The Senate Finance Committee Releases Draft Response to The House Passed “One, Big, Beautiful Bill”.

Updated June 18, 2025: The much-anticipated Senate response to the House’s tax bill is now released. While in draft, it does show some key areas of alignment between the House and Senate on tax reform. However, it also shows some notable differences. 

While we will certainly learn more over the coming weeks, it may prove difficult to meet the targeted July 4^th date discussed in the Senate. Even if achieved, there could be some challenges in passing the Senate version in the House with the narrow majority.

Like the House version, the Senate bill contains a significant number of tax law changes. A high-level overview of some of the changes are noted below. The summary below also highlights some of the differences between the two versions. 


TAX RATES

• House - Permanent extension of rates currently in place effective December 31, 2025
• Senate – No changes / similar to House

IRC 199A (QBI DEDUCTION)

• House – Permanently Increases the deduction from 20% to 23% of qualifying income
• Senate – Permanently increases the deduction at the current 20% of qualifying income

ESTATE TAX LIFETIME EXEMPTION

• House – Permanently expands the exemption amount to $15 million indexed for inflation
• Senate – No changes / similar to House

RESEARCH AND EXPERIMENTAL EXPENDITURES (R&E)

• House –
  • Allows domestic R&E to be deducted as incurred for years beginning after 31, 2024 and before Jan. 1, 2030
  • No change to treatment of foreign R&E
  • Change made on a cutoff method for expenditures (Prospective)
• Senate –
  • Permanently allows domestic R&E to be deducted for years beginning after December 31, 2024
  • No change to treatment of foreign R&E
  • Change made on a cutoff method for expenditures (Prospective) unless for a qualified small business which is allowed to immediately write off previously disallowed deductions or over a one-year or a two-year period

BONUS DEPRECIATION

• House –
  • 100% bonus depreciation allowed for assets acquired after 19, 2025 and before Jan. 1, 2030
  • Expands 100% bonus depreciation to certain real property used in manufacturing meeting certain requirements
• Senate –
  • 100% bonus depreciation allowed for assets acquired after Jan. 19, 2025 (Permanent)
  • Expands 100% bonus depreciation to certain real property used in manufacturing meeting certain requirements

IRC 179 DEDUCTION

• House - Maximum expensing amount under IRC 179 increased to $2,500,000 with phaseout beginning at $4,000,000
• Senate – No changes / similar to House

INTEREST EXPENSE LIMITATION (IRC 163(j))

• House - Allows once again the addback of depreciation and amortization in the calculation of the interest expense limitation for years beginning after 31, 2024 and before Jan. 1, 2030
• Senate - Allows once again the addback of depreciation and amortization in the calculation of the interest expense limitation for years beginning after Dec. 31, 2024 (Permanent)

STATE AND LOCAL TAX DEDUCTION

• House –
  • State and local tax itemized deduction limitation expanded to $40,000 subject to phase-out that reduce the deduction to $10,000
  • State taxes paid by S Corporation and Partnership trade or businesses other than specified service businesses continue to be available not subject to the limitations above
• Senate –
  • State and local tax itemized deduction limitation remains at $10,000
  • State taxes paid by S Corporation and Partnership trade or businesses are deductible up to the greater of $40,000 or 50% of the pass-through entity taxes

ENERGY CREDITS

• House - Various credits created and expanded under the Inflation Reduction Act are subject to phase-out and termination
• Senate – No changes / similar to House

There are many other proposals included in the bill that will impact taxpayers in both positive and negative ways. Of the items noted above, the Senate focused on permanency on the more broadly impactful provisions and the House focused on getting to the desired tax law, even if only on a temporary basis.

The Republicans hold a very narrow margin, so the ultimate success of the bill is uncertain. Redpath will continue to provide updates on the status of the bill as it progresses through Congress and, as things move forward, we will provide additional analysis on the key topics and the impact on various tax planning strategies.

For businesses looking ahead, preparation, adaptability, and expert consultation from Redpath will be key to navigating what’s next.