The House passed the "One Big Beautiful Bill Act" (the Budget Reconciliation / Tax Bill) by a vote of 215–214 on May 22, 2025. Below are key provisions affecting ASA Members and the Senate is still reviewing the legislation and may amend these provisions.

Key Provisions Included in House Bill for Small Businesses:

• Section 199A Deduction Increased: The 20% pass-through business income deduction is increased to 23% and made permanent. This provides direct relief to S corps, partnerships, sole proprietorships, and LLCs taxed as pass-throughs.
• Bonus Depreciation Restored: Restores 100% bonus depreciation for qualified property placed in service from 2025 through 2029.
• R&D Deduction Reinstated: Allows immediate deduction of U.S.-based research and development expenses instead of amortizing over five years.
• Manufacturing Expensing Extended: Immediate expensing for investments in qualified manufacturing and refining facilities through 2029.
• Section 179 Cap Raised: The cap for small business expensing is increased from $1,000,000 to $2,500,000, with a higher phase-out threshold.
• Marginal Tax Rates Extended: The lower individual tax rates from the 2017 law (set to expire in 2025) are made permanent. This is essential for pass-throughs taxed at the individual level.
• Estate & Gift Tax Exemption Increased: Beginning in 2026, the estate and gift tax exemption is permanently increased from $10 million to $15 million and indexed to inflation. This provides long-term planning certainty for business owners concerned with intergenerational transfers.
• Business Interest Deduction Relief (163(j)): Excludes depreciation and amortization from the adjusted taxable income formula, allowing more generous interest deductibility.
• Contractor Reporting Threshold Increased: Raises the 1099-NEC/MISC reporting threshold from $600 to $2,000, easing compliance for businesses that work with independent contractors.
• Paid Family and Medical Leave Credit Made Permanent: Retains the employer credit (up to 25% of wages), now available for insured leave and for employees with six months’ tenure.

Here are a few other interesting potential changes:

• Child Care Credit Expansion: Raises the business credit cap to $500,000 ($600,000 for small businesses), including payments to outside providers.
• Charitable Deduction for Non-Itemizers: Allows a temporary deduction for non-itemizers ($150 individual / $300 joint) from 2025 to 2028.
• Auto Loan Interest Deduction: Allows up to $10,000 in interest deduction for U.S.-assembled vehicles (limited application but may be useful for fleet-dependent businesses).
• Tip Income Deduction: Creates a deduction for qualified tips earned between 2025 and 2028. Tips must be voluntary and paid in customary tipping occupations. The deduction is not available for employees earning more than $160,000 and excludes service fields like law, health care, consulting, and performing arts.

The proposed tax legislation is now being considered by the Senate.  For now, the small business provisions are not expected to be targeted. We expect the Senate committees of jurisdiction to release most of the revised text of their version of the bill next week.  We will keep you posted as the bill moves forward through the Senate.

The House voted this week on a $9.4 billion rescissions package, with some Republicans expressing concerns about it. The proposal includes rescinding $8.3 billion in foreign aid and $1.1 billion in funds for public broadcasting and national public radio. Rep. Amodei (R-NV), who chairs the bipartisan Public Broadcasting Caucus, mentioned last week that he had not yet decided to support the package. Rep. McCaul (R-TX) has raised concerns regarding the proposed $400 million funding cancellation for PEPFAR. House Appropriations Chair Cole stated that the package is anticipated to proceed to the floor without changes. It remains uncertain if the Senate will make any alterations. Senate Appropriations Chair Collins noted that her committee will review the package. Additionally, the House voted on three bills to overturn D.C. laws related to immigration and policing, along with a Senate-passed bill to permanently ban fentanyl-related substances.