Introduction
This newsletter provides timely information about the key policy discussions happening in Washington D.C. that may affect the tax reform/TCJA reauthorization bill through 2025 and possibly into 2026.
The 2024 elections will set the stage for legislative negotiations that some are already calling the "Super Bowl of tax." The expiration of numerous provisions of the Tax Cuts and Jobs Act (TCJA) is likely to force Congress to reckon with trillions in federal tax revenue — recent Congressional Budget Office (CBO) scores indicate an extension of policies expiring under the TCJA will cost US$4.6 trillion over the following decade. At the same time, burgeoning federal debt and deficits increase pressure on Congressional negotiators to raise revenue and reduce tax incentives. Stakeholders are likely to find that extension of the TCJA creates new winners and losers under the tax code as Congress considers changes even to non-expiring parts of the tax code, such as increases to the corporate rate.
Efforts to repeal, modify, or extend the TCJA are likely to touch almost every major sector of the economy: (1) the tax code's corporate provisions — including provisions on energy, research, insurance, and others; (2) a number of the tax credit programs, such as the New Markets, Opportunity Zones, and other location-based incentives; (3) revising the international provisions to respond to policy changes relating to the Organization for Economic Cooperation and Development's Pillar One and Pillar Two projects; and (4) incentives for investing in manufacturing, in particular for cleantech, biotech, and semiconductors and advanced computing.
The substantial fiscal impact of the legislation and search for revenue offsets also raises defensive concerns even for tax policies untouched under TCJA, as well as the opportunity to streamline new or uncompetitive provisions. It's little wonder that current Ways and Means Chairman Jason Smith (R-MO) described this effort as the Super Bowl of tax policy, but it may be worth noting that a prior contest with respect to expiring tax measures — the 2012 Congressional-executive negotiation over the Bush tax cuts — were perhaps more alarmingly named "taxmageddon."
Process Update
Republicans, Democrats Continue TCJA Member Education Process: Since the previous issue of this newsletter, Republicans and Democrats in both chambers have continued to outline their plans for educating members ahead of the 2025 "Superbowl of tax." Several House Republican tax teams have held or finalized dates for field hearings and listening events that will convene stakeholders to consider the implications of specific provisions of the TCJA for business and individual taxpayers. Some tax teams, including Rep. Kevin Hern's (R-OK) Global Competitiveness Team and Rep. Brian Fitzpatrick's (R-PA) Working Families Team, will choose to draft white papers summarizing the results of their stakeholder engagement, rather than suggest specific legislative proposals to committee staff ahead of negotiations.
Senate Republicans have begun an effort to educate their members on the TCJA, including by creating a set of six tax teams, but are generally farther behind in the member education process than House Republicans. Speaking to reporters, Senate Finance Committee Ranking Member Mike Crapo (R-ID) suggested the committee will avoid making any firm decisions on 2025 strategy until "we have the whole picture understood and in front of us — which would include knowing who controls the White House, who controls the Senate, who controls the House."
Democratic tax writers have been similarly tight-lipped about their member education processes. Senate Finance Committee Democrats convened June 20, 2024 for their initial closed-door meeting to determine a strategy for the 2025 TCJA fight. Senate Finance Committee Chair Ron Wyden emerged from the meeting suggesting the committee plans to develop a "menu" of tax policy options and will prioritize credits for low-income individuals while generating revenue. Ways and Means Committee Democrats have not publicly indicated how they plan to approach TCJA extension.
The tax teams and their respective chairs include:
- American Manufacturing — Rep. Vern Buchanan (R-FL)
- Working Families — Rep. Brian Fitzpatrick (R-PA)
- American Workforce — Rep. Darin LaHood (R-IL)
- Main Street — Rep. Lloyd Smucker (R-PA)
- New Economy — Rep. David Schweikert (R-AZ)
- Rural America — Rep. Adrian Smith (R-MO)
- Community Development — Rep. Mike Kelly (R-PA)
- Supply Chains — Rep. Carol Miller (R-WV)
- U.S. Innovation — Rep. Ron Estes (R-KS)
- Global Competitiveness — Rep. Kevin Hern (R-OK)
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