By Christopher Migliaccio, JD, Partner, Elisha M. Brestovansky, CPA, MBA, Director and Thomas Kinder, JD, LLM, Director
Key Takeaways
- The Senate preserved the $40,000 State and Local Tax deduction and removed limits on Pass-Through Entity Tax, aligning closely with the House version.
- Section 899, the proposed tax on foreign-owned U.S. corporations, was dropped following a Treasury agreement with G-7 allies.
- Proposed taxes on wind, solar and litigation funding were excluded from the final Senate version of the Bill.
On July 1, the Senate narrowly passed its reconciliation bill – formally known as the “One Big Beautiful Bill Act” (the Bill). The vote was 51 to 50 with Vice President JD Vance casting a tie-breaking vote. The Bill is now headed back to the House, where the stated goal is still for it to be passed by July 4. Meeting that timeline, however, will require swift reconciliation of the differences between the House and Senate versions.
As noted in our previous article, there were several differences and key takeaways from both versions of the Bill. For the most part, the Senate version of the Bill remained the same from the originally released version. Below are the key differences in the version that was passed.
Key Differences
- The State and Local Tax (SALT) cap of $40,000 from the House version has been preserved and there is NO limit on the deduction for Pass-Through Entity Tax (PTET). The previous version of the Bill permitted only a $10,000 SALT deduction and limited PTET to 50%. This is a big win for businesses, aligning more closely with the House version, and we anticipate that there will likely be no amendments to this section of the Bill.
- On June 26, the Treasury Department announced a deal with G-7 allies to exclude U.S. companies from some taxes imposed by other countries (i.e., Pillar 2 and Digital Service Taxes) in exchange for removing the new Section 899, which some were calling the ‘revenge’ tax, from the Bill. As mentioned in our previous article, Section 899 was introduced to impose a tax on foreign-owned U.S. corporations if the owner was in a country that imposed unfair taxes on U.S. businesses. Section 899 does not appear in the passed version of the Bill.
- An earlier version of the Senate’s bill added a provision for an excise tax on wind and solar projects – especially those that use materials sourced from countries outside the U.S. Proponents from the renewable energy industry had concerns that the industry would experience significant harm. Ultimately, this excise tax was left out of the Bill completely.
- Both the Senate and the House versions had a new tax regime for third-party litigation funding. This additional tax on litigation funding companies was not included in the final version of the Bill.
Stay Tuned
As noted earlier, it is anticipated that a final version of the Bill will head to the President’s desk by July 4 but negotiations continue. Stay tuned for further updates.
Contact Us
If you have questions about the proposed tax changes, please contact your PKF O’Connor Davies client service team or:
Christopher Migliaccio, JD
Partner
cmigliaccio@pkfod.com
Elisha M. Brestovansky, CPA, MBA
Director
ebrestovansky@pkfod.com
Thomas Kinder, JD, LLM
Director
tkinder@pkfod.com