On Friday, July 4, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA).

The bill includes tax cuts for businesses and high income earners and significant increases in defense and border spending. The bill also includes work requirements and cuts to Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, and social services. The Seattle Metro Chamber’s federal priorities—behavioral health, addiction, housing, childcare, workforce training, transportation, and environmental/education funding—are largely undercut or unaddressed. Bright spots are the renter tax credits and potential hospital fund boost, but these are marginal compared to the bill’s overall direction.

  • Health and opioid crisis: The bill imposes eligibility tightening and cuts to Medicaid (up to 18% to 20%) and SNAP benefits. This would reduce funding for behavioral health and addiction treatment programs that rely on Medicaid/SNAP support and could reduce or remove coverage for thousands in Seattle.
  • Housing supply crisis and childcare affordability: The bill has a renter’s tax credit and expands the Child & Dependent Care Tax Credit, which will provide tax-based relief. This will help renters and families, addressing affordability indirectly. But it does not provide direct federal funding for shelter or workforce housing.
  • Tax cuts for small businesses: The bill extends the 2017 Tax Cuts and Jobs Act provisions increasing deductions for qualified business income, adds deductions for tip income and overtime pay, and raises the state and local tax deduction cap to $40,000 for some filers. Taken together, these provide modest tax relief for small business owners, particularly those in hospitality and service industries.
  • Research education and natural resources: The bill offers cuts to non-defense spending that will likely lead to reductions in energy, education and agency funding. This threatens federal support for higher education, research and development, and national parks.

What’s next?

Regulations

Given the many new policies and some significant changes to existing law included, this new law will result in many IRS/Treasury guidance and regulatory projects over the coming months (some projects statutorily mandated). We should begin seeing signals from the Trump Administration soon on which projects will be prioritized. Some of these projects will include:

  • No Tax on Tips
  • No Tax on Overtime
  • Biofuels/SAF (Sec. 45Z)
  • Advanced Manufacturing/FEOC/domestic content (Sec. 45X and other credits)
  • Tech-Neutral Credit (Secs. 45Y/48E) commence construction for wind and solar
  • Agriculture Lending (ACRE Act)
  • International tax regimes

As with any regulatory effort, this process will provide formal comment and testimony opportunities for companies and trade associations. Perhaps more importantly, the relationships developed on Capitol Hill during the crafting of this bill should help provide champions for individual issues, especially with tax committee members, as those committees have jurisdiction over the IRS and Treasury. Other committees, like those with jurisdiction over Department of Energy, Environmental Protection Agency, and Department of Agriculture will have input on the clean energy incentives, like Foreign Entity of Concern and Clean Fuel Protection Credit. Engaging with these offices and departments early and throughout the regulatory process, in addition to administration officials, can help deliver favorable rules.

Future Legislative Opportunities

The congressional and administration relationships built over the last year, in addition to the demonstrable economic activity to result from the certainty following bill enactment, can also help serve as a momentum-builder for extensions or positive revisions of incentives impacted by this bill. There will be many opportunities over the next 3.5 years to address tax policy – some the result of actively-developed legislation, and some driven by the impending expiration of certain provisions.

In the immediate term, House Ways and Means Committee Chairman Jason Smith (R-MO) has signaled his intention to not “rest on his laurels” after this tax package passes. He intends to pursue bipartisan tax legislation in late 2025 or 2026 to address bipartisan issues that were not addressed in this bill. He has demonstrated the ability to reach across the aisle when he and then-Senate Finance Committee Chairman Ron Wyden (D-OR) worked on a bill together last year. Bipartisan legislation could also be possible in the next Congress (2027-28) if Democrats win a majority in the House.

If bipartisan legislation is not on the table, House Speaker Mike Johnson has indicated his willingness to do another reconciliation bill. The Republican majorities in the House and Senate could again develop a bill under the reconciliation process once the current fiscal year ends on Oct. 1. Of course, a new partisan reconciliation bill could present further risks to some policies like clean energy incentives as they seek revenue offsets.

Other annual legislation, like the budget/Continuing Resolution (CR) and the National Defense Authorization Act (NDAA) sometimes serve as tax policy vehicles. Also, depending on the policy issue, pending legislation such as permitting reform (perhaps for critical minerals) or the Farm Bill (perhaps for Sec. 45Z) could potentially carry tax provisions.

In addition to the more proactive opportunities outlined above, the expiration of certain tax policies can help build the momentum for tax legislation. Below are some upcoming dates that are worth looking at:

  • Balance of 2025: Permitting reform, Fix Our Forests Act, National Defense Authorization Act, CR, potential beginnings of bipartisan or new reconciliation tax bill
  • Late 2026: Surface Transportation Act (Highway Bill) Reauthorization and Medicaid Work Requirements implementation date
    • Depending on the political climate, a package including delay of Medicaid work requirements may provide an avenue for extenders or changes to other tax policy.
    • Lame-Duck (Post-midterm elections) 2026: In addition to policy drivers above, if one or both chambers switch parties, there may be a rush to get a bill done while Republicans still have the pen.
  • Late 2027: Wind, solar, hydrogen, wind Manufacturing Production Credits expiring
    • Extensions at this time depend on which party controls House and Senate. Should Democrats reclaim the House in the 2026 Midterm Elections, they will have some leverage to push for extension of IRA energy tax provisions expiring in 2027, likely as part of the CR.
  • Late 2028: FAA Reauthorization, No Tax on Tips/Overtime expire, Debt Limit
    • The confluence of state and local tax deduction cap, No Tax on Tips, and No Tax on Overtime – in addition to Federal Aviation Administration Reauthorization – may create the conditions for significant tax package – likely during the post-election lame-duck session in December 2028. Additionally, the $5 trillion increase to the debt limit is anticipated to last through 2028, though the specific date will not be known for a little while.
  • Late 2029: State and local tax deduction cap deal expires (reverts to 10%), Sec. 45Z Clean Fuel Production Credit and metallurgical coal 45X Advanced Manufacturing Production Credit incentive expire (both are Republican priorities)
  • After December 2030: Sec. 45X Advanced Manufacturing Production Credit and baseload Secs. 45Y Clean Electricity Production Credits/48E Clean Electricity Investment Credits phasedowns to begin
    • Section 45X’s Advanced Manufacturing Production Credit phaseout is set to begin after 2030, leaving December 2030 as the likely deadline for advocacy focusing on an extension of that tax credit. 45X Advanced Manufacturing Production Credit did not see any new inclusions (aside from designating metallurgical coal as a critical mineral), and this may provide an opportunity for other mined or refined materials or new technologies to become eligible for the credit – including hydrogen or nuclear

Other legislation not named in the list above that could carry a tax title could include a reconciliation bill (as discussed), a China competitiveness bill, a stimulus/infrastructure bill (depending on the economy), a future Water Bill (WRDA) or Farm Bill, and, as mentioned, the yearly National Defense Authorization Act and budget/CR.

Resources