TCJA Extensions: Navigating Challenges in Policy and Planning

The heavy lifting for a major tax bill could be completed in the House in the early months of 2025, though how quickly a package would move is hard to gauge.

Anna Taylor of Deloitte Tax LLP said she expects Republicans could follow a timetable similar to that of Democrats when they negotiated much of the American Rescue Plan Act in the weeks after the 2020 election and passed a budget resolution in January 2021. The bill was signed into law March 11, 2021, a pace unlikely to be met for a complicated extension or even expansion of the Tax Cuts and Jobs Act, she said.

“I think that’s about as fast as you could expect any group to reach consensus and move a bill through,” Taylor said.

The budget reconciliation process can help lawmakers fast-track legislation because it only requires a simple majority in the Senate, with limits on debate and an amendment process restricted by relevance and deficit impact.

“Although it’s exhausting on the floor, it can be done fast,” Michael W. Evans, former chief majority counsel for the Senate Finance Committee, said of the reconciliation process, adding he expects Republicans to move as quickly as Democrats did in 2021.

While the TCJA was temporarily stalled in the Senate in 2017 over the budget resolution, once a deficit number was agreed to, Republicans began to sprint. The bill was introduced Nov. 2, 2017, and signed into law by then-President Trump 50 days later on Dec. 22.

House Republicans got the ball rolling on reconciliation planning before the 2024 elections by holding information sessions for caucus members on the process, and House Speaker Mike Johnson, R-La., briefed Senate Republicans on the plan in July.

Because Congress hasn’t yet considered a budget resolution for fiscal 2025, Republicans could have two reconciliation bills in 2025 under resolutions for fiscal 2025 and fiscal 2026. Republicans took advantage of a similar situation in 2017 when their first reconciliation bill — to repeal the Affordable Care Act — was rejected by the Senate, but they still had a second budget resolution in their pocket to use for the TCJA.

“They could get two bites at the apple if they decide they want to do that,” Taylor said.

Evans, now a partner at K&L Gates LLP, said he thinks tax extensions would be included in the first of the two reconciliation efforts, largely because they’re part of the known universe of legislation in Congress and “you don’t have to spend a lot of time defining the playing field.”

A slim margin in the House — which still hasn’t officially been called for Republicans — may create hurdles for expedient passage, however, as dissonance within the caucus on issues of local taxation, the Inflation Reduction Act’s clean energy credits, and the importance of offsetting the extensions could all reemerge in January 2025.

Possible Pressure Points

There’s no guarantee of smooth sailing in establishing what makes it into that early reconciliation bill or how long the Senate might spend on the package after House passage.

Johnson and President-elect Trump have both said they want to roll back at least some of the IRA’s clean energy tax credits, and repeals could help offset some of the bill’s cost. But House Republicans whose districts have seen investment and job growth as a result of projects funded by the credits have urged Johnson against a full repeal of the incentives.

Republicans in both chambers are also not all singing the same tune on the need for pay-fors to cover the cost of the TCJA extensions. Soon-to-be Senate Finance Committee Chair Mike Crapo, R-Idaho, has argued that extending existing tax policy doesn’t require an offset, while deficit hawks in the House are pushing for deficit-conscious legislation.

The cap on the state and local tax deduction, which has been a thorn in the side of both Democrats and Republicans since the passage of the TCJA, is also likely to serve as a topic of debate. The $10,000 cap on the SALT deduction is scheduled to sunset at the end of 2025.

And it isn’t just the individual SALT deduction cap that might be at the center of that fight because grabbing some dollars via a corporate SALT cap appears to be on the table.

“It’s an idea that’s been discussed,” Taylor said.

Lame Duck

The odds of resurrecting in the lame-duck session the House-passed tax package (H.R. 7024), with its renewals of research and development expensing, bonus depreciation, and looser net interest expensing, are low, according to the Deloitte duo of Jonathan Traub, a former Ways and Means GOP staff director, and Taylor, former tax and trade counsel for Senate Majority Leader Charles E. Schumer, D-N.Y.

“Never say never, but it doesn’t feel like there is an urgency to resurrect that package in this moment; they’re thinking about gearing up for the big, big battle next year,” Taylor said of the $79 billion tax package negotiated by House Ways and Means Committee Chair Jason Smith, R-Mo., and Senate Finance Committee Chair Ron Wyden, D-Ore.

There could be a “clear the barn bill” that might make the launch of Trump’s presidency easier by including a debt-limit deal or fiscal 2025 appropriations, Traub said. That package might include some small, bipartisan tax provisions, but not the core of the House-passed tax bill consisting of retroactive restoration of research and development expensing and net interest expensing formulas, he said.

“Unless Congress miraculously revives the Smith-Wyden bill in the lame duck, I don’t think it’s coming back next year,” Traub said of R&D expensing.

Rising Concern From the Left

Democrats and other advocates against extending the TCJA’s provisions have somewhat resigned themselves to hoping for limiting any further changes in the tax code beyond the 2017 cuts.

Groundwork Action, a progressive policy group, urged Democrats to oppose further tax cuts for high-income individuals and large corporations.

“Trump’s rise to power was underwritten by his billionaire boy’s club, and he’s made it clear he intends to return the favor with even bigger handouts to the ultra-wealthy,” Lindsay Owens of Groundwork Action said in a Nov. 7 statement. “Next year, Democrats must be united in opposing a single penny in tax cuts for the wealthy or corporations.”

Ways and Means Committee member Dwight Evans, D-Pa., in a Nov. 7 release, vowed to fight Republicans’ tax agenda in 2025, citing opposition to “more tax cuts for the wealthiest and big corporations.”

Dylan Dusseault of Patriotic Millionaires said that while the political will still exists among Democrats to fight the extensions, the election results limit any chances to fully stop — rather than slow down — an inevitable reconciliation bill.

“There might be some opportunities to stop them from making things worse than they were at the TCJA,” Dusseault said of changes to the tax code that lowered rates for corporations and high-income earners. “But I think as far as, like, extending what exists on the TCJA, I don’t see a lot of leverage points. I think it’ll be closer to kind of what we saw happen in 2017 — they’re going to ram these through.”

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