Senate Republicans continue to weigh counterproposals to key provisions of the House-passed reconciliation package, the One Big Beautiful Bill Act (H.R. 1), this week as the Senate races to pass the tax and spending bill by July 4. On Wednesday, Senate Finance Committee Chairman Mike Crapo (R-ID) outlined the Finance Committee’s tax proposals to Republican Senators, which included changes to House-passed provisions on the state and local tax (SALT) deduction cap and proposed rollbacks of Inflation Reduction Act (IRA) clean energy tax credits.

While key details on several counterproposals remain unannounced, the Senate Finance Committee is expected to publicly release text of its legislative proposals as early as Friday this week.

What We Are Watching. Senate Republicans are expected to break from the House on several tax proposals:

• Inflation Reduction Act Amendments: Chairman Crapo told Senate Republicans on Wednesday that the Finance Committee would propose less stringent phase-outs for several IRA clean energy tax credits compared to the House-passed bill, including varying phase-outs based on energy type. The Senate may also include counterproposals on foreign entity of concern (FEOC) requirements for IRA credits and transferability limits.
• State & Local Tax (SALT) Deduction Cap: The Senate is widely expected to scale back House Republican’s proposed increase to the cap on the state and local tax (SALT) deduction. The House proposed to increase the cap to $40,000 (compared to $10,000 under current law) for households with a modified adjusted gross income (MAGI) up to $500,000.
• Business Provisions: Senate Majority Leader John Thune (R-SD) has pledged to make permanent several business-related provisions extended through 2029 in the House-passed bill, including 100 percent bonus depreciation and immediate expensing of domestic research and development (R&D) expenditures.
• Retaliatory Taxes: Several Senate Republicans have suggested the Senate would soften or delay the House’s proposal to impose new retaliatory US tax increases against countries with certain “unfair foreign taxes,” known as Section 899.

What’s Next? The Senate Finance Committee is expected to release text of its legislative proposals as soon as Friday, however, public release may be delayed to next week as Senate Republicans continue to resolve lingering issues. Additional changes to the Senate Finance Committee text may also occur prior to Senate floor consideration of the bill. Further Byrd Rule challenges to Republican proposals by Senate Democrats are also likely following release of the text.

Leader Thune is likely to initiate Senate floor consideration of H.R. 1 in the coming weeks. Upon bringing the bill to the Senate floor, the Senate will begin an amendment process known as a “Vote-a-Rama,” where the Senate will likely consider several hundred amendments to the bill. Following the amendment process, the Senate will vote on final passage which only requires a simple majority under reconciliation rules. Should the Senate successfully pass their version of H.R. 1, Republican leaders will be forced to reconcile differences between the House- and Senate-passed versions of the reconciliation package, either through a formal conference process, through informal negotiations, or by accepting amendments from the other chamber.

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