Legislation to make permanent the section 199A deduction for qualifying noncorporate business income has been introduced in both the House and Senate. The legislation is partisan—only Republicans cosponsored it in both chambers of Congress—but the number of cosponsors (35 in the Senate, including most of the Senate GOP’s leadership, and 152 in the House) demonstrates the strength of support for the measure.

On January 3, Rep. Vern Buchanan (R-FL), a senior member of the tax-writing Ways & Means Committee, introduced H.R.143, a bill that would make permanent expiring individual tax rates (including section 199A), the standard deduction, the estate tax personal exemption, and other individual tax provisions. The bill also specifically repeals the expiration date of section 199A, the deduction for qualifying noncorporate business income.

In a January 31 executive order (EO), President Trump once again made Treasury tax regulations subject to White House review. Office of Information and Regulatory Affairs (OIRA) review of tax regulations was not required until President Trump’s first term, from 2017 to 2021. But then-President Biden reversed that order, again exempting tax regulations from OIRA review. Now, per this latest Trump EO, IRA will again be reviewing proposed tax regulations.

On January 3, Rep. Andy Biggs (R-AZ) introduced legislation that would repeal the limits on the kinds of businesses that are eligible for the section 199A deduction for qualifying noncorporate business income. The bill would also repeal the estate tax while retaining the step up in basis for assets passing to heirs after the decedent’s death.

A bipartisan Senate bill, the “Charitable Act,” would reestablish an above-the-line charitable deduction. The deduction would allow taxpayers who do not itemize to deduct their charitable contributions up to an amount equal to up to one third of the standard deduction.

Both Republicans and Democrats have named the members joining the House Ways & Means and Senate Finance Committees for the 119^th Congress. These lawmakers will have particular influence over what goes in and what stays out of the massive tax bill Congress intends to enact this year.

Donald Trump’s victory was declared when, at just about 5:30 a.m. on Wednesday, November 6, the media projected he had won swing state Wisconsin, taking him over the 270-vote electoral college count needed to win the presidency. 

Republicans will control the Senate in the incoming 119th Congress (2025-2026). The GOP’s undisputed win of 53 of the Senate’s 100 seats means Democrats have lost control of the upper chamber in the 119th Congress.

Republicans won the 218 seats needed to control the House; it will give the GOP the “trifecta”—a clean sweep of all three levers of legislative power in Washington.

If, as expected, the GOP controls both the House and Senate next year, the risks and challenges of the 2025 tax bill have become a bit clearer. Here is a run-down.

Four Democratic Senators have introduced legislation that would subject pass-through (non-corporate) business income to payroll (Social Security/Medicare) taxes. Currently, many pass-through businesses (S corporations, partnerships, sole proprietorships) characterize some of their business income as dividends or other non-wage income and thus avoid having to include it in the payroll tax base.

On September 26 President Biden signed into law the three-month funding bill that avoided a government shutdown on October 1. The continuing resolution (CR) extended fiscal year (FY) 2024 funding levels until December 20 and made few (none of them controversial) policy changes. So, the tough issues—e.g., FY 2025 funding levels, whether to block certain regulations (including the fiduciary rule)—were left to be resolved during the November-December lame duck session of the 118^th Congress.

On September 12, the Senate Finance Committee held a hearing to lay the groundwork for the 2025 tax bill effort to cut down on “tax avoidance.” The hearing highlighted proposals to improve tax equity in current law. It also focused considerable discussion on section 199A, the deduction for qualifying noncorporate business income.

The premium tax subsidies that allow lower-income individuals to get Affordable Care Act (ACA) health insurance free or at reduced cost are scheduled to expire at the end of 2025. If the current subsidies do expire, millions of low-income individuals will face significant health insurance cost increases. Extension of the subsidies will be a key issue in the 2025 tax bill and/or during the November-December lame-duck session of the 118^th Congress.

The ENABLE Act, a bill that makes permanent three provisions of the ABLE account law, passed the Senate under a unanimous consent agreement on September 19. The bill, the ENABLE Act, was introduced in the Senate by Sen. Bob Casey (D-PA), the author of the original ABLE Act, and Sen. Eric Schmitt (R-MO) and in the House by Rep. Lloyd Smucker (R-PA) and Rep. Don Beyer (D-VA).

Private sector economists, including the respected Committee for a Responsible Federal Budget (CRFB), are sounding the alarm over the cost of both presidential candidates’ tax proposals. This suggests the 2025 tax bill will be as much about revenue as tax policy.

A September 30 report from the Treasury’s Inspector General for Tax Administration (TIGTA) finds that millions of taxpayers are not paying the ten percent early withdrawal penalty tax or income taxes owed on pre-retirement early withdrawals from their retirement savings plans. This raises the specter of Congressional review of proposals for tougher enforcement.

A bipartisan bill to cut off employee retention tax credit (ERTC) claims has been introduced in the Senate. The bill pulls the ERTC provisions from the House-passed HR 7024, a bill that has been long-stalled in the Senate.

On September 26, the Internal Revenue Service (IRS) announced it is opening its employee retention tax credit (ERTC) corrections program to allow tax professionals, payroll companies and other third parties that filed ERTC claims on behalf of a business to make corrections to their clients’ claims under the agency’s voluntary disclosure program.

At a September 12 hearing, the Senate Finance Committee explored tax avoidance strategies used by the very wealthy. Strategies identified included lack of current tax liability on unrealized asset gains, step-up in basis, trust rules, and private placement life insurance (PPLI). This is a prelude to the looming 2025 tax bill debate.