Congressional Republicans are working on a new tax package. It could include an increase in the section 199A qualified business interest (QBI) deduction, and improvements to health savings account (HSA) rules. It could happen as part of another bill (government funding), or as a second all-GOP reconciliation bill.

The package is still under construction, but Members are considering a proposal to increase the QBI deduction to 23 percent (up from current law’s 20 percent). They are also looking at increasing the annual contribution limit for HSAs, adding a new tax deduction for individual choice health reimbursement arrangements (ICHRAs), and other HSA enhancements. These issues are “left over,” as some Members characterize them, from provisions included in the House version of the recently-enacted tax/spending cuts reconciliation bill, but left out of the bill that was signed into law on July 4.

Other tax proposals are also in play, but the work has yet to consider offsets for new, revenue-losing tax provisions. It is clear, though, say the Hill staffers working on this package, that there will be offsets in play as the package comes together.

The path to enactment is still murky. Some Republicans—especially those in the House—say it could be done via a second reconciliation bill. (A second reconciliation bill would require the House and Senate to first approve a second Congressional budget resolution.) Senate Republican Leader Sen. John Thune (R-SD) has not ruled out such a procedure. And Speaker of the House Rep. Mike Johnson (R-LA) says he is “confident” that a second reconciliation package—one that is member-driven and reflective of consensus in the House GOP Conference—will come together “later this year.” Other Washington insiders think it is more likely this will wait until 2026.

Other Hill sources say a tax package could be added, as a tax title, to a government funding bill—more likely an appropriations bill than a continuing resolution (CR). Government funding legislation could come as an “omnibus” that combines funding for all (or most) government agencies and programs, or as “minibus” bills that combine some of the 12 regular order appropriations bills into multiple, smaller packages.

Prospects: There is considerable skepticism about whether Congress will or can enact another tax bill this year. Both a reconciliation bill—which would be all-GOP—and the omnibus/minibus “path” are politically fraught. Either way, the high likelihood is that it will not happen until deep into the fall/early winter, if not longer than that.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.