From the SEMA Washington, D.C., office
In a pivotal development for businesses of all sizes, but especially small businesses, the U.S. House of Representatives narrowly passed a sweeping legislative package, the "One Big Beautiful Bill Act," that renews and expands several long-standing pro-growth tax incentives. The House passage of the bill represents a significant milestone for Speaker Mike Johnson and President Donald Trump as they seek to deliver on several key campaign promises to support the business community.
The Senate is beginning its work on its own version of the bill, and the differences between the two will be negotiated later this year.
About the House Bill
The House bill, which narrowly passed by a 215 to 214 margin, includes a broad array of provisions important to SEMA members and the broader business community, including:
- Extension of 2017 Tax Cuts and Jobs Act: The bill permanently extends the discounted tax rates for individuals and pass-through businesses that are scheduled to expire at the end of 2025. This provision would eliminate tax on earned tips, overtime pay, create a car loan interest deduction of up to $10,000 for tax years 2025 to 2028, and also includes tax relief for seniors.
- 199A Deduction: The bill increases the 199A small business deduction from 20% to 23% and makes it permanent. This provision helps pass-through businesses, whose owners pay taxes as individuals, compete with businesses that are taxed at the 20% corporate tax rate. If enacted into law, small businesses, including partnerships and S corporations, will be able to subtract 23% of their qualified business income from their taxes. The House Ways and Means Committee estimates this provision will create more than 1 million small business jobs annually and generate $750 billion in economic growth for small businesses.
- Business Expensing and R&D: Renews 100% immediate expensing for equipment and machinery, 100% immediate expensing for research and development in the United States, increased deductions for interest expenses, and supports the expansion of new production factories and growing operations in America by allowing 100% expensing for new factories, improvements to existing factories and other production facilities.
- Regulatory Reforms and Cost Controls: The bill includes new work requirements for Medicaid recipients and repeals several green energy tax incentives, measures aimed at reducing federal outlays and curbing long-term spending growth.
How the Process Will Unfold
House Republicans employed a process known as budget reconciliation to move the legislation forward, providing the Senate an opportunity to pass the bill with a simple majority, since reconciliation bills are not subject to the filibuster and thus do not require 60 votes to end debate prior to a vote. Now, Senate Republicans must either pass the House bill or make changes to it, which would require the House to vote on the Senate version of the bill.
Both chambers must pass the same bill text in order for the legislation to advance to the president for his signature.
Remaining Hurdles
While House passage of the bill is a significant step, especially in light of the Republican's five-seat majority, the bill's path forward is complex. In addition to extending the 2017 tax law, the House bill includes a few provisions that are divisive among the Republican caucus, including:
- State and Local Tax (SALT) Deduction Cap: After intense negotiations with members from high-tax states, House leaders included a provision to increase the SALT deduction cap from $10,000 to $40,000 for households earning up to $500,000.
- Work Requirements and Spending Offsets: Fiscal conservatives in the House secured language to strengthen Medicaid work requirements and accelerate the rollback of green energy incentives.
As Senate deliberations begin, SEMA and other stakeholders across the industry will monitor for changes or inclusions of key provisions. The clock is ticking, with congressional leaders aiming to deliver a final bill to the president's desk before the Fourth of July holiday to avoid any disruptions related to the statutory debt ceiling.
Next Step
SEMA will continue to provide timely updates, analysis and advocacy on behalf of our members as the bill moves through the Senate and into conference negotiations. Stay tuned for more as we continue to advocate for pro-growth, pro-business policies in Washington, D.C.
For additional information, contact Juan Mejia, SEMA's senior manager for federal government affairs, at juanm@sema.org.
