Reconciliation Bill Process

A reconciliation bill will be used to advance President Trump and the Republican’s tax wishes of extending the TCJA and then some. Reconciliation bills come with the advantage of only requiring a simple majority to pass in the Senate, rather than 60 votes, which would not likely happen. But a host of restrictions and procedures accompany the reconciliation bill process, including what’s allowed in and how much spending is permitted.

Debates have also surfaced over the use of one reconciliation bill or two. Senate leaders and some House representatives are aiming for two: a quick first bill to address border security, energy, and defense, followed by a more complex tax bill later in the year. However, House leaders are pushing for one all-inclusive bill, arguing that waiting for tax is a mistake that may push it out of reach. President Trump is reportedly indifferent, so long as it all gets done, but has voiced preference for one bill in the past.
 
The House and Senate also need to agree on an amount to spend, called a budget resolution. Generally, this first stems from the House, but at present the Republican party is not fully aligned, and the Senate has taken a first step. Budget hawks are delaying the tax bill process, knowing that cost projections to extend the TCJA alone are estimated at $4.6 trillion. The group is balking at adding much to the current $36 trillion national debt, and with such a slim majority, the GOP cannot afford to have much division. 

Another dispute is on how to score the bill, with current cost projections unpalatable for many. To help optics, some in Congress would like to alter the method to one that assigns no cost for extending current legislation. Additionally, executive orders through the president generally do not count in the legislation scoring process, so revenue generated from tariffs, for example, may not be included as a pay-for.

What Might Be Included

Extending TCJA temporary provisions remains a priority, but a wave of other tax proposals has been flowing in as well. Some reiterate campaign promises, such as no tax on tips, and others are wish list items offered up for consideration, like the Taxpayer Assistance and Service Act, a bipartisan discussion draft of taxpayer service improvements.

Spending cuts to Medicaid and other social programs are being reviewed for potential inclusion as offsets for costly tax cuts but could get significant public pushback. Proposed tax credit and deduction offsets vary greatly and include rollbacks of the Inflation Reduction Act’s clean energy credits. In addition, President Trump recently proposed ending both the carried interest preference for hedge fund managers and tax breaks for sports team owners to pay for no tax on tips, overtime pay, and Social Security benefits.

While including all proposals is a long shot, some may make their way in. Whether any provisions of TCJA 2.0 are retroactive is also uncertain. Last year, a bipartisan bill, the Tax Relief for American Families and Workers Act of 2024, aimed to retroactively enact several items, including full research expensing and bonus depreciation. But despite quick approval in the House, it collapsed in the Senate. Items from that bill could be included in a 2025 bill as well.

Timing

Though President Trump and others in Congress want fast action on a tax bill, the inherent complexity and long list of potential inclusions may delay progress. There are other matters needing attention also that could derail speedy timelines.

Currently, the government is only funded through March 14, and the debt ceiling suspension that expired on January 1 needs to be addressed as well. These items, plus the breadth of tax proposals to sort through and how to compromise on paying for them, could potentially push a tax bill into the summer or even later. But as we’ve seen so far, anything is possible.

We will continue to monitor developments and keep you updated as they occur. Please reach out to your RubinBrown adviser with any questions or concerns.