US: House Ways and Means Committee releases tax provision summary for budget reconciliation, amends earlier recommendations

14 May, 2025

The US House Ways and Means Committee released a Description of Tax Provisions related to budget reconciliation recommendations, including proposals to extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and other reforms on 12 May 2025.

This updated description amends recommendations released on 9 May 2025, with changes and details on additional proposals.

The bill includes key proposals like exemption of tipped and overtime income from taxation, reinstating spending for domestic research and experimental expenditures, and introducing measures to provide further tax relief to Americans.

Main proposals for businesses are:

R&E expense deduction flexibility

Abolishing the mandatory capitalisation of domestic research or experimental expenditures for amounts paid or incurred in tax years starting after 31 December 2024, and before 1 January 2030. Taxpayers can deduct, capitalise, and recover over 60 months, or capitalise and recover over 10 years. However, foreign research expenditures must still be capitalised and amortised over 15 years.

Reinstatement of EBITDA limitation

Reintroducing the EBITDA limitation for taxable years from 31 December 2024 to 1 January 2030. During this period, adjusted taxable income for interest deduction limitation will exclude deductions for depreciation, amortisation, or depletion.

Enhanced GILTI and FDII deductions

Lowering the preferential rates on GILTI and FDII by increasing corporate deductions for tax years starting after 31 December 2025: from 37.5% to 50% for GILTI (including the section 78 gross-up) and from 21.875% to 37.5% for FDII, making current rates permanent.

GILT, or global intangible low-taxed income, is a tax imposed on the income of foreign companies controlled by US corporations or citizens. FDII is a foreign-derived intangible income provision that lets domestic corporations deduct income from selling, leasing, or licensing products to non-US persons for use abroad and from providing services to individuals or property outside the US

BEAT rate increase repeal

Repealing the rules increased the base erosion and anti-abuse tax (BEAT) rate on modified taxable income from 10% to 12.5% and reduced regular tax liability by all credits.

Higher Section 179 expensing limits

Raising the section 179 expense limit for qualifying property to USD 2,500,000 and the phaseout threshold to USD 4,000,000 for property placed in service in tax years starting after 31 December 2024.

Enforcement of remedies against unfair foreign taxes

The addition of section 899, “Enforcement of Remedies Against Unfair Foreign Taxes,” to the Code. This section increases specific US taxes in response to discriminatory foreign taxes, such as the Pillar Two UTPR, DSTs, or diverted profits taxes. US taxes will rise by 5% annually, starting the first year the unfair tax applies, up to a maximum 20% increase. Affected taxes include:

The 30% rate on FDAP income, certain capital gains, and US-source income of nonresident aliens;
The 30% rate on FDAP income and US-source income of foreign entities;
The 21% corporate income tax on a foreign corporation’s ECI. When a foreign person conducts a trade or business in the US, all US-sourced income related to that activity is considered Effectively Connected Income (ECI).
The 30% branch profits tax;
The 4% tax on US-source gross investment income of foreign private foundations.

Tax credit reform proposals

The proposals include ending, phasing out, or restricting credits like clean vehicle credits, energy-efficient home improvement credits, residential clean energy credits, clean electricity production and investment credits, and advanced manufacturing production credits.

Main proposals for individuals

Making the TCJA income tax rate schedules permanent for individuals, estates, and trusts, with inflation adjustments, except for the top bracket.
Permanently increase the estate tax exemption to USD 15 million (indexed for inflation) for taxable years starting after 31 December 2025.
In addition to the standard deduction, allowing an income tax deduction for qualified tips and overtime compensation for taxable years starting after 31 December 2024.
Replacing the temporary USD 10,000 SALT (state and local taxes) deduction limit with a permanent USD 30,000 limit.