By Jonathan Tucker | Principal, Research & Development Tax Credits
On April 2, 2025, Senate Republican leaders released a budget resolution that, once voted on, would begin the reconciliation process for tax reform. This is a similar framework to what the House passed in February. This Senate framework aims to keep tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), just like the House, but using the current policy baseline where the cost of the 2017 TCJA tax cuts set to expire at the end of 2025 won’t count towards the deficit. The drama will unfold as Senate Republicans may opt not to seek guidance from the Senate parliamentarian on whether a current policy baseline meets reconciliation rules.
Instead, they may rely on an argument that the Budget Committee Chairman, Senator Graham (R-SC), has the sole authority to set the baseline. This would be a huge departure from not only a budgeting standpoint but also an authority standpoint. Using a current policy baseline, which would be unprecedented in the reconciliation process, is seen as the best strategy to make 2017 TCJA tax cuts provisions permanent by simply “ignoring” the cost of making them permanent.
This upcoming Senate vote on the budget resolution is expected to maintain House reconciliation instructions, which includes a $4.5 trillion net deficit increase to fund 2017 TCJA tax cut extensions (however, this cost will be ignored if current policy baseline is used), reduced if savings fall short of $2 trillion, and at least $880 billion in spending cuts from Energy & Commerce.
However, the Senate resolution would require only minimal savings from Senate committees, drawing criticism from the House. This debate highlights differences between the House and Senate over whether spending cuts should be dictated by the budget resolution or decided later in the reconciliation bill. It also exposes divisions among Republicans, some insisting tax cut extensions be paired with significant spending cuts, while others prefer a different approach.
House Republican leaders are urging their members to back the Senate’s efforts, emphasizing the need for this budget resolution to bring the reconciliation process to being (i.e., where the actual details will be hammered out). However, as of now, it seems Leader John Thune (R-SD) believes he lacks enough votes to pass, adding the Senate may stay in session through the weekend if necessary to get the votes. Senate consideration of a budget resolution involves a “vote-a-rama,” where numerous amendments are voted on, typically extending overnight into a weekend or recess.
Assuming the budget resolution passes, Republicans will still need to resolve internal disputes over revenue offsets and the long-running debate on lifting the TCJA’s $10,000 cap on state and local tax (SALT) deductions, a priority for GOP members from high-tax states. In addition, there has been chatter that the tax bill might include corporate and individual tax rate increases.
The Senate aims to vote on the budget resolution before the two-week recess starting April 11, signaling progress on a tax bill that has caused months of internal GOP disputes.
Conclusion
As the Senate inches closer to a vote that could redefine tax policy, taxpayers must stay ahead of the curve. The implications of using a current policy baseline to extend TCJA provisions without accounting for the cost could significantly impact tax planning strategies moving forward.
While taxpayers continue to wait on possible policy changes, capitalizing on existing incentives remains essential. KBKG and its experts specialize in navigating complex tax legislation and translating policy shifts into practical, strategic solutions. Those with questions about current tax incentives and benefits are encouraged to contact a KBKG expert today.
About the Author
Jonathan Tucker | Principal – Research & Development Tax Credits
Jonathan Tucker is based in Atlanta, GA, and has over 20 years of experience providing federal business tax advisory services, primarily in R&D tax credits, to clients in various industries including technology, manufacturing, transportation, healthcare, retail and consumer products, hospitality, media and entertainment, financial, and other professional services industries. Read More