Accounting

Harvard wins reprieve, SALT stalls: Tax bill winners and losers

Published

9 hours ago

June 17, 2025

U.S. businesses and wealthy universities scored major wins in the Senate Republicans’ version of President Donald Trump’s tax bill, while low-income Americans and clean energy providers are poised to be hit the hardest.

The Senate bill has already sparked backlash from various GOP factions and several provisions threaten the fragile coalition that squeaked the legislation through the House by a single vote last month.

The legislation could still be altered before it heads to the Senate floor, where Trump can afford to lose no more than three Republicans.

Here’s who’s winning and losing at this stage in the tax fight.

Winners

Manufacturers, banks

The Senate would make permanent three business tax deductions that the House bill would sunset after 2029. The tax breaks include the ability to use depreciation and amortization as the basis for interest expensing, the research and development write-off and a 100% bonus depreciation of certain property, including most machinery and factories. Banks could see a surge in lending as companies have more cash freed up to invest in projects.

Wealthy U.S. colleges

Private universities that have endowments of at least $2 million per pupil would pay an excise tax of 8%, a significant decrease from the devastating 21% rate that was included in the House proposal. That’s still up from the current tax of 1.4% but it’s a more survivable outcome for universities like Harvard, Yale, Princeton and MIT.

Chipmakers

The Senate bill calls for increasing an investment credit for semiconductor manufacturers to 30%. That’s up from the previous credit of 25%, giving chipmakers more incentive to spend on new facilities. Major beneficiaries of the tax credit have included Intel Corp., Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Micron Technology Inc.

An employee gives utensils to customers at a restaurant in New York

Tipped workers

The Senate bill makes good on one of Trump’s campaign promises of no taxes on tips and overtime — to a point. Senators would cap the amount of tipped wages that can be exempt at $25,000 per individual and overtime at $12,500 per individual and $25,000 per couple. Those deductions start to phase out $150,000 in income per person.

Foreign investors

Senators plan to delay and scale back a duty on investors in foreign countries with tax regimes that the U.S. deems unfair. The provision, informally called a revenge tax because it targets countries that impose digital services levies, would be delayed until 2027 for calendar-year filers. It then raises the levy by 5 percentage points each year until it hits a 15% cap.

Health insurers

The Senate abandoned an endeavor to cut costs in the Medicare Advantage program. The move will allow lawmakers to avoid backlash from trimming the popular health insurance program that is largely relied upon by retired Americans. It’s also good news for managed care companies which benefit from the program: Humana Inc. and UnitedHealth Group Inc.

Losers

Residents of high-tax states

Senators decided to put a placeholder state and local deduction cap of $10,000 in the draft bill, a drastic decrease from the $40,000 in the House-passed bill. The decision has already roiled House lawmakers from New York, New Jersey and California. Trump earlier told senators that he was open to lowering the SALT cap, according to a person familiar with the matter.

Clean energy

Senators went along with House efforts to quickly phase out a Biden-era tax credit for wind and solar. The bill also would eventually end investment and production tax credits for other types of power, including hydropower and geothermal.

Electric vehicle makers

Electric vehicle makers, including Tesla Inc and General Motors Co., will be hurt by the end of a consumer tax credit of as much as $7,500 for the purchase of electric cars. Tax credits for commercial and used electric vehicles will also be eliminated.

Low-income Americans

Federal funding for Medicaid would be cut in the Senate bill, shrinking the program that provides health-care to over 70 million Americans, including the financially vulnerable and those with disabilities. The cuts are more aggressive than the proposals in the House version of the bill, as part of lawmakers’ efforts to find ways to pay for the package.

Pass-through businesses

Owners or closely-held businesses, including partnerships and limited liability companies, had a widely-used deduction scaled back in the Senate version of the bill. The House draft called to increase a write-off for business income to 23% from the current 20%. The Senate plan just calls to preserve the 20% rate in the tax code. Advocates for the break say a bigger deduction is necessary to create parity between privately held businesses, which pay a top rate of 37%, and the 21% corporate rate.

Deficit hawks

The bill raises the debt ceiling by $5 trillion, an increase from $4 trillion in the House version.

SNAP recipients

After mulling a scaleback of cuts to federal food aid for the poor, the Senate version makes cuts to the Supplemental Nutrition Assistance Program as a way to help pay for the expensive spending package. The changes require state governments to cover more of the cost of federal food stamps received by their residents.

Accounting

In the blogs: Breathing room

Published

4 hours ago

June 17, 2025

Business Finance News

Private equity in the profession; green cards and exit taxes; governance for preparers; and other highlights from our favorite tax bloggers.

Breathing room

Current Federal Tax Developments (https://www.currentfederaltaxdevelopments.com/): The critical updates of Notice 2025-33, which impacts digital asset brokers and their compliance obligations under IRC Sections 6045, 3406 and related penalty provisions, extend and modify previously granted transitional relief, “offering much-needed breathing room.”
Sovos (https://sovos.com/blog/): The IRS will decommission the Filing Information Returns Electronically system in January 2027; all 2026 returns will need to use the new IRS Information Returns Intake System. The window for preparation is closing fast.
Institute on Taxation and Economic Policy (https://itep.org/category/blog/): State legislatures are enjoying a quiet time now, a temporary calm before the storm of the federal tax and budget debate begins raging again.
Tax Foundation (https://taxfoundation.org/blog): Illinois policymakers should think twice before taxing GILTI.

Simplify, simplify, simplify

Mauled Again (http://mauledagain.blogspot.com/): Why hasn’t the blogger been commenting on the federal legislation that would extend and enlarge tax cuts and tax breaks for wealthy individuals and corporations? The answer is simple.
TaxProf Blog (http://taxprof.typepad.com/taxprof_blog/): The contours of the Supreme Court’s dormant Commerce Clause doctrine of internal consistency, which asks whether a state tax intrinsically overreaches in imposing a burden upon interstate commerce, are difficult to understand. A recent paper examines how uncertainty is suggested again by Zilka v. Tax Review Board.
The Rosenberg Associates (https://rosenbergassoc.com/blog/): Private equity entered the accounting profession with promises of creating value and fixing many of the pain points in the profession. A recent survey shows that while PE is already delivering on some of those promises, mixed feelings (and warning signs) abound.
Wiss (https://wiss.com/insights/read/): The recent Tax Court decision in Soroban Capital Partners LP v. Commissioner has rippled through the financial and legal communities and reinforced the importance of functional roles over formal titles when determining tax liability under self-employment tax.
Virginia – U.S. Tax Talk: (https://us-tax.org/about-this-us-tax-blog/): When a foreign national works in the U.S. and is granted stock options, taxation of these options can become complex if the individual later leaves the U.S. and becomes a nonresident alien for tax purposes.

Think about it

Accounting

Oil industry gets $1B tax tweak in GOP’s Senate bill

Published

5 hours ago

June 17, 2025

Business Finance News

Senate Republicans included a tax break estimated to be worth more than $1 billion for oil and gas producers in their version of President Donald Trump’s sprawling fiscal package.

The provision would allow energy companies subject to a 15% corporate alternative minimum tax to deduct certain drilling costs when calculating their taxable income. Companies including ConocoPhillips, Ovintiv Inc. and Civitas Resources, Inc. lobbied in favor of it.

The change, included in the legislation released Monday by Republicans on the Senate tax writing committee, is nearly identical to a bill by Republican Senator James Lankford. His home state of Oklahoma is among the top oil and gas producing states.

Lankford’s bill, called the Promoting Domestic Energy Production Act, would cost the US government $1.1 billion over 10 years, according to the non-profit Tax Foundation, which cited an estimate from the non-partisan Joint Committee on Taxation.

A representative for Lankford declined to comment.

Earlier this year, Lankford told CNBC that his bill was necessary to prevent independent oil and gas producers from being squeezed by the Corporate Alternative Minimum Tax, enacted under former President Joe Biden to prevent corporations from using deductions and credits to pay little or no taxes.

“If we can’t get rid of that entirely we at least need to give some relief to those folks who are independent producers,” Lankford said. “We need to be able to get some relief to them so they’re not constantly worried about it.”

Environmental and watchdog groups including Friends of the Earth and Public Citizen panned the provision included in the Senate bill as a giveaway to fossil fuel companies.

“This proposal would introduce a massive new loophole for oil and gas companies,” said Lukas Shankar-Ross, deputy director for climate for Friends of the Earth.

Accounting

Rich colleges would face lower tax hike under Senate tax bill

Published

5 hours ago

June 17, 2025

Business Finance News

Wealthy U.S. colleges scored a win on Monday with the release of Senate Republicans’ tax bill, which would institute a lower tax increase on endowments than what GOP House members have backed.

Private universities with at least 500 students that have endowments of $2 million per pupil or more would pay an excise tax of 8% under the new bill released by the Senate Committee on Finance. The levy would be placed on net-investment income earned by the endowments. That’s much lower than the 21% rate that was included in the House proposal, which passed the chamber in May.

The endowment tax would raise revenue to offset President Donald Trump’s tax cuts and it would punish universities that are “woke,” in the words of the House tax-writing committee. The White House has frozen federal funding to a number of schools including the Ivy League’s Harvard, Princeton and Columbia.

Under the new proposal, institutions with endowments of $750,000 to $1,999,999 per student would face a tax of just 4%. Under the House plan, colleges with endowments over $1.25 million per student but below $2 million would pay 14%. Colleges have warned that the House plan would be extremely costly for the schools and take away from financial aid provided to students.

Religious schools would be exempt from the tax in both the House and Senate proposals. The current levy of 1.4% on the richest colleges was instituted as part of the 2017 Trump tax cuts.

Karin Johns, director of tax policy for the National Association of Independent Colleges and Universities, said the tax should be eliminated and not expanded.

“The tax remains purely punitive, unfairly impacts one sector of higher education, disincentivizes charitable giving, and siphons funds to the federal government used to support students and their families,” she said in an emailed statement.