amendment in the nature of a substitute (AINS)—which the committee is scheduled to mark up on May 13, beginning at 2:30 p.m. Following the release of the text, the committee released a section-by-section summary of the bill and the Joint Committee on Taxation (JCT) released a description of the bill’s tax provisions and a revenue table.
The AINS includes extensions of some Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) expiring provisions that were initially unveiled through initial legislative language released late Friday evening. The amendment includes a number of revenue raisers and revisions to the Inflation Reduction Act energy tax credits. The AINS will serve as the base text for the committee.
Brownstein is closely monitoring the AINS and the markup and will provide more information, including a comprehensive analysis of the AINS, later this week.
Bessent Estimates Debt Limit Will Be Reached in August, Urges Action: In letters sent to House Speaker Mike Johnson (R-LA), House Minority Leader Hakeem Jeffries (D-NY), Senate Majority Leader John Thune (R-SD), and Senate Minority Leader Chuck Schumer (D-NY) on May 9, Treasury Secretary Scott Bessent advised that the United States will run out of borrowing authority in August and urged action by Congress to raise or suspend the limit before the “X-date” is reached. Bessent called for Congress to address the debt limit “by mid-July” in order to account for “significant uncertainty in projecting government cash flows” and provide sufficient time for Congress to increase the limit before its scheduled month-long recess in August. The Republican majorities in Congress and President Trump intend to include a debt limit extension in the budget reconciliation legislation currently being considered by Congress.
House Republicans Renew Push to Preserve Some IRA Credits: Led by Rep. Mariannette Miller-Meeks (R-IA), 12 House Republicans sent a letter to House Ways and Means Committee Chairman Jason Smith (R-MO) urging the committee to preserve the Section 48E Clean Electricity Investment Tax Credit (ITC) and the Section 45Y Clean Electricity Production Tax Credit (PTC), both of which were enacted as part of the Inflation Reduction Act (IRA, Pub. L. 117-169). The letter states that the ITC and PTC have helped advance an “America First energy agenda” and that repealing the credits “would result in a 10% increase in electricity costs for consumers by 2026.” The letter also urges the preservation of the transferability option currently available under both credits. Many Republicans in Congress support eliminating or phasing out such credits and using any associated savings as a pay-for for the budget reconciliation legislation.
SALT Negotiations Continue as ‘SALT Caucus’ Rejects Offer to Raise Deduction Cap to $30,000: On May 8, the “SALT Caucus”—an informal group of House Republicans representing districts in high-tax states such as California, New York and New Jersey—rejected a proposal to raise the cap on the deduction of the state and local tax (SALT) from $10,000 to $30,000. Reps. Elise Stefanik (R-NY), Andrew Garbarino (R-NY), Nick LaLota (R-NY) and Mike Lawler (R-NY) released a joint statement saying that the increase was proposed “with no notice or agreement” and was “an amount they already knew would fall short of earning our support.” Breaking with her fellow New York Republicans, Rep. Nicole Malliotakis (R-NY), a member of the Ways and Means Committee, signaled support for the increased SALT deduction cap, stressing that it would “provide much-needed relief for the middle-class and cover 98% of the families in my district.”
The tax bill released by the House Ways and Means Committee (discussed above) includes the increased $30,000 SALT cap but limits eligibility for the deduction to individuals with annual incomes under $400,000. The provision was announced after further meetings with the SALT Caucus but it is unclear whether the group will support the provision.
Tax Worldview
UK-U.S. Trade Framework Does Not Include DST Relief: On May 8, the White House announced the framework for a trade agreement between the United States and United Kingdom. The agreement, known as the Economic Prosperity Deal (EPD), seeks to accomplish three objectives: (1) encourage increased trade between the United States and the United Kingdom; (2) remove trade barriers; and (3) ensure an “enduring economic partnership” that is “built on a shared vision of the challenges that face our economies.” However, the agreement does not include a commitment from the United Kingdom to reduce or eliminate the United Kingdom’s 2% digital services tax imposed on U.S. companies.
1111 Constitution Avenue
NTA Urges Quick Resolution of ERTC Claims: In a May 8 blog post, National Taxpayer Advocate (NTA) Erin Collins called for the Internal Revenue Service (IRS) to finish processing all Employee Retention Tax Credit (ERTC) claims by the end of 2025. The ERTC is a COVID-19 pandemic-era credit program that allowed businesses that were forced to temporarily close or experienced a gross receipt decline during the pandemic to keep employees on payroll but has been subject to abuse by organizations filing fraudulent claims in an attempt to claim the credit.
Collins noted since the window for filing ERTC claims closed as of April 15, 2025, the IRS should “turn its full attention to administering this program in a manner that prioritizes fairness, transparency, and taxpayer rights.” She noted that, as of early April, the IRS had yet to process over 597,000 ERTC claims. Collins also urged the IRS to prioritize claims from taxpayers facing financial hardships while also exercising transparency and protecting taxpayer rights.
Bessent: ‘Depoliticize’ IRS Audits: Speaking at a congressional hearing on May 6, Treasury Secretary Scott Bessent stated that the Internal Revenue Service (IRS) audit processes are under review amid allegations that the selection criteria is biased by political affiliation. Bessent noted that the IRS will plan to “look at the distribution of who is audited and why they are audited.”
Hearings and Events
House Ways and Means Committee
On May 13, the House Ways and Means Committee held a markup of “Legislative proposals to comply with the reconciliation directive included in section 2001 of the Concurrent Resolution on the Budget for Fiscal Year 2025, H. Con. Res. 14.”
Senate Finance Committee
The Senate Finance Committee has no tax hearings scheduled for this week.