Legislative Lowdown
Senate Finance Tax Title Goes Through ‘Byrd Bath’: Senate Parliamentarian Elizabeth McDonough has initiated the Byrd Bath process for the Senate Finance Committee’s (SFC) tax title within the reconciliation package. Senate Democrats and Republicans are presenting their cases for provisions in the title to ensure they comply with the Senate’s rules for budgetary measures. Senate Democrats are challenging several provisions in the bill including provisions eliminating taxes on firearms, tax credits for donations to private school scholarships and health care provisions. This process has delayed the Senate in advancing the bill on the floor and the vote-a-rama process. As a result of these delays, the bill may now reach the Senate floor on June 26, with final passage extending into the weekend.
Mullin, House Holdouts Talk Potential SALT Compromise: Sen. Markwayne Mullin (R-OK) held a call with House Republicans from blue states, including Reps. Mike Lawler (R-NY), Young Kim (R-CA) and Andrew Garbarino (R-NY), to explore a possible compromise on the state-and-local tax (SALT) deduction cap as Senate GOP leaders try to resolve key hurdles in the One, Big, Beautiful Bill Act (OBBB). The potential compromise would keep the House’s $40,000 cap but tighten income eligibility. Though no deal has been reached, SALT holdouts refuse to budge from the House’s version, which limits deductions only to those earning above $500,000.
Senate Advances Ken Kies’ Nomination to be Assistant Secretary for Tax Policy: Last week, Senate Majority Leader John Thune (R-SD) filed a procedural motion on the nomination of Ken Kies to be assistant secretary for tax policy at the U.S. Department of Treasury. Kies was most recently the managing director of the Federal Policy Group, and he previously served as the chief of staff on the Joint Committee on Taxation and as chief tax counsel on the House Ways and Means Committee. As assistant secretary, he will play a role in the development and implementation of the OBBB and deregulation efforts.
Energy-Tax Mainlines
Trump Rails Against Clean Energy Tax Credits in the OBBB: Over the weekend, President Trump criticized clean energy tax credits in a Truth Social post, specifically calling wind and solar inefficient, costly and reliant on China. His remarks come amid internal Republican debates over how to scale back clean energy incentives from the Inflation Reduction Act (IRA). While the House took a hardline approach, eliminating most credits, the Senate is pursuing a phased rollback, allowing reduced credits for projects starting through 2028. Trump’s comments add pressure the debate and could complicate GOP efforts to pass the bill by the July 4 deadline.
Senate Republicans Look to Ease Cuts to Solar, Hydrogen Credits: Several Senate Republicans are working to soften the SFC’s rollback of clean energy tax credits, aiming to extend timelines for hydrogen and residential solar incentives in the OBBB. Lawmakers like Sens. Shelley Moore Capito (R-WV), Jim Justice (R-WV) and Bill Cassidy (R-LA) expressed concern that the proposed elimination of the Section 45V Hydrogen Production Tax Credit would jeopardize projects like the Appalachian Hydrogen Hub. Others warned axing the solar provisions would harm small businesses and lead to job losses. While some Republicans seek a smoother transition to preserve investment certainty, hardliners in the House, including Rep. Chip Roy (R-TX), oppose any weakening of the House-passed rollbacks.
1111 Constitution Avenue
IRS Improves Pre-Filing Agreement Tax Certainty Program for Large Business and International Taxpayers: The Internal Revenue Service (IRS) announced enhancements to its Pre-Filing Agreement (PFA) program that provides greater tax certainty for large business and international taxpayers. The updated program promotes cooperative tax compliance by allowing taxpayers to resolve potential issues before filing, reducing audit risks and encouraging voluntary compliance. Key improvements include a redesigned PFA landing page with statistics, new submission guidance, a resource page to help identify eligible issues and updated guidelines to better align PFA requests with tax deadlines.
Tax Worldview
‘Revenge Tax’ Would Slam Broad Swath of Companies, Industries: A proposed tax measure in the OBBB, Section 899, would sharply raise U.S. taxes on foreign companies from countries seen as taxing American firms unfairly. Major players like Honda, BP, SAP and Takeda—with significant U.S. investments—could be affected. While most companies have stayed quiet, some, including Takeda and Novo Nordisk, have voiced concerns. Analysts say the measure could hit a wide range of sectors, especially manufacturing, and may be intended as more of a bargaining chip than a lasting policy.
Faulkender Says U.S. Already Has a ‘Revenge Tax’ Tool on the Books: Deputy Treasury Secretary Michael Faulkender emphasized that the Trump administration already has the authority to retaliate against discriminatory foreign taxes, such as digital services taxes targeting U.S. firms, even without the proposed Section 899 provision. Faulkender noted that the administration could also invoke the long-unused Section 891, which allows the U.S. to impose steep taxes on countries that engage in discriminatory tax practices. While the Trump administration supports Section 899 and is evaluating the use of Section 891—per an executive order from President Trump—Faulkender stressed that the U.S. will not tolerate policies like the Organization for Economic Co-operation and Development’s (OECD) undertaxed profits rule or digital services taxes that unfairly target American businesses.
EU Businesses Call for Quick Solutions to U.S. ‘Revenge Tax’: European businesses are pressuring the European Union to adjust its global minimum tax in response to Section 899. Companies are urging options like exempting U.S. firms, softening the rule’s impact or aligning with the United States’ global intangible low-taxed income (GILTI) tax regime to avoid billions in added taxes and protect cross-border investment. While the European Commission remains committed to its 15% tax, it has signaled openness to negotiation.
Canada Finance Minister Says Digital Services Tax Going Ahead: Canada’s Finance Minister François-Philippe Champagne confirmed the government will move forward with its 3% Digital Services Tax (DST) on large U.S. tech firms like Amazon and Alphabet, despite opposition and ongoing trade talks with the United States The tax applies to digital services revenue from Canadian users exceeding C$20 million annually, with the first payment due June 30 and applied retroactively to 2022. While Minister Champagne acknowledged that broader discussions are ongoing, he emphasized that the tax was approved by Canada’s Parliament and will be enforced.
EU Approves Simplification of Carbon Border Tax: The European Union (EU) has agreed to modify its upcoming Carbon Border Adjustment Mechanism (CBAM), set to take effect next year, by exempting most importers while still covering most emissions. The modified measure will require importers of carbon-intensive goods like steel and cement to pay a CO2 price equivalent to what EU producers face, aiming to level the playing field with countries with weaker climate rules. Under the changes, only importers bringing in more than 50 tons annually will be subject to the tax, exempting about 90% of companies but still covering 99% of emissions.
At a Glance
Transfer Pricing Rules Land on Business Deregulation Hit Lists: Business groups are urging the Treasury Department to reconsider certain transfer pricing regulations they believe are legally questionable and burdensome for multinational companies. Key concerns include rules on factoring in corporate group credit when setting intercompany loan interest rates, requirements to include stock-based compensation in cost-sharing agreements and provisions allowing retroactive tax adjustments based on profit differences. Critics argue these rules conflict with the arm’s-length standard and increase tax uncertainty, while imposing unfair burdens on multinational companies.
Brownstein Bookshelf
JCT Releases Score for Senate Finance Text: The OBBB is estimated to increase the federal deficit by approximately $442 billion over 10 years, according to the Joint Committee on Taxation (JCT). The Senate bill uses the “current policy” baseline that assumes existing tax provisions are extended—an approach that better reflects lawmakers’ longstanding intent to avoid sudden tax increases. The estimate is significantly lower than the House bill’s projected cost, due in part to this scoring method. Both the House and Senate proposals aim to make permanent the 2017 Tax Cuts and Jobs Act (TCJA), provide targeted relief for seniors and workers earning overtime or tips, and reduce costs through measures like rolling back certain energy tax credits. The Senate version maintains the $10,000 cap on the SALT deduction, though that figure remains under negotiation.
JCT Releases Second Score for Senate Finance Text: On Monday night, the JCT found that the OBBB is estimated to increase the federal deficit by approximately $4.2 trillion over 10 years. The new score uses the “current law” baseline that assumes existing tax provisions expire within the next 10 years, as it does under current law. The estimate is significantly higher than the previous score released by JCT which estimated the bill would cost $442 billion using the current policy baseline. The House-passed bill also uses the current law baseline and the JCT previously scored that bill at $3.7 trillion. The Senate is still slated to use the current policy baseline estimate to proceed with its package.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Committee has no tax hearings scheduled for this week.
Senate Finance Committee
The Senate Finance Committee does not have any hearings scheduled for this week.
