In a dramatic turn of events, the House of Representatives has advanced a much-anticipated budget resolution, setting the stage for pivotal tax changes that could significantly impact businesses nationwide. The passage of this budget resolution paves the way for “one big beautiful bill” to provide a major boost to industries relying on research and development (R&D) incentives, depreciation tax benefits, and other key tax provisions.
1st Hurdle Passed in the House:
On the evening of February 25, 2025, tensions ran high in the House as Speaker Mike Johnson initially withdrew the budget resolution bill from the floor—only to bring lawmakers back for a final critical vote minutes later.
The resolution narrowly passed at approximately 8:30 PM, with all Republicans except Kentucky Representative Thomas Massie voting in favor (217 votes). All Democrats and Massie opposed the bill (215 votes).
Meanwhile, the Senate passed its own budget resolution on February 21, 2025, though it does not include tax provisions. This development moves the House closer to fulfilling Trump’s tax cuts and reduced spending promises. Notably, there remains a possibility that Section 174 research expense amortization requirements will be reversed before the 2024 income tax return filing deadline.
Trump Administration's Legislative Push
The Trump administration has been anything but predictable. However, if his first 100 days in office are any indication, swift congressional action on key priorities is likely in 2025. The House’s budget plan aligns with Trump's "America First" agenda, consolidating tax extensions and GOP priorities such as border security and defense spending into a single comprehensive bill. The President has gone on record supporting the single-bill approach over the Senate’s two-bill plan.
Now, the Senate takes center stage, reviewing and proposing amendments to the House’s budget resolution. While the timeline remains uncertain, historical reconciliation processes have taken an average of five months. However, given the administration’s push for expediency, a faster timeline is possible, if not probable, though no official dates have been announced. Once both chambers agree on a budget plan, drafting a reconciliation bill will be the next major challenge.
Key Provisions to Look for in the Upcoming Reconciliation Bill
- Immediate Expensing for R&D Costs
One of the most critical elements of this reconciliation bill will be the restoration of immediate expensing for domestic research and experimental (R&E) expenditures. If we look to H.R. 7024* for how Congress might structure this change, we might expect this provision to allow businesses to deduct R&D costs upfront rather than amortizing them over five years. Foreign R&D expenses, however, could still require 15-year amortization. The big question for many American businesses is whether a fix to research expensing would be retroactive to 2022-2023, or only on a go-forward basis. - Extension of 100% Bonus Depreciation
Businesses making capital investments will benefit from the extension of 100% bonus depreciation, allowing full deductions on qualified property expenses through 2026. If included in the reconciliation bill, this measure is expected to drive economic growth by stimulating investments in equipment, machinery, and technology. - Business Interest Deduction Relief
The reconciliation bill stands to reinstate the EBITDA-based calculation for the business interest deduction under Section 163(j), easing restrictions on interest expense deductions for businesses. This change applies retroactively for tax years beginning after December 31, 2023, and continues through 2025. - Additional Business and Taxpayer Benefits
The reconciliation bill could also include enhancements to the Child Tax Credit, tax relief for disaster-affected communities, and provisions aimed at boosting affordable housing construction.
Next Steps & What to Watch For:
The Senate will now review and propose amendments to the House’s budget resolution. If both chambers agree on a final budget, they will draft a reconciliation bill that could include tax changes like a Section 174 fix. The political landscape is unpredictable, but if this process follows the momentum of Trump’s first term, it could move quickly in 2025. If your company relies on R&D tax credits, this is the perfect time to assess your eligibility and secure an estimate. Getting in line early ensures you’ll be ready to maximize potential benefits if these changes take effect this tax season. Click here if you want to book an appointment.
Stay Tuned for Updates:
We are closely monitoring the Budget Reconciliation process and will provide timely updates through our website, emails, and social media channels. Sign up for Tax News & Updates below to stay ahead of these important changes! Stay informed —ABGi will continue to provide insights and guidance as the situation develops.
To receive email updates on the latest 174 and R&D credit news, enter your email:
