Article | Tax alert

House approves sweeping tax reform, spending cuts bill; now heads to Senate

May 22, 2025 · Authored by Jessica L. Jeane

On the morning of May 22, 2025, the House of Representatives passed a sweeping reconciliation bill that includes major tax reform and spending cuts, some of which would become effective this year. By the narrowest of margins, the titled “One, Big, Beautiful Bill Act” now heads to the Senate after clearing the House by a 215-214 vote. While this is a major step forward in advancing the president’s agenda, it is critical to note that Senate Republican leadership has forewarned that the tax bill as currently drafted will require changes before it can pass the upper chamber. As the saying goes, beauty is in the eye of the beholder, and it remains to be seen just how beautiful the Senate views the House-approved bill.

As such, we expect further negotiations over the legislation’s more controversial provisions once the Senate returns from recess on June 2, such as the increase of the state and local tax (SALT) deduction, the repeal and phaseout of certain Inflation Reduction Act (IRA) credits, and Medicaid reforms, all of which could imperil overall prospects for passage given Republicans’ narrow majorities in Congress and competing priorities, as previously covered in detail in our Policy Pulse space. Senate leadership can only afford to lose three Republican votes to pass it's not-yet revised bill.

“The Senate’s focus will be permanency,” a senior Senate Republican aide told Baker Tilly on May 22. Notably, most of the business-favorable provisions are revived temporarily under the House bill. In that vein, Senate Finance Chair Mike Crapo (R-ID) has said his reconciliation objective is to make more of the tax cuts permanent.

As discussed in our recent tax alert, the legislation would make permanent several individual provisions enacted by the Tax Cuts and Jobs Act (TCJA) that are currently set to expire on Dec. 31, 2025. Additionally, the House-approved bill includes principal tax-related promises made by President Trump during his campaign to include deductions to offset the income tax on tips, overtime and Social Security income.

That said, a few noteworthy changes and clarifications introduced by way of a 42-page manager’s amendment