On Monday, June 16, the Chairman of the U.S. Senate Finance Committee, Mike Crapo (R-ID), released proposed legislative language that is intended to operate as the first draft of the Senate’s substitute amendment (“Senate Bill”) for the tax provisions of the One Big Beautiful Bill Act that passed the U.S. House of Representatives on May 22. 

This proposed language has not yet been voted on by the full Senate, but already several Senators have raised concerns about certain provisions, including Medicaid, the Inflation Reduction Act, clean energy credits, and the state and local tax cap (“SALT cap”).

Please refer to GBQ’s previous coverage of the House-passed bill for context. This release will focus on the major business tax differences between the two bills. Before any provisions become law, the House and the Senate must pass identical bills, which then become law if signed by the President.  

Read Also: U.S. House Narrowly Passes Tax Bill

Will Permanence Win Vs. Temporary Relief?

In most business tax provisions, the Senate version prioritizes permanence, compared to the House version, which would provide only temporary relief. Read on for a list of key differences between the Senate and House versions of the bill.

Bonus Depreciation/Expensing Of Non-Real Property

The Senate version would allow for permanent 100% bonus depreciation on property acquired and placed in service after January 19, 2025.

Research & Experimentation Immediate Expensing

Unlike the House version, the Senate version would make permanent the ability to currently deduct (rather than capitalize/amortize) research expenditures incurred in the U.S. Amounts capitalized during 2022, 2023, and 2024 could be immediately deducted by small business taxpayers by filing amended returns for prior years, and all other taxpayers could elect the deduction either fully in 2025 or ratably between 2025 and 2026. Foreign research expenditures would still be subject to capitalization and amortization over 15 years.

Business Interest Deductibility

The Senate version would make permanent the use of tax-basis Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) times 30%, rather than the current law providing for Earnings Before Interest and Taxes (EBIT) times 30%.

Bonus Depreciation On Real Property Used For Manufacturing/Production

Similar to the House version, the Senate version would provide for new immediate expensing on real property used for qualified production purposes (i.e., manufacturing or refining).

Inflation Reduction Act Credits 

Similar phase-outs to the House version are present in the Senate version, although the Senate version delays the phase-out of hydropower, nuclear, and geothermal credits, and increases the advanced manufacturing investment credit rate from 25% to 30% for property placed in service after Dec. 31, 2025. The Senate version also does not curtail the transferability of production tax credits. 

International Tax

The Senate version makes many more changes to the international tax landscape than the House version, including modifications to Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion & Anti-Abuse Tax (BEAT), as well as expense allocation for foreign tax credit purposes. There are several other international provisions related to permissible tax years of controlled foreign corporations (CFCs), downward attribution of stock ownership for purposes of defining a foreign corporation as a CFC, a look-through rule for CFCs, and pro rata income inclusions for shareholders of CFCs. 

Retaliatory/‘Revenge’ Tax

One aspect that is fairly consistent between the two versions is the new Section 899, which would apply punitive taxes to taxpayers connected to countries that have been designated by the Treasury Secretary as “offending foreign countries.” The current Administration and Congress have repeatedly expressed displeasure at the manner in which the previous Administration’s Treasury Department conducted negotiations with the OECD’s base erosion project. Offending foreign countries are those that have imposed “extraterritorial” or “discriminatory” taxes, such as the Undertaxed Profits Rule (UTPR), or digital services taxes (DSTs). The effective date of this provision is for tax years beginning after 2026, demonstrating that this provision is intended to provide negotiating leverage during ongoing discussions between the U.S. Treasury and counterparties on the OECD’s Pillar 2 minimum tax project and individual countries’ DSTs that may target U.S. technology companies.

Qualified Business Income Deduction (199A)

The Senate version would make this deduction permanent, though, unlike the House version, it would not increase this deduction to 23%, but would maintain the 20% deduction amount. The Senate version would also expand the deduction phase-in range, which could ease limitations for specified service trades or businesses and other entities subject to the wage and investment limitation. 

Senate Unveils A Different SALT Cap Strategy 

The Senate version notably maintains the status quo concerning the individual SALT deduction at $10,000, while expressing that this remains subject to negotiation. Several members of the U.S. House have already warned that they will not accept a figure lower than the $40,000 passed by the House. 

The Senate version would curtail the use of pass-through entity tax (PTET) elections by requiring PTETs to be separately stated to partners and limiting the deductibility by partners to the greater of 1) $40,000 of their PTET allocation or 2) 50% of their PTET allocation.

What’s Consistent Between House & Senate Versions Of The Bill?

The Senate version in many other respects is quite similar to the House version, including: 

  • President Trump’s campaign priorities of an enhanced deduction for seniors, a tip income tax deduction, a deduction for overtime pay, and deductions for interest paid on loans secured by new U.S.-made vehicles 
  • Permanent extension and enhancement of estate and gift tax exemption amounts 
  • New savings accounts for a qualifying child who is a U.S. citizen, with a pilot program to seed the accounts with $1,000 for each child born between Jan. 1, 2024, and Dec. 31, 2028 
  • Permanent expansion of Opportunity Zones 
  • Higher excise taxes on the endowments of educational institutions, though lower than the proposed House version rate of 21% 
  • Enhancements to tax credits for employer-provided benefits 

Conclusion: Still A Long Way To Go 

The tax policy landscape remains quite dynamic, and it is important to remember that these proposals do not yet have the force of law. They remain subject to ongoing negotiations, and interested stakeholders should still engage with policymakers to participate in the process. Moreover, the deficit impact of the Senate version has not yet been made public, and several lawmakers in the House and Senate have expressed concern with major components of the two bills, including Medicaid, the SALT cap, and the persistent level of deficit spending, including the impact on the market for U.S. debt. 

Reach out to a GBQ tax advisor for more information on how the various proposals can affect you and your business. 

By Mark Silvaggio, JD, CPA, Tax and Business Advisory & John Petzinger, State and Local Tax


Check out our tax-related resources:

2025 Ohio Sales Tax Holiday Kicks Off August 1

Tariff Turmoil: Strategies To Thrive In A Shifting Global Trade Landscape

House Bill 54: Paving The Way For Ohio’s Transportation Future

« Back
Tags: SALT, Tax