WASHINGTON — The Senate Finance Committee released the long-awaited tax portion of its reconciliation bill on Monday, setting the stage for drawn-out negotiations with their House colleagues after changing several key provisions in the 549-page bill.
The text release starts the clock for senators to finalize the package, get it approved by the Senate parliamentarian, and vote on the measure before the end of next week to meet Republicans’ self-imposed deadline of July 4. The parliamentary process could take several days as each provision must be reviewed by the Senate adviser to ensure they adhere to the strict rules of reconciliation.
Once the package passes the Senate, it will then be returned to the House for consideration. From there, Republicans will likely need to convene what is known as a conference committee between House and Senate leaders to negotiate a compromise package in order to avoid a legislative tennis match.
That could be easier said than done as there are several provisions in the Senate version that have already angered House Republicans who spent weeks negotiating with GOP leaders to include their priorities.
Here are some of the changes that could be the biggest sticking points for House Republicans:
Extension of green energy tax credit expirations
As expected, the Senate text aims to eliminate hundreds of billions of dollars previously approved under former President Joe Biden and criticized by some conservatives as “Green New Deal subsidies.”
However, the Senate text appears to shift the timeline for when many of those clean energy tax credits could be phased out, giving business owners who benefit from the credits more time to adjust.
“The legislation also achieves significant savings by slashing Green New Deal spending and targeting waste, fraud and abuse in spending programs while preserving and protecting them for the most vulnerable,” Senate Finance Chair Mike Crapo, R-Idaho, said in a statement.
Under the House resolution, the credits are each given specific expiration dates whereas in the Senate version they are given a certain number of days after enactment.
For example, the elimination of tax credits for residential clean energy could be eased under the Senate bill, softening the blow for the repeal of renewable energy sources such as solar panels, solar water heaters, geothermal heat pumps, and more.
While the House bill would eliminate those credits by the end of 2025, the Senate version would expire the credit six months after the bill is signed — giving the credits a moving deadline and a slower phaseout.
The Senate text also appears to change the timeline for several tax credits incentivizing the usage of clean vehicles, including credits for purchasing used clean energy vehicles; new clean vehicles; commercial vehicles; and more.
Many of those provisions were set to expire by the end of the year under the House proposal, but now would also expire between 90-180 days after the bill is signed.
The bill would ease the expiration of tax credits on fueling equipment for alternative vehicles such as electric cars. Similar to other language, the Senate text would implement a more flexible phaseout to eliminate the tax credit one year after the bill is signed rather than at the end of this year, which is the date currently proposed in the House version.
Those eased timelines, along with others tucked in the bill, were likely included to win over Republicans in the Senate such as Sen. John Curtis, R-Utah, who pushed for relaxed phaseouts. If the tax credits were eliminated immediately, Curtis and others argued, it could cause a surge in utility prices.
However, it’s not clear how that will go over with fiscal conservatives in the House, who have called for the immediate elimination of clean energy credits.
The Senate Finance Committee summary does tout provisions to boost nuclear energy and support “consistent energy sources” to reduce market distortions. It also includes language that “stops penalizing fossil fuels in favor of intermittent green energy.”
Medicaid limits
The Senate tax portion made a number of significant changes to the House language on Medicaid, including one controversial proposal to help pay for Republicans’ proposed tax cuts.
In the newly released text, Republicans are proposing to lower the Medicaid provider tax to 3.5%, far below the current 6% tax. That could raise concerns among some lawmakers who have already voiced concerns about reduced funding for Medicaid in some states.
Medicaid provider taxes are taxes placed by states on medical providers like hospitals and clinics that then boost reimbursement from the federal government.
The bill would also implement stricter requirements for eligibility screening and verification as part of an effort to ensure undocumented immigrantss cannot be approved for benefits.
For the most part, Senate Republicans left much of the language in the House surrounding Medicaid untouched.
For example, the language maintains provisions establishing new work requirements for able-bodied adults without dependents, requiring at least 80 hours a month or some other activity, such as community service. The bill would also maintain restrictions introduced by the House to ban Medicaid funds going toward abortion procedures or gender transitions.
SALT changes in Senate bill
One of the most politically potent issues tucked into the reconciliation bill is the proposed expansion of federal deductions for state and local taxes paid, also known as SALT.
The Senate version includes language to extend the current deduction cap, which sits at $10,000 per household. That proposal has already set off a firestorm among blue-state Republicans in the House who have demanded a much higher limit — even going so far as to threaten voting against the full package if a higher deduction is not included.
House Republican leaders offered to increase the current deduction cap to $40,000 for individuals who make $500,000 or less a year. The cap would then increase by 1% every year over the next decade and remain permanent after that period.
That proposal was met with skepticism in the Senate, prompting many fiscal conservatives to push for a lower number to reduce costs. The $10,000 proposal is meant to be a starting point for negotiations, Senate aides say, but it has already been met with anger from SALT proponents in the House.
“That is the deal, and I will not accept a penny less,” Rep. Mike Lawler, R-N.Y., said of the House-negotiated deal. “If the Senate reduces the SALT number, I will vote NO, and the bill will fail in the House.”
Other New York Republicans called the deal “insulting,” arguing it is a “slap in the face” to the blue-state Republicans who handed the GOP a majority in the House.
“If we want to be the big tent party, we need to recognize that we have members representing blue states with high taxes that are subsidizing many red districts across the country with constituents who benefit from refundable tax credits despite paying zero in taxes,” Rep. Nicole Malliotakis, R-N.Y., said in a statement.
House Republican leaders have warned for months not to make drastic changes to SALT policy, warning it could be tough to sell anything less than what was already negotiated — especially with only a three-vote margin in the House.
“I’m very concerned about what they might do on the SALT number and any number of other provisions in the bill,” House Speaker Mike Johnson, R-La., told the Deseret News last week. “I’ve been very consistent publicly and privately. They need to hopefully modify it as little as possible, but I also understand that, you know, it’s a separate chamber, and they’re going to do their thing.”