The so-called “one big beautiful” reconciliation bill making its way through Congress could mean a lot of big changes for organizations. Luckily for them, experts are watching the complex legislative game and giving the rest of us the highlights.
It’s the timing of the legislation rather than one particular provision that Jennifer Acuña, Washington national tax principal at KPMG, is paying closest attention to at the moment.
“The first question that we get right out of the gate is, ‘When can I expect something?’ Timing affects everything,” from effective dates for new tax provisions to a company’s exposure to a new provision, Acuña told CFO Brew.
So, what are organizations to do while waiting for this legislative sausage to be made? Plan for everything, of course.
“Clients are trying to work through various scenarios,” she said, to consider what certain provisions would mean to business “if they survive, if they’re modified, and how to respond to those should [they] make it over the finish line.”
What’s in it? As the name “big” suggests (no judgment on whether it’s “beautiful,” too), the bill has a lot in it. But for CFOs paying specific attention to tax implications, the reconciliation bill includes some of those greatest hits that business interests have backed for years.
If passed as is, the bill would extend the tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA). This includes the reinstatement of 100% bonus depreciation on equipment and property.
But it would also allow companies to immediately write off domestic research and experimentation expenses, rather than capitalizing and amortizing them over years, as the TCJA requires. This would retroactively apply to the beginning of the year, Acuña said.
What’s not in it? The current version increases the limit on individual state and local tax (SALT) deductions from $10,000 to $40,000. It does not include new limitations on corporate SALT (C-SALT) deductions, Acuña noted, which was something lawmakers discussed as an offset to the TCJA tax cuts.
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“There was a lot of concern in the business community that they would be in the crosshairs to pay for the lion’s share of those [TCJA] extensions,” she said. “Those individual provisions in particular are very pricey, trillions of dollars. So they had been looking at those potential offsets, like…C-SALT.”
The bill also cancels energy credits that the Biden-era Inflation Reduction Act created. But the bill provided “ample phaseouts” for those credits, compared to previous legislation that had more immediate repeals, Acuña said.
Lawmakers discussed but did not include other provisions that Acuña called “taxpayer unfavorable.” Those included a rate increase on stock buyback taxes, increased taxes on carried interest, or new taxes on the wealthy.
Buckle up, buttercup. House members passed the reconciliation bill last Thursday. The White House called the legislation a “once-in-a-generation opportunity to cement” President Donald Trump’s agenda.
The Senate will get its turn to make (potentially significant) changes, according to Acuña. For one, senators may sprinkle some C-SALT limits in their version, she said. That’s why KPMG is telling clients to not assume certain provisions will or won’t make it in the final version, she added.
It appears that more changes are indeed ahead. Sen. Ron Johnson, a Republican from Wisconsin and critic of the bill, said over the weekend that he had enough votes from his GOP colleagues to hold up the legislation until supporters agree to more spending cuts, Axios reported.
“The Senate usually has a very heavy hand in making changes that they need to the bill,” Acuña said. “And this is going to be no exception.”