SBLC Update: Tax Legislation and Upcoming Schedule

We had originally telegraphed a potential “Hill Day” type meeting for this upcoming week (June 11).  I’m taking that off the calendar for now, but that does not mean we won’t do an extra Hill Day still this year.  More full explanation is included below.

Save the Date:  Wednesday, June 25, 2025 at 2:00 PM EDT.  We would like to do an SBLC “Policy Brief” virtual meeting, with those on this e-mail distribution list.   Zoom invitation to follow next week.  Purpose is to have a discussion and allow Q&A on the tax legislation.  Will further discuss strategy for advocacy for remainder of 2025. 

As you all are surely aware, the House of Representatives passed its reconciliation package (read: Tax Legislation) – officially titled the “One Big Beautiful Bill Act” (by a vote of 215–214) on May 22, 2025.  After reviewing the House bill, we can report that it includes almost everything the SBLC has asked for in this legislative cycle. Below are the key provisions affecting small businesses, along with a short explanation of how each provision may affect your members and their businesses.  Remember, the Senate is still considering the legislation and could amend/change any of these provisions through the process.

Key Provisions Included in House Bill for Small Businesses:

Section 199A Deduction Increased :  The 20% pass-through business income deduction is increased to 23% and made permanent. This provides direct relief to S corps, partnerships, sole proprietorships, and LLCs taxed as pass-throughs.

Bonus Depreciation Restored :  Restores 100% bonus depreciation for qualified property placed in service from 2025 through 2029.

R&D Deduction Reinstated : Allows immediate deduction of U.S.-based research and development expenses instead of amortizing over five years.

Manufacturing Expensing Extended : Immediate expensing for investments in qualified manufacturing and refining facilities through 2029.

Section 179 Cap Raised : The cap for small business expensing is increased from $1,000,000 to $2,500,000, with a higher phase-out threshold.

Marginal Tax Rates Extended : The lower individual tax rates from the 2017 law (set to expire in 2025) are made permanent. This is essential for pass-throughs taxed at the individual level.

Estate & Gift Tax Exemption Increased : Beginning in 2026, the estate and gift tax exemption is permanently increased from $10 million to $15 million and indexed to inflation. This provides long-term planning certainty for business owners concerned with intergenerational transfers.

Business Interest Deduction Relief (163(j)) : Excludes depreciation and amortization from the adjusted taxable income formula, allowing more generous interest deductibility.

Contractor Reporting Threshold Increased: Raises the 1099-NEC/MISC reporting threshold from $600 to $2,000, easing compliance for businesses that work with independent contractors.

Paid Family and Medical Leave Credit Made Permanent: Retains the employer credit (up to 25% of wages), now available for insured leave and for employees with six months’ tenure.

Here are a few other interesting potential changes that were not on our SBLC policy agenda:

Child Care Credit Expansion :  Raises the business credit cap to $500,000 ($600,000 for small businesses), including payments to outside providers.

Charitable Deduction for Non-Itemizers :  Allows a temporary deduction for non-itemizers ($150 individual / $300 joint) from 2025 to 2028.

Auto Loan Interest Deduction :  Allows up to $10,000 in interest deduction for U.S.-assembled vehicles (limited application but may be useful for fleet-dependent businesses).

Tip Income Deduction :  Creates a deduction for qualified tips earned between 2025 and 2028. Tips must be voluntary and paid in customary tipping occupations. The deduction is not available for employees earning more than $160,000 and excludes service fields like law, health care, consulting, and performing arts.

The proposed tax legislation is now being taken up by the Senate.   For now, the small business provisions are not expected to be targeted .  Which is why we are not taking up the Hill Day visits next week.  We expect the Senate committees of jurisdiction to release most of the revised text of their version of the bill next week.  I advise we only react to actual text and not speculation – which we don’t have yet as of 3:00 PM on Friday, June 6, 2025. 

The Republicans on the Senate Finance Committee met with President Trump this week.  It has been reported, and is our understanding, that those Senators were attempting to make the case for keeping business tax incentives permanent as proposed by the House. They don’t need any convincing from us at this point. But, there are competing interests in the Senate – some of which want to find more budget savings (that focuses more on Medicaid program changes, but could involve making the small business provisions something less than permanent). I believe our best efforts will be to react to any Senate changes that alter our desired SBLC priorities.

If any SBLC member has a major item that was not included in the House package, please let us know. We can still help facilitate meetings in Washington, D.C. to advocate for specific items at the margins. That said, the SBLC’s agenda was secured in the House on every major priority it pursued in this package.

We will keep you posted as the bill moves forward through the Senate.

FOR ADDITIONAL INFORMATION CONTACT:

Matt Morgan

Partner - SBLC

(317) 554-7997

Mmorgan@btlaw.com