• Expansion of business interest deduction under Code section 163(j). Under current law, business interest deductions generally are limited to 30% of the taxpayer’s “adjusted taxable income.” The House Bill reinstates the more taxpayer favorable earnings before interest, taxes, depreciation, and amortization (rather than earnings before interest and taxes) standard that applied prior to 2022 for calculating the limitation. This modification would apply to taxable years beginning after December 31, 2024, and before January 1, 2030.
• Extension of limitation on excess business losses under Code section 461(l). The House Bill makes permanent the annual limitation on excess business losses ($313,000 for tax years beginning in 2025; $626,000 for married taxpayers filing jointly) for noncorporate taxpayers introduced by the TCJA and continues the carryforward of such excess business losses to subsequent taxable years as a net operating loss. The House Bill also provides that excess business losses disallowed in taxable years beginning after 2025 will be taken into account in determining a taxpayer’s excess business losses in subsequent taxable years.
• Increased expensing for certain depreciable business assets under Code section 179. The House Bill increases the amount a taxpayer may deduct under Code section 179 for the cost of qualifying depreciable tangible personal property from $1.25 million to $2.5 million for property placed in service in 2025 and increases the threshold at which the allowance begins to phase out from $3.13 million to $4 million in 2025. The $2.5 million and $4 million amounts would be adjusted for inflation for taxable years beginning after 2025.
• Deduction of domestic research and experimental expenditures under new Code section 174A. Current law generally requires domestic research and development expenditures to be amortized over five years. The House Bill permits taxpayers to immediately deduct 100% of domestic research and development expenditures paid or incurred in taxable years beginning after December 31, 2024, and before January 1, 2030. Alternatively, taxpayers could elect to capitalize and amortize such expenditures ratably over a period of no less than 60 months.
• Renewal and enhancement of Opportunity Zone incentives. The current Opportunity Zone incentive is set to expire on December 31, 2026. The House Bill establishes a new Opportunity Zone incentive, with modified eligibility requirements, additional tax return and information reporting requirements, and enhanced benefits for investments in rural areas.
• Limitation on amortization of certain sports franchises under Code section 197. The House Bill limits the percentage of professional sports teams’ intangibles (e.g., contract values, brand value, and goodwill) that can be amortized over 15 years to 50% of the value of those intangibles, compared to 100% under current law. This change would apply to applicable intangibles acquired after the date of enactment.

Individual tax provisions

• Ordinary income tax rates. The House Bill permanently extends the lower individual income tax rates and thresholds introduced by the TCJA that are currently scheduled to expire after 2025 (including the top marginal rate of 37%).
• Deductions of state and local taxes. The House Bill permanently increases the cap for deductions of state and local taxes (SALT) introduced by the TCJA to $40,400. This cap is reduced (but not below $10,000) by 30% of the excess of the taxpayer’s modified adjusted gross income over $505,000. The House Bill also eliminates the ability of certain service partnerships and S corporations (generally those that are not entitled to a qualified business income deduction under Code section 199A), such as investment management businesses, financial service businesses, brokerage service businesses, law firms, and accounting firms, to utilize pass-through entity tax regimes (which were enacted by numerous states following passage of the TCJA), in taxable years beginning after December 31, 2025.
• Itemized deductions in general. The House Bill replaces the “Pease” limitation on itemized deductions (which was temporarily eliminated by the TCJA and scheduled to return in 2026) with a new permanent limitation that generally caps the value of each dollar of itemized deductions at $0.35 and applies only to taxpayers in the highest individual income tax bracket. This new limitation is effective for taxable years beginning after December 31, 2025.

International tax provisions

• Increase to GILTI and FDII effective tax rates under Code section 250. Under current law, the effective tax rate for “global intangible low-taxed income” and “foreign-derived intangibles income” is scheduled to increase after 2025 from 10.5% and 13.125% to 13.125% and 16.406%, respectively. The House Bill permanently increases the effective tax rate on such income to 10.668% and 13.335%, respectively.
• Increased base-erosion and anti-abuse tax (BEAT) under Code section 59A. The BEAT rate currently is scheduled to increase from 10% to 12.5% after 2025. The House Bill permanently increases the BEAT rate to 10.1% beginning in 2026. However, such rate is increased to 12.5% for domestic corporations that are more than 50% owned by non-U.S. persons who have a nexus to “discriminatory foreign countries” (see discussion of new Code section 899 below).
• Increased taxes on non-U.S. persons under new Code section 899. The House Bill adds new Code section 899, which increases the applicable tax rate for certain U.S.-source income (including withholding tax rates on interest, dividends, and other “FDAP” income, and tax rates imposed on “effectively connected income”) earned by certain persons who have a nexus to “discriminatory foreign countries” that directly or indirectly impose “unfair foreign taxes” on U.S. persons. The new tax would apply to governments of any discriminatory foreign country, non-U.S. individuals who are residents of any discriminatory foreign country, corporations that are residents of, or more than 50% owned (by vote or value) by residents of a discriminatory foreign country, and certain partnerships, trusts, and other entities. The term “unfair foreign tax” generally means any undertaxed profits rule, digital services tax, diverted profits tax, and, to the extent set forth in IRS regulations, any extraterritorial tax, discriminatory tax, or any other tax enacted with a public or stated purpose indicating the tax will be economically borne – directly or indirectly – disproportionately by U.S. persons. A “discriminatory foreign country” generally is any foreign country that imposes one or more “unfair foreign taxes.” The applicable tax rate generally will increase in increments of 5% each year that an applicable “unfair foreign tax” is imposed (up to 20% in the aggregate). The increased tax would apply to taxable years beginning on or after the latest of (i) 90 days after enactment of the House Bill, (ii) 180 days after the date of enactment of the “unfair foreign tax” causing a country to be treated as a “discriminatory foreign country,” or (iii) the first date that the “unfair foreign tax” of such country applies.

Provisions affecting tax-exempt organizations

• Tiered excise tax on private foundations under Code section 4940(a). The House Bill increases the rate of excise tax on the net investment income of private foundations qualifying under Code section 501(a) from 1.39% under current law to (i) 2.78% for asset values between $50 million and approximately $250 million, (ii) 5% for asset values between $250 million and approximately $5 billion, and (iii) 10% for asset values exceeding $5 billion.
• Tiered excise tax on private college and university endowments under Code section 4968. The House Bill increases the rate of excise tax on the net investment income of private colleges and universities from 1.4% under current law to 7%, 14%, or 21%, depending on the specific institution’s “student-adjusted endowment.”
• Expansion of the application of excess compensation tax under Code section 4960. The House Bill modifies the definition of a “covered employee” under Code section 4960 to include any current or former employee of an applicable tax-exempt organization.
• Expanded unrelated business income tax under Code sections 512 and 513. The House Bill increases and expands the “unrelated business income tax” applicable to charitable organizations to include (i) qualified transportation fringe benefits, such as transit benefits or parking benefits and (ii) income from the sale or licensing of a charitable organization’s name or logo.
• Corporate charitable deduction floor under Code section 170. The House Bill introduces a 1% floor for corporate charitable deductions.

Energy tax provisions

• Clean electricity PTC under Code section 45Y. Generally eliminated in the House Bill, with a safe harbor for projects with beginning of construction (BOC) before 60 days after enactment of  the House Bill and placed in service (PIS) before 2029; also subject to “prohibited foreign entity” rules limiting availability for certain projects (PFE Rules).
• Clean electricity ITC under Code section 48E. Generally eliminated in the House Bill, with a safe harbor for projects with BOC before 60 days after enactment of the House Bill and PIS before 2029; also subject to PFE Rules.
• Advanced nuclear facility credit under Code sections 45Y and 48E. Subject to accelerated in the House Bill  termination but remains available for facilities with BOC before 2029, subject to PFE Rules.
• Clean hydrogen PTC under Code section 45V. Subject to accelerated termination in the House Bill but remains available for projects with BOC before December 31, 2025.
• Carbon oxide sequestration credit under Code section 45Q. Remains available in the House Bill through originally scheduled expiration under the Inflation Reduction Act (IRA), subject to PFE Rules and elimination of transferability under Code section 6418 for facilities with BOC after two years from enactment of the House Bill.
• (Non-wind component) advanced manufacturing PTC under Code section 45X. Subject to accelerated phase-out in the House Bill beginning in 2030 but remains available, subject to PFE Rules and elimination of transferability under Code section 6418 for credits generated after 2027.
• (Wind component) advanced manufacturing PTC under Code section 45X. Subject to accelerated termination in the House Bill but remains available through 2027, subject to the PFE Rules and elimination of transferability under Code section 6418 for credits generated after 2027.
• Clean fuel PTC under Code section 45Z. Remains available through originally scheduled expiration under IRA, subject to PFE Rules and elimination of transferability under Code section 6418 for credits generated after 2027.
• Zero-emission nuclear PTC under Code section 45U. Remains available in the House Bill for projects that begin construction before 2032, subject to PFE Rules.
• Geothermal energy property ITC under Code section 48. Subject to accelerated phase-out in the House Bill for projects with BOC after 2029 but remains available, subject to PFE Rules and elimination of transferability under Code section 6418, for facilities with BOC after two years from enactment.
• Special rules for residential solar and wind. No credit allowed under Code sections 45Y or 48E for residential solar water-heating property, solar electric property, or small wind energy property if (i) the taxpayer/owner rents or leases such property to a third party and (ii) the third party would qualify for the 25D credit if the third party were the owner of such property.
• Credits expiring after 2025 from accelerated termination. (i) Residential Clean Energy Credit under Code section 25D; (ii) Energy Efficient Home Improvement Credit under Code section 25C; (iii) New Energy Efficient Home Credit under Code section 45L; (iv) Clean Vehicle Credit under Code section 30D; (v) Previously Owned Clean Vehicle Credit under Code section 25E; (vi) Alternative Fuel Vehicle Refueling Property Credit under Code section 30C; and (vii) Qualified Commercial Clean Vehicles Credit under Code section 45W.

Trusts and estates provisions

• Increased exemption. The House Bill permanently increases to $15 million (indexed for inflation after 2025) the basic estate and gift tax and generation-skipping transfer tax exemption amount.
• Tax rates. For taxable years beginning after December 31, 2025, the House Bill makes permanent the income tax rate schedules for estates and trusts under current law, including the highest rate as 37% (and not the 39.6% rate that was set to take effect after 2025).
• SALT. The SALT cap rules in the House Bill that are applicable to individuals (as discussed above) also apply to trusts and estates.

In-depth 2025-146