Reconciliation Update: Tax Bill Goes to Senate

June 3, 2025

The Republican reconciliation legislation—One Big Beautiful Bill— heads to the Senate as Congress returns from its Memorial Day recess. 

Why it matters: The bill will extend many of the 2017 Tax Cuts and Jobs Act (TCJA) provisions and deliver on many of the President’s campaign priorities. 

  • After the House narrowly passed the bill 215-214, Republicans are optimistic they can deliver the legislation to the President’s desk by July 4. 
  • That timeline could slip to August, but the debt ceiling “X-date” will be a hard deadline on enacting the bill. 

The big picture: The Senate is expected to leave its imprint on the bill, though key changes will likely focus on several controversial items. A variety of factions will make the path in the 53-47 Senate tricky, but House leaders argue the 220-213 House chamber is harder to pass. 

  • Personal SALT Deduction: Speaker Mike Johnson (R-LA) struck a deal with the SALT caucus to raise the deduction cap to $40,000 with a phase-out for incomes above $500,000. However, there are no “SALT senators,” so the levels could be readjusted to lessen the budgetary impact. Still, senators are aware that the House GOP SALT caucus holds enough votes to kill the legislation if the levels aren’t satisfactory. 
  • IRA Tax Credits: A variety of Inflation Reduction Act (IRA) tax credits for energy-efficient conversions, electric vehicles, and other upgrades will sunset sooner under the current language, which the Speaker updated to get budget hawks on board. Several GOP senators are more supportive of the tax credits and do not want to cut off businesses that have made investments. 
  • Overall Spending and Medicaid: Senate leaders will have to navigate moderates and Medicaid supporters, who are pitted against fiscal hawks who want to slow or reduce government spending through entitlement reforms. Sen. Rand Paul (R-KY) is refusing to support the bill as long as the debt ceiling remains included.
What they’re saying: For commercial and multifamily real estate, the topline issues remain largely the same. 

  • 199A Passthrough: The qualified business income deduction increases to 23% from 20% and is made permanent.
  • Low-Income Housing Tax Credit (LIHTC) Boost: The bill would increase the state housing credit ceiling by 12.5% and lower the tax-exempt bond requirements, similar to the 2024 Wyden-Smith Bill.
  • Renews Opportunity Zones: The bill authorizes a new round of Opportunity Zone designations, starting on Jan. 1, 2027, and ending on Dec. 31, 2033. Some tweaks were made to various low-income definitions, and we expect the Senate will make additional modifications to the program. 
  • Bonus Depreciation Made Permanent: Allows full expensing of qualifying property.
  • Interest Expense Deduction: Increases the cap on the deductibility of business interest expense under 163(j) for taxable years beginning after 2024 and before 2030 by allowing the EBITDA definition of taxable income. 
    • Note that the 2017 TCJA law allows real property trade or business to elect not to be subject to the cap, but they must be depreciated using the alternative depreciation system. 
  • Immediate Factory Expensing: The qualified production property would allow full, immediate expensing for certain manufacturing buildings with construction beginning in 2025 through 2029 and placed into service.
    • The legislation limits the deduction to owner-occupied facilities that manufacture, produce, or refine any tangible personal property. 
    • Office space associated with the facility is explicitly excluded from the definition. The current language would also exclude leased facilities. 
  • Section 899: Real estate and other industries with a global investor base are raising concerns about a provision that would expand Treasury’s authority to impose retaliatory taxes on foreign direct investment in the U.S. (Read more about Section 899 in the article below.)
Yes, but: The real estate industry has been concerned about a few items that did not end up making it in the bill. 

  • No Business SALT Cap: There are no provisions to cap business state and local income or property taxes. However, rumors persist that this item could show up again in a future version. 
  • No Carried Interest Rollback: President Trump had reiterated his push to close this “loophole” in a call last week with Speaker Mike Johnson (R-LA). The bill does not change carried interest treatment.
Contact David McCarthy (dmccarthy@crefc.org) with any questions. 

Contact  

David McCarthy
Managing Director,
Chief Lobbyist, Head of Legislative Affairs
202.448.0855
dmccarthy@crefc.org
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2025 CRE Finance Council. All rights reserved.

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