Senate Revisions to the "One Big Beautiful Bill Act"

June 27, 2025

The Senate has advanced its work on the "One Big Beautiful Bill Act," refining the tax and spending legislation previously passed by the House. This sweeping bill includes extensions of tax cuts, spending reductions for federal programs, and updates to Medicaid policies. However, key differences between the House and Senate provisions, coupled with rulings from the Senate parliamentarian, have introduced complexity into its path forward.

This article provides an overview of the notable Senate updates, including the parliamentarian's rulings, Medicaid provisions, SALT deduction adjustments, and other significant revisions. We’ll also explore the implications of these changes and what lies ahead for this legislation.

Key Senate Updates to the Bill

Parliamentarian Rulings Shape Final Senate Text

One of the most significant developments stems from rulings by Senate Parliamentarian Elizabeth MacDonough. Applying the Byrd Rule, which restricts reconciliation bills to provisions directly related to federal spending, several high-profile items were ruled ineligible for inclusion. Among the provisions removed were:

Medicaid Restrictions – Efforts to block noncitizen immigrants from receiving Medicaid, Medicare, and CHIP benefits were excluded. Provisions targeting funding for gender-affirming care were also barred.
Judicial Oversight Limits – A proposal to restrict federal courts' ability to issue nationwide injunctions or temporary restraining orders was deemed noncompliant.
Public Lands Sales – Attempts to expedite the sale of federal lands were struck, even after pushback from GOP senators and hunting advocacy groups.
Environmental Rollbacks – The repeal of EPA standards for vehicle emissions and a measure allowing developers to bypass judicial environmental reviews were removed.
Federal Oversight Changes – Language weakening the Consumer Financial Protection Bureau and slashing pay for Federal Reserve staff also failed to pass the reconciliation test.

These rulings ensure the bill narrowly adheres to the reconciliation framework, requiring only 51 Senate votes for approval instead of the typical 60.

Medicaid Provision Adjustments

Medicaid-related provisions remain a contentious area. The original House bill froze state provider taxes at current levels and prohibited new taxes, aiming to lower federal Medicaid contributions. Conversely, the Senate proposed sharper cost reductions by gradually lowering allowable provider taxes from 6% to 3.5% by 2031. However, this proposal has been met with resistance from moderate lawmakers and faced scrutiny following the parliamentarian’s rulings.

A coalition of 16 House Republicans outlined their opposition in a letter, warning that the Senate’s sharper cuts could jeopardize Medicaid access and complicate states’ ability to meet their funding obligations.

SALT Deduction Disagreement

Disputes over the state and local tax (SALT) deduction cap remain unresolved. The House initially proposed raising the cap from $10,000 to $40,000 for households earning up to $500,000, coupling this with annual indexing for inflation through 2033. The Senate, however, has leaned toward a stricter approach, proposing to make the $10,000 cap permanent.

This impasse has sparked significant debate, particularly among lawmakers from high-tax states. The House "SALT caucus" has indicated it may withhold support for the final bill unless more lenient deduction provisions are included. Senate negotiators are reportedly working toward a compromise that balances fiscal conservatism with support from moderate Republicans.

Other Significant Changes to Tax Provisions

In addition to the SALT deduction issue, the following are some other major tax provisions affecting businesses and high-income taxpayers that have been modified in the Senate version of the bill:

Deduction for Qualified Business Income – The Senate bill would make the deduction permanent at 20%, lower than the 23% deduction in the House bill. The Senate bill would also increase the deduction phaseout limits to $75,000 for single filers and $150,000 for married filing jointly.
Bonus Depreciation for Qualified Property – The House bill extended bonus depreciation through 2029. The Senate bill makes the extension permanent. In addition, the Senate bill includes an option to elect 40% bonus depreciation in lieu of 100% bonus depreciation for qualified property placed in service in the first tax year ending after Jan. 19, 2025.
Limitation on Business Interest Expense – Consistent with the House bill, the Senate bill would also allow adjusted taxable income to be calculated without deductions for depreciation, amortization, or depletion. However, the Senate bill would make this change permanent, while under the House bill it would expire Dec. 31, 2029.
Charitable Contributions for Nonitemizers – The House bill allows for an above-the-line deduction of $150 for individuals and $300 for married couples for charitable contributions for taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2029. The Senate bill permanently increases the amount to $1,000 for individuals and $2,000 for married couples for taxable years beginning after Dec. 31, 2024.
Expensing of Research and Development Expenses – The House bill allows immediate expensing for 5 years rather than a 5-year amortization period for domestic R&D amounts paid or incurred in tax years beginning after Dec. 31, 2024, and before Jan. 1, 2030. The Senate bill allows permanent expensing rather than a 5-year amortization period for domestic R&D amounts paid or incurred in tax years beginning after Dec. 31, 2024.

For further information on the R&D update, click here.

Energy and Climate Provisions Phase-Out

The Senate text aligns with the House in phasing out several renewable energy subsidies and tax credits. Key items to sunset include:

Electric Vehicle Tax Credit – The $7,500 credit for new electric vehicle purchases and various subsidies for commercial vehicles will be fully eliminated by 2027.
Residential Renewable Energy Incentives – Credits for solar panels and wind energy installations will sunset after 2025, marking a departure from recent climate-friendly initiatives.

The Next Steps

The Senate is racing to meet an ambitious July 4 deadline set by President Trump to finalize the legislation. While Senate Majority Leader John Thune remains optimistic and has expressed hopes for a vote as soon as Friday, June 27, several roadblocks could delay final approval:

Reconciliation Negotiations – Disagreement on Medicaid cuts, SALT deductions, and numerous smaller provisions has caused tension between Senate factions. According to the Joint Committee on Taxation, the tax provisions in the Senate bill are hundreds of billions of dollars more expensive. Several proposals lawmakers had hoped to use to cut spending and trim the overall cost have been ruled out of order by the Senate parliamentarian, including several additional rulings on Thursday, June 26.
Return to the House – Once approved in the Senate, the altered text will return to the House for a final vote. Should major changes remain, House negotiators will face pressure to address concerns from both moderates and fiscal conservatives.
Presidential Approval – President Trump has expressed urgency in signing the legislation, calling it critical to his second-term agenda.

Implications of the Bill

If passed, the "One Big Beautiful Bill Act" would have significant effects on federal tax law, government spending, and the national debt. Moderate Republicans hope the final package reaches a middle ground that garners bipartisan support. However, with fiscal hawks advocating for steeper cuts and progressives voicing concerns over provisions affecting Medicaid beneficiaries, the legislation remains a focal point of political division.

Conclusion

The "One Big Beautiful Bill Act" represents a pivotal moment in shaping federal tax and fiscal policy. The Senate’s ability to balance these proposals with adherence to reconciliation rules has led to significant revisions and drawn sharp debate. While the finalized legislation’s impact will unfold across sectors, its passage or failure could have lasting implications for the economic and political landscape.

Legislative activity regarding this important law change is ongoing. We will continue to monitor the situation and provide timely updates as they become available.

To get notified on key updates on the "One Big Beautiful Bill Act", sign up to our subscriber list.

For more information on how to navigate the "One Big Beautiful Bill Act", contact our Herbein tax team today.

Article Contributed by Stacy Weller