The House Ways and Means Committee has advanced a sweeping tax reform bill that proposes nearly $6 trillion in tax cuts alongside approximately $2 trillion in tax increases. The legislation passed in the House of Representatives on May 22, 2025.
The legislation touches nearly every corner of the tax code and is designed to extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while also introducing new measures aimed at curbing foreign tax abuses and reining in certain tax benefits.
A Balancing Act of Cuts and Increases
At the heart of the legislation is a delicate balancing act: delivering substantial tax relief while offsetting some of the cost through targeted tax increases. The nearly $6 trillion in proposed tax cuts include extensions of lower tax rates for individuals and corporations, expanded deductions and enhanced credits. To help pay for these cuts, the bill introduces roughly $2 trillion in tax increases, primarily aimed at high-income earners and pass-through business owners.
Among the most significant changes is the extension of the TCJA’s individual tax provisions, which were set to expire in 2025. These include lower individual tax rates, a higher standard deduction and the expanded child tax credit. The bill would make these provisions permanent, providing long-term certainty for taxpayers.
Business Incentives and Expensing Provisions
For businesses, the bill offers a suite of incentives designed to spur investment and innovation. One of the most notable provisions is the extension of full expensing for research and development (R&D) costs through 2029. This reverses a controversial change that required companies to amortize domestic R&D expenses over five years, a move that drew criticism from the tech and manufacturing sectors. While previous bills called for a retroactive repeal of this code section back to 2022, the current House bill aims to eliminate the domestic R&D capitalization requirement beginning after 2024. Foreign source R&D would still be subject to the 15-year capitalization period.
Bonus depreciation, another key business incentive, would also be extended through 2029. This allows companies to immediately deduct the full cost of qualifying capital investments, rather than depreciating them over time. Under TCJA bonus depreciation was slowly phasing out from the previous 100-percent deduction. This bill would restore the current 60-percent bonus deduction in 2025 back to the 100-percent. Additionally, the bill introduces a new provision allowing immediate expensing of up to $2.5 million for investments in qualified production property, such as new or improved manufacturing facilities.
The bill also temporarily reverts the limitation on business interest deductibility to an EBITDA-based calculation for 2024 through 2029. The current calculation is based on EBIT, causing many highly capitalized businesses to lose significant interest deductions. This was another TCJA provision that was expected to be retroactively changed back to 2022.
International Tax Reforms and Anti-Abuse Measures
On the international front, the legislation seeks to maintain the status quo for key provisions affecting multinational corporations. It would permanently preserve the current rates for Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII), while repealing a scheduled increase in the Base Erosion and Anti-Abuse Tax (BEAT).
The bill also introduces a new section of the tax code—Section 899—which would impose retaliatory measures against foreign jurisdictions that enact discriminatory taxes targeting U.S. companies. This provision is seen as a direct response to the proliferation of digital services taxes and other levies that disproportionately affect American tech giants.
Rollbacks on Renewable Energy Incentives
One of the more controversial aspects of the bill is its rollback of several renewable energy tax credits that were expanded under the Inflation Reduction Act. The legislation phases out or repeals a range of clean energy incentives, including credits for solar, wind and electric vehicle production. It also includes provisions to prevent what it calls “prohibited foreign entities” from claiming renewable energy credits, a move aimed at curbing foreign influence in the U.S. energy sector.
Changes to SALT Deduction and Opportunity Zones
The bill also addresses the long-debated state and local tax (SALT) deduction cap. It proposes tripling the cap from $10,000 to $30,000 but introduces new restrictions to limit its use by high-income taxpayers. Additionally, the legislation cracks down on SALT cap workarounds by disallowing certain entity-level deductions for partnerships and S-corporations that have taken advantage of the pass through entity tax elections currently available in most states
Opportunity Zones (OZs), a program designed to spur investment in economically distressed areas, would also see significant changes. The bill accelerates the expiration of existing OZ designations and allows for new designations starting in 2027. It also extends the deferral period for capital gains invested in OZs and modifies the rules for excluding gains on long-term investments.
Individual and Estate Tax Reforms
Beyond the extension of TCJA provisions, the bill includes several new benefits for individual taxpayers. The child tax credit would be increased to $2,500 per child from 2025 through 2028. To target working-class families, the bill eliminates federal income tax on tips and overtime pay for a five-year period beginning in 2024.
Estate and gift tax exemptions would also be permanently increased to $15 million per individual, up from the current level of approximately $13.6 million. This change is expected to benefit wealthy families and could reignite debates over wealth inequality and intergenerational transfers of wealth.
Impacts on Tax-Exempt Organizations and Employer Benefits
The legislation takes aim at large university endowments and private foundations by increasing excise taxes on investment income and expanding the definition of “covered employees” subject to compensation limits. These changes are intended to prevent tax-exempt organizations from being used as vehicles for excessive executive pay or tax avoidance.
For employers, the bill includes several provisions to enhance workplace benefits. It expands the use of Health Savings Accounts (HSAs) and Individual Coverage Health Reimbursement Arrangements (ICHRAs) and makes permanent the ability to use educational assistance programs to repay student loans. However, it also tightens the rules for deducting executive compensation above $1 million, a move aimed at curbing excessive pay in publicly traded companies.
What’s Next for Proposed Tax Changes in 2025?
If the legislation also passes in the Senate, it would represent one of the most significant overhauls of the U.S. tax code in recent history. Its passage would not only extend key elements of the TCJA but also reshape the tax landscape for individuals, businesses and nonprofits alike. For questions or more information, contact your Windham Brannon tax advisor today, or reach out to Nicole Suk.
