Tax Byte
Senate Finance Committee Revisions to OBBBA
The Senate Finance Committee’s release of their version of the One Big Beautiful Bill Act (OBBBA) on June 16, 2025, introduces significant modifications to the House bill that can be useful in answering client questions as negotiations to a final bill progress.
Executive Summary for Tax Practitioners
The Senate’s revisions to the House-passed OBBBA present a mixed bag for tax planning including more conservative individual tax provisions, enhanced business incentives, and complex interactions with existing code sections. Most critically, the SALT deduction differences could derail the entire package. The Senate’s self-imposed deadline of July 4th is looming.
Individual Tax Provisions: Key Changes from House Version
Child Tax Credit Reduction
- Senate Version: $2,200 per qualifying child
- House Version: $2,500 per qualifying child
- Client Impact: Families with multiple children face $300 less benefit per child annually
Child Tax Credit Social Security Number Requirements
- House Version: Requires ALL taxpayers AND spouses to have SSNs (bars mixed-status families entirely)
- Senate Version: For joint filers, only ONE spouse needs an SSN to claim the CTC
- Impact: Senate approach significantly reduces the estimated 2 million children who would lose CTC eligibility
Enhanced Senior Tax Relief
- Senate Version: $6,000 additional deduction for seniors (tax years 2025-2028)
- House Version: $4,000 additional deduction for seniors (tax years 2025-2028)
- Effective Dates: Both versions apply to same timeframe (2025-2028), no timing difference
SALT Deduction: The Deal-Breaker Issue
- Senate Position: $10,000 cap (labeled as “placeholder”)
- House Position: $40,000 cap for all filing statuses (single, HOH, and MFJ) with income limits up to $250,000/$500,000
- Critical Issue: House Republicans from high-tax states have threatened to vote against any final bill maintaining the $10,000 cap
- Client Advisory: High-income clients in NY, NJ, CA, and CT should prepare for continued SALT limitations regardless of final outcome
Business Tax Provisions: Permanent Extensions
Section 199A Enhancement
The Senate version makes permanent the qualified business income deduction with the rate increased to 23% (up from the current 20%). This represents one of the most significant business tax benefits in the package. The enhanced deduction includes expanded applicability and addresses the key concern for pass-through entity clients facing the 2025 expiration.
Technical Changes: New two-step calculation for high-income taxpayers replaces the current phase-in rules, potentially benefiting specified service trade or business (SSTB) owners.
R&D Expensing Restoration: Critical Difference
- House Version: Temporary restoration (tax years 2025-2030 only)
- Senate Version: Makes R&D expensing PERMANENT
- Client Impact: Senate approach provides long-term planning certainty that businesses have demanded since 2022 Section 174 changes
- Planning Note: Technology and pharmaceutical clients should monitor negotiations as permanence dramatically affects long-term R&D investment strategies
Business Interest Deduction Enhancement
- House Version: Temporary EBITDA-based limitation restoration (tax years 2025-2028)
- Senate Version: PERMANENT reinstatement of EBITDA-based limitation under Section 163(j)
- Client Benefit: Leveraged businesses gain permanent enhanced ability to deduct interest expense
- Technical: Senate permanently reverses the 2022 change from EBITDA to EBIT calculation
Bonus Depreciation
- House Version: Temporary restoration (tax years 2025-2030 only)
- Senate Version: Makes 100% bonus depreciation permanent for qualified property.
- Client Impact: Provides certainty for capital-intensive client planning.
Green Energy Tax Credit Phase-Outs: Slower Timeline
Critical for Renewable Energy Clients: The Senate version provides a more generous phase-out schedule for IRA tax credits:
- Investment Tax Credit (ITC): Extended availability through more projects
- Production Tax Credit (PTC): Slower wind-down than House version
- Nuclear/Geothermal Credits: Significantly delayed cuts compared to House
Client Action Required: Energy clients should accelerate project development to capture credits before phase-out completion.
Debt Ceiling and Byrd Rule Compliance
- Senate Version: $5 trillion debt limit increase (vs. House $4 trillion)
- Byrd Rule Considerations: The inclusion of NFA tax repeals suggests confidence in budget reconciliation compliance, but SALT provisions remain vulnerable to parliamentarian challenge.
Timeline and Legislative Strategy
- July 4th Deadline: Senate Republicans are targeting passage before the July recess
- Reconciliation Process: Simple majority threshold, but narrow 53-47 Republican majority leaves little room for defections
- House Return: Any Senate changes require House re-passage, where SALT differences could prove fatal
What to Watch
- SALT Negotiations: The $10,000 vs. $40,000 difference could determine bill viability
- Senate Republican Defections: Ron Johnson (deficit concerns) and Rand Paul (debt ceiling) opposition
- Byrd Rule Challenges: Democrats may challenge non-budgetary provisions
- CBO Scoring Updates: New estimates could affect moderate Republican support
Bottom Line for Tax Professionals
The Senate’s version represents a more fiscally conservative approach on individual provisions while being significantly more generous to businesses through permanent (rather than temporary) extensions of critical provisions. The permanent restoration of R&D expensing and EBITDA-based interest deductions provides the long-term planning certainty that businesses have demanded since the 2022 tax changes.
The SALT deduction dispute poses the greatest threat to passage, but the Senate’s permanent business provisions could prove decisive for final negotiations. Tax professionals should prepare clients for continued uncertainty while positioning them to benefit from likely permanent business provisions, particularly the enhanced 23% Section 199A deduction and potential permanent R&D expensing restoration.
Stay alert for rapid developments as Senate leadership works toward their July 4th deadline. The narrow Republican majority means any single senator’s concerns could reshape the entire package.
This analysis is based on the legislative text released June 16, 2025. Tax professionals should monitor developments closely as negotiations continue.