Citrin Cooperman’s Tax Summary: The One, Big, Beautiful Bill Act

To Our Clients and Colleagues:

On July 4, 2025, President Trump signed into law a landmark reconciliation bill (Public Law 119-21) making permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) nearly six months ahead of their scheduled expiration. The bill, passed by the House in a narrow 218-214 vote after a high-stakes series of negotiations, represents the most comprehensive rewrite of the federal tax code since the TCJA itself.

The legislation delivers long-term changes to individual and business taxation. Core TCJA features are now permanent, including lower individual tax rates, an expanded standard deduction, a larger child tax credit, and the 20% deduction for passthrough income. Bonus depreciation and full expensing, both major incentives for business investment, have also been extended without sunset. The estate tax exemption was also locked in at a permanent floor of $15 million per individual which provides long-term certainty for estate planning and wealth transfer strategies.

While broadly aligned with House priorities, the final package reflects significant Senate revisions and last-minute compromises. The $10,000 cap on the state and local tax (SALT) deduction will rise to $40,000 through 2029 before reverting. A new federal “Trump Account” provides a $1,000 contribution for each child born from 2025 through 2028. In addition, the legislation includes several provisions aligned with President Trump’s campaign priorities, including targeted tax relief for tip income, overtime pay, and interest on personal auto loans.

The legislation includes key international tax and tax credit provisions. Among other things, it increases the effective tax rates on global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) to 14 percent by reducing the Section 250 deduction, and eliminates the concept of a deemed 10% return on tangible assets. The legislation also simplifies foreign tax credit calculations by relaxing certain expense allocation rules. Meanwhile, the base erosion and antiabuse tax (BEAT) is permanently set at 10.5 percent (higher than its 2025 level, but lower than the previously scheduled increase under TCJA). However, the legislation also reinstitutes the controlled foreign corporation “downward attribution” rules in order to address complexities that arose from their former repeal, while also introducing entirely new concepts of jurisdiction to tax earnings of certain foreign affiliates of foreign controlled corporations. In sum, these changes roll back some of TCJA’s more favorable international rates, but stop short of a full structural overhaul.

The legislation also preserves certain clean energy incentives introduced in the Inflation Reduction Act, but imposes accelerated phaseouts and eligibility restrictions, including safe harbor limitations for wind and solar projects not under construction by 2026, and the electric vehicle credit which is repealed immediately. These mixed signals reflect both legislative compromise and a stated intention by the administration to limit subsidies through executive action.

While the bill provides clarity and permanence on many fronts, it also raises new strategic questions. For entity choice planning, the interplay between a broadened 'qualified small business stock' exclusion and a preserved passthrough regime under Section 199A requires careful comparison. The Section 1202 expansion makes C corporations more attractive for certain types of exits. However, higher SALT deduction limits and the continued availability of PTET elections at the state level reinforce the appeal of passthrough structures. Business owners may find themselves pulled in opposite directions and many will need to model outcomes under both structures to determine the best path forward.

This summary highlights the most impactful provisions across individual, business, international, and industry-specific tax areas. We will continue to provide detailed insights in the coming weeks, including implementation timelines, transition guidance, and tax planning opportunities across industries. As always, we look forward to supporting you as you navigate this new legislative landscape and make informed decisions for the future.

Sincerely,

Citrin Cooperman Advisors LLC | Washington National Tax

LEGAL DISCLAIMER

This document is provided by Citrin Cooperman Advisors LLC for general guidance, and does not constitute the provision of legal advice, accounting services, investment advice, or professional consulting. The information provided should not be used as a substitute for consultation with professional tax, accounting, legal, or other advisors. Before acting on any of the content, you should consult a qualified professional who is familiar with the full details of your specific circumstances. The material is provided without representations or warranties of any kind (whether express or implied) including, but not limited to, guarantees of accuracy, completeness, timeliness, performance, merchantability, or suitability for any particular purpose.

© Citrin Cooperman Advisors LLC. All rights reserved. “Citrin Cooperman” is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients’ business needs. The two firms operate as separate legal entities in an alternative practice structure.

ACKNOWLEDGMENTS

This analysis reflects the collective efforts and insights of numerous professionals within Washington National Tax at Citrin Cooperman. The text was prepared by a team that included:

Amanda Adams, Bob Alperin, Mario Amaya-Lainez, Jenni Black, Daniel Carlson, Brian Ciszczon, Fred Corso, Bryce Liquerman, Michael Mishik, Shaun Sawtell, Lauren Shapiro, and Caleb Spainhour.

70101 – EXTENSION AND ENHANCEMENT OF REDUCED RATES ..................................................... 1

70102 – EXTENSION AND ENHANCEMENT OF INCREASED STANDARD DEDUCTION ....................... 1

70103 – TERMINATION OF DEDUCTION FOR PERSONAL EXEMPTIONS OTHER THAN TEMPORARY SENIOR DEDUCTION ................................................

70104 – EXTENSION AND ENHANCEMENT OF INCREASED CHILD TAX CREDIT ................................ 1

70107 – EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNTS AND MODIFICATIONS OF PHASEOUT THRESHOLDS ......... 2

70108 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENT INTEREST ................................................ 2

70110 – TERMINATION OF MISCELLANEOUS ITEMIZED DEDUCTIONS OTHER THAN EDUCATOR EXPENSES ............................................................... 2

70111 – LIMITATION ON TAX BENEFIT OF ITEMIZED DEDUCTIONS .......................................................... 2

70113 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION AND EXCLUSION FOR MOVING EXPENSES ................................................. 3

70114 – EXTENSION AND MODIFICATION OF LIMITATION ON WAGERING LOSSES........................ 3

70115 – EXTENSION AND ENHANCEMENT OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE ACCOUNTS PERMITTED .................................. 3

70116 – EXTENSION OF SAVERS CREDIT ALLOWED FOR ABLE CONTRIBUTIONS

70117 – EXTENSION OF ROLLOVERS FROM QUALIFIED TUITION PROGRAMS TO ABLE ACCOUNTS PERMITTED ............................................................. 3

70119

70305– EXCEPTIONS FROM LIMITATIONS ON DEDUCTION FOR BUSINESS MEALS ........................11

70306 – INCREASED DOLLAR LIMITATION FOR EXPENSING OF CERTAIN DEPRECIABLE ASSETS .......11

70307 – SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION PROPERTY ......................12

70421 – PERMANENT RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES .............13

70603 – EXCESSIVE EMPLOYEE REMUNERATION FROM CONTROLLED GROUP MEMBERS AND ALLOCATION OF DEDUCTION .................................13

INTERNATIONAL 13

70311 – MODIFICATIONS RELATED TO FOREIGN TAX CREDIT LIMITATION ...............................................13

70312 - MODIFICATIONS TO DETERMINATION OF DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE TO TESTED INCOME .......................14

70313 - SOURCING CERTAIN INCOME FROM THE SALE OF INVENTORY PRODUCED IN THE UNITED STATES ...................................................................15

70321 - MODIFICATION OF DEDUCTION FOR FOREIGN-DERIVED DEDUCTION ELIGIBLE INCOME AND NET CFC TESTED INCOME ...............................15

70322 – DETERMINATION OF DEDUCTION ELIGIBLE INCOME .................................................................16

70323 – RULES RELATED TO DEEMED INTANGIBLE INCOME .................................................................16

70331 – MODIFICATIONS TO BASE EROSION MINIMUM TAX AMOUNT.......................................17

70341 - COORDINATION OF BUSINESS INTEREST LIMITATION WITH INTEREST CAPITALIZATION PROVISIONS ...........................................................17

70342 - DEFINITION OF ADJUSTED TAXABLE INCOME FOR BUSINESS INTEREST LIMITATION ....................17

70351 - PERMANENT EXTENSION OF LOOK-THRU RULE FOR CONTROLLED FOREIGN CORPORATIONS 18

70352 - REPEAL OF ELECTION FOR 1-MONTH DEFERRAL IN DETERMINATION OF TAXABLE YEAR OF SPECIFIED FOREIGN CORPORATIONS ......................18

70353 - RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES. .18

70354 - MODIFICATIONS TO PRO RATA SHARE RULES ..............................................................................19

70106 – EXTENSION AND ENHANCEMENT OF INCREASED

BENEFITS ................... 20

70112 – EXTENSION AND MODIFICATION OF QUALIFIED TRANSPORTATION FRINGE BENEFITS ... 20

70113 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION AND EXCLUSION FOR MOVING EXPENSES ...............................................

– ENHANCEMENT OF EMPLOYER-PROVIDED

– EXTENSION AND ENHANCEMENT OF PAID FAMILY AND MEDICAL

70514 – PHASE-OUT AND RESTRICTIONS ON ADVANCED MANUFACTURING PRODUCTION CREDIT ..............................................................................26

70515 – RESTRICTION ON THE EXTENSION OF ADVANCED ENERGY PROJECT CREDIT PROGRAM ...27

70521 – EXTENSION AND MODIFICATION OF CLEAN FUEL PRODUCTION CREDIT ....................................27

70522 – RESTRICTIONS ON CARBON OXIDE SEQUESTRATION CREDIT ........................................28

70605 – ENFORCEMENT PROVISIONS WITH RESPECT TO COVID-RELATED EMPLOYEE RETENTION CREDITS ..............................................................................28

TAX-EXEMPT ORGANIZATIONS 28

70415 – MODIFICATION OF EXCISE TAX ON INVESTMENT INCOME OF CERTAIN PRIVATE COLLEGES AND UNIVERSITIES ................................28

70416 – EXPANDING APPLICATION OF TAX ON EXCESS COMPENSATION WITHIN TAX-EXEMPT ORGANIZATIONS....................................................29

70428 – NONPROFIT COMMUNITY DEVELOPMENT ACTIVITIES IN REMOTE NATIVE VILLAGES ...............29

CHARITABLE

CONTRIBUTIONS AND PHILANTHROPY ............................ 29

70411– TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO SCHOLARSHIP GRANTING ORGANIZATIONS....................................................29

70426 – 1-PERCENT FLOOR ON DEDUCTION OF CHARITABLE CONTRIBUTIONS MADE BY CORPORATIONS .....................................................30

70429 – ADJUSTMENT OF CHARITABLE DEDUCTION FOR CERTAIN EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE WHALING .............31

70424 - PERMANENT AND EXPANDED REINSTATEMENT OF PARTIAL DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF INDIVIDUALS WHO DO NOT ELECT TO ITEMIZE .....................................31

70425 - 0.5 PERCENT FLOOR ON DEDUCTION OF CONTRIBUTIONS MADE BY INDIVIDUALS ...............31

70428 – NONPROFIT COMMUNITY DEVELOPMENT ACTIVITIES IN REMOTE NATIVE VILLAGES ...............31

EDUCATION-RELATED PROVISIONS

70412– EXCLUSION FOR EMPLOYER PAYMENTS OF STUDENT LOANS ....................................................31

70413 – ADDITIONAL EXPENSES TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF 529 ACCOUNTS ................................31

70414 – CERTAIN POSTSECONDARY CREDENTIALING EXPENSES TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF 529 ACCOUNTS ............................................................ 32

70606 – SOCIAL SECURITY NUMBER REQUIREMENT FOR AMERICAN OPPORTUNITY AND LIFETIME LEARNING CREDITS ................................................ 32

70110 – TERMINATION OF MISCELLANEOUS ITEMIZED DEDUCTIONS OTHER THAN EDUCATOR EXPENSES ..............................................................

70115 – EXTENSION AND ENHANCEMENT OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE ACCOUNTS.................................................... 32

70116 –

70435 – EXCLUSION OF INTEREST ON LOANS SECURED BY RURAL OR AGRICULTURAL REAL PROPERTY ..............................................................35

70437 – TREATMENT OF CAPITAL GAINS FROM THE SALE OF CERTAIN FARMLAND PROPERTY ...............36

70422 – PERMANENT ENHANCEMENT OF LOWINCOME HOUSING TAX CREDIT ..............................36

70423 – PERMANENT EXTENSION OF THE NEW MARKETS TAX CREDIT ............................................37

70430 – EXCEPTION TO PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING FOR CERTAIN RESIDENTIAL CONSTRUCTION CONTRACTS ..............................................................................37

70439 – RESTORATION OF TAXABLE REIT SUBSIDIARY ASSET TEST .........................................37

70108 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENT INTEREST ...............................................37

DISASTER RELIEF AND CASUALTY LOSSES

70438 – EXTENSION OF RULES FOR TREATMENT OF CERTAIN DISASTER-RELATED PERSONAL CASUALTY LOSSES ...................................................................37

70109 – EXTENSION AND MODIFICATION OF LIMITATION ON CASUALTY LOSS DEDUCTION ........38

IRS INFORMATION REPORTING AND

70432 – REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY NETWORK TRANSACTIONS ........38

70433 – INCREASE IN THRESHOLD FOR REQUIRING INFORMATION REPORTING WITH RESPECT TO CERTAIN PAYEES ....................................................38

70605 – ENFORCEMENT PROVISIONS WITH RESPECT TO COVID-RELATED EMPLOYEE RETENTION CREDITS ..............................................................................38

70525 – ALLOW FOR PAYMENTS TO CERTAIN

–

MISCELLANEOUS PROVISIONS

70118 – EXTENSION OF TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN THE SINAI PENINSULA AND ENHANCEMENT TO INCLUDE ADDITIONAL AREAS ............................................... 40

70309 – SPACEPORTS ARE TREATED LIKE AIRPORTS UNDER EXEMPT FACILITY BOND RULES ................. 40

70403 – RECOGNIZING INDIAN TRIBAL GOVERNMENTS FOR PURPOSES OF DETERMINING WHETHER A CHILD HAS SPECIAL NEEDS FOR PURPOSES OF THE ADOPTION CREDIT ................... 40

70427 – PERMANENT INCREASE IN LIMITATION ON COVER OVER OF TAX ON DISTILLED SPIRITS ........... 40

70434 – TREATMENT OF CERTAIN QUALIFIED SOUND RECORDING PRODUCTIONS ................................... 40

70436 – REDUCTION OF TRANSFER AND MANUFACTURING TAXES FOR CERTAIN DEVICES ... 41

70531 – MODIFICATIONS TO DE MINIMIS ENTRY PRIVILEGE

O VERVIEW

The One, Big, Beautiful Bill Act (or, more technically, “an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”) represents a sweeping legislative initiative that includes significant changes to the federal tax code. This legislative package draws extensively on key elements of the 2017 Tax Cuts and Jobs Act (TCJA), aiming to make permanent many of its expiring provisions. It also introduces new tax policies designed to support working families, encourage economic growth in rural communities, simplify tax administration, and unwind certain climate and clean-energy related tax credits enacted in recent years.

Many of the provisions described herein would be effective for tax years beginning after December 31, 2025, or following the date of enactment (July 4, 2025), although certain provisions are retroactive or prospective in nature.

As of this publication date, July 9, 2025, this summary cites provision section numbers as set forth in the Senate Amendment to H.R. 1. Future updates will reflect the final section numbers as published in Public Law 119-21, along with any subsequent technical corrections.

INDIVIDUALS

70101 – EXTENSION AND ENHANCEMENT OF REDUCED RATES

This provision permanently extends the TCJA’s decrease to the federal income tax bracket schedule. The TCJA’s federal income tax bracket schedule was set to expire in 2026, thereby returning most rates to higher figures. This provision also adds a year of inflation adjustment to the 10%, 12%, and 22% tax brackets.

This provision applies to taxable years beginning after December 31, 2025.

70102 – EXTENSION AND ENHANCEMENT OF INCREASED STANDARD DEDUCTION

This provision increases and makes permanent the TCJA’s expansion to the standard deduction. The increased TCJA standard deduction was set to expire in 2026.

In 2025 under this provision, the standard deduction for single filers increases from $12,000 to $15,750. For heads of households, the standard deduction increases from

$18,000 to $23,625. Thereafter, these figures will be adjusted annually for inflation.

The permanent increase applies to taxable years beginning after December 31, 2024.

70103 – TERMINATION OF DEDUCTION FOR PERSONAL EXEMPTIONS OTHER THAN TEMPORARY SENIOR DEDUCTION

This provision permanently decreases the deduction for personal exemptions to zero while creating a new deduction for seniors in the amount of $6,000 for each qualified individual. Qualifying individuals must be 65 years of age or older, and the exemption amount is reduced for individuals with an adjusted gross income greater than $75,000.

This provision applies to taxable years beginning after December 31, 2024, and before January 1, 2029

70104 – EXTENSION AND ENHANCEMENT OF INCREASED CHILD TAX CREDIT

This provision increases and makes permanent the TCJA expansion to the child tax credit. Under the TCJA, the child tax credit was $2,000 per child, and the taxpayer was required to provide the child’s social security number to receive the credit. Of the child tax credit, $1,700 was refundable for the 2024 tax year. There was also a nonrefundable $500 credit for non-child dependents. The credit phased out beginning at $200,000 or $400,000 of modified adjusted gross income for individuals filing jointly. The TCJA amendments were set to expire in 2026, thereby returning the child tax credit to $1,000 per child, removing the social security number requirement, decreasing the phaseout thresholds, and eliminating the non-child credit.

Under this provision, the credit is increased from $2,000 to $2,200 beginning in 2025 and will be inflation adjusted beginning in 2026. Also, the $1,700 refundable credit is made permanent and will be inflation adjusted annually beginning in 2026. The phaseout thresholds and $500 credit for non-child dependents are permanently extended. To claim the child tax credit under this provision, the taxpayer must provide valid social security numbers for both the child and the parent. If the

taxpayers are married filing jointly, only one spouse is required to provide a social security number The parent’s social security number must be work-eligible, i.e., issued by the Social Security Administration for employment purposes

This provision applies to taxable years beginning after December 31, 2024.

70107 – EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNTS AND MODIFICATIONS OF PHASEOUT THRESHOLDS

This provision makes permanent the increased alternative minimum tax (AMT) exemption amounts under the TCJA, while also reverting the exemption phaseout thresholds to 2018 levels.

Under Section 55, taxpayers subject to the AMT are entitled to AMT exemption amounts of $88,100 as adjusted for inflation ($137,000 in the case of joint returns). These exemptions are reduced once a taxpayer’s alternative minimum tax income (AMTI) surpasses certain phaseout thresholds. Currently these thresholds are set at $626,350 for individual filers and $1,252,700 for joint filers, as adjusted for inflation. While this provision makes permanent the increased exemption amounts, it reverts the phaseout threshold to the original amount as enacted by the TCJA, adjusting the amount for inflation starting in 2026.

This provision applies to taxable years beginning after December 31, 2025.

70108 – EXTENSION AND MODIFICATION OF LIMI T ATION ON DEDUCTION FOR QUALIFIED RESIDENT INTEREST

This provision makes permanent the $750,000 home mortgage acquisition indebtedness limitation on home mortgage interest deductibility under Section 163. Under the TCJA, the deduction for qualified residence interest, also known as the home mortgage interest deduction, would have increased from interest on the first $750,000 in home mortgage acquisition debt to interest on the first $1 million in home mortgage acquisition debt after December 31, 2025. This provision permanently reduces the deduction for interest on

qualified residence interest to the $750,000 home mortgage acquisition debt amount. In addition, the provision treats certain mortgage insurance premium payments as qualified residence interest under Section 163.

This provision applies to taxable years beginning after December 31, 2025.

70110 – TERMINATION OF MISCELLANEOUS ITEMIZED DEDUCTIONS OTHER THAN EDUCATOR EXPENSES

The TCJA suspended miscellaneous itemized deductions from 2017 through 2025. This provision makes that suspension permanent, except for unreimbursed educator expenses for eligible educators. Eligible educators are kindergarten through grade 12 teachers that work at least 900 hours in a given school year. Eligible expenses include books, athletic supplies, and computer equipment.

This provision applies to taxable years beginning after December 31, 2025.

70111 – LIMITATION ON TAX BENEFIT OF ITEMIZED DEDUCTIONS

This provision introduces a new formula for the limitation on the amount of itemized deductions a taxpayer may take. The TCJA suspended the limitation on itemized deductions under Section 68. However, that suspension was set to expire at the end of 2025.

Under this provision, Section 68 is amended to enact a new framework to limit the amount of itemized deductions. Starting for tax years beginning after December 31, 2025, the amount of itemized deductions that a taxpayer may claim is reduced by 2/37 of the lesser of:

• The amount of allowable itemized deductions, or

• The taxpayer’s taxable income (calculated without regard to any itemized deductions) which exceeds the dollar amount at which the 37% rate bracket begins under Section 1.

This limitation does not affect the calculation of the QBI deduction under Section 199A.

This provision applies to taxable years beginning after December 31, 2025.

70113 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION AND EXCLUSION FOR MOVING EXPENSES

This provision permanently extends the TCJA suspension of the moving expenses deduction under Section 217. Prior to the TCJA, taxpayers could deduct moving expenses incurred in connection with work relocation under certain conditions. While the TCJA suspension was set to expire after 2025, this provision makes the suspension permanent. Only members of the armed forces and intelligence community are exempted from this suspension.

Moreover, this provision makes permanent the TCJA’s suspension on the exclusion for qualified transportation fringe benefits under Section 132. Only members of the armed forces and intelligence community are exempted from this suspension.

This provision applies to taxable years beginning after December 31, 2025.

70114 – EXTENSION AND MODIFICATION OF LIMITATION ON WAGERING LOSSES

This provision limits the Section 165 deduction for wagering losses to 90% of such losses and only to the extent of wagering winnings. Also, this provision clarifies that “losses from wagering transactions” includes any deduction otherwise allowable under Section 165 incurred in carrying on any wagering transaction.

This provision applies to taxable years beginning after December 31, 2025.

70115 – EXTENSION AND ENHANCEMENT OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE ACCOUNTS PERMITTED

This provision makes the increased contribution limitation to ABLE accounts permanent by removing the current sunset date of January 1, 2026, provided under the TCJA. The inflation adjustment formula has been modified to use 1996 as the base year

This provision applies to contributions made after December 31, 2025.

70116 – EXTENSION OF SAVERS CREDIT ALLOWED FOR ABLE CONTRIBUTIONS

For taxable years ending after December 31, 2025, this provision amends Section 25B(d)(1) to permanently classify contributions made by an eligible individual to their own ABLE account as “qualified retirement savings contributions” for purposes of the saver’s credit. For tax years beginning before January 1, 2027, the provision continues to recognize a broader set of contributions as countable for the saver’s credit eligibility, such as IRA contributions, salary deferrals under 401(k), 403(b), and 457(b) arrangements, and voluntary contributions to employer-sponsored retirement plans.

Separately, and for taxable years beginning after December 31, 2026, this provision increases the maximum amount of contributions eligible for the credit under Section 25B(a) from $2,000 to $2,100.

70117 – EXTENSION OF ROLLOVERS FROM QUALIFIED TUITION PROGRAMS TO ABLE ACCOUNTS PERMITTED

This provision modifies Section 529(c)(3)(C)(i)(III) by striking the prior sunset language, thereby eliminating the December 31, 2025, expiration and allowing tax-free rollovers from 529 plans to ABLE accounts to continue on a permanent basis.

This provision applies to taxable years beginning after December 31, 2025.

70119 – EXTENSION AND MODIFICATION OF EXCLUSION FROM GROSS INCOME OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH OR DISABILITY

Pursuant to the Tax Cuts and Jobs Act, any income generated from the discharge of student loan debt upon the death or total disability of the student is excluded from taxable income, but the TCJA called for the provision to expire after December 31, 2025. Congress has now made this provision permanent, but taxpayers seeking to invoke the protections of this provision must furnish a work-eligible Social Security number.

This provision applies to discharges after December 31, 2025.

70120 – LIMITATION ON INDIVIDUAL DEDUCTIONS FOR CERTAIN STATE AND LOCAL TAXES, ETC.

This provision modifies Section 164(b)(6) to replace the $10,000 limitation on the deduction for state and local taxes (SALT) with a new, temporary “applicable limitation amount” for individual taxpayers.

• Under the revised provision, the SALT deduction cap is increased to $40,000 for tax year 2025, $40,400 for 2026, and indexed upward by 1% annually for 2027 through 2029. For taxable years beginning after December 31, 2029, the cap reverts to a flat $10,000. For married individuals filing separately, the applicable limitation amount is halved.

• The provision also introduces an income-based phaseout: for tax years through 2029, the applicable limitation is reduced by 30% of the amount by which a taxpayer’s modified adjusted gross income exceeds a defined threshold ($500,000 in 2025, $505,000 in 2026, and indexed thereafter). The phaseout is capped so that no taxpayer’s deduction falls below $10,000. For this purpose, “modified adjusted gross income” includes amounts excluded under Sections 911, 931, or 933.

Citrin Cooperman Insights - The final “SALT Cap” provision preserves the ability of pass-through businesses to continue deducting payments made under state pass-through entity tax (PTET) regimes. This represents a shift from an earlier proposal that would have limited these deductions. The proposed restriction was ultimately dropped in response to widespread concerns from tax professionals and business advocates who emphasized that disallowing PTETs would penalize small businesses and erode parity with C corporations. Preserving deductibility at the entity level ensures continued planning certainty for passthrough owners in high-tax jurisdictions.

The final SALT provision also reflects a careful political compromise between those who favored maintaining the $10,000 cap (or eliminating it entirely) and those who were pressing for expanded relief. The end result is a temporary, income-sensitive increase that phases down for high earners and sunsets after 2029. The structure of the phaseout and inflation indexing helped reduce the overall budget score, allowing the SALT provision to move forward without jeopardizing passage of the broader reconciliation package.

70201 – NO TAX ON TIPS

This provision implements a new Section 224 to create an income tax deduction up to $25,000 for qualified tips. Qualified tips are any cash tips received by an individual in an occupation that traditionally and customarily received tips on or before December 31, 2024, as provided by the Secretary. This deduction is available in addition to the standard deduction. The deduction begins to phase out at $150,000 ($300,000 for joint returns). The maximum deduction is reduced by $100 for each $1,000 by which the taxpayer’s modified AGI exceeds the thresholds.

• Non-employee workers such as independent contractors may deduct qualified tips received in the course of trade or business only to the extent the tips exceed the sum of the cost of goods sold and other expenses, losses, or deductions.

Qualified tips must meet the following criteria:

• The tip is paid voluntarily without any consequence of nonpayment, not the subject of negotiation, and determined by the payor.

• The tip is not received in the course of trade or business of a specified service trade or business as defined in Section 199A(d)(2). Excluded businesses include, inter alia, health, law, consulting, and investment management.

• Other requirements established by the Secretary.

• The tip is reported to the IRS and the taxpayer on an information return (e.g., W-2, 1099s, Form 4137, etc.).

A qualified tip deduction is permitted only if the taxpayer provides their social security number Failure to include a correct social security number allows the IRS to remove the deduction and assess tax as if it were a mathematical or clerical error.

Any amount deducted as a qualified tip is excluded from qualified business income.

This provision additionally amends Section 45B(b)(2) to extend the employer social security credit to beauty service businesses. Such businesses include those providing services relating to barbering and hair care, nail care, esthetics, and body and spa treatments. This credit permits employers to reduce their income tax liabilities by the amount they pay for the employer share of the Social Security and Medicare taxes on certain employee tips. However, employers are not permitted to receive credits for payroll taxes paid on tips below an employee’s minimum wage threshold. Currently, the employer social

security credit applies only to tips received for food and beverages services.

Persons reporting compensation to qualified tip recipients must report the tips separately from other income on the information return required to be submitted with respect to the recipient.

This provision applies to taxable years beginning after December 31, 2024, and does not apply to any taxable year beginning after December 31, 2028

70202 – NO TAX ON OVERTIME

This provision implements a new Section 225 and creates an income tax deduction for qualified overtime compensation up to $12,500 ($25,000 for joint returns). Qualified overtime compensation is compensation paid pursuant to Section 7 of the Fair Labor Standards Act of 1938 that is in excess of the employee’s regular compensation rate. Qualified overtime compensation does not include qualified tips The taxpayer must provide their social security number Failure to include a correct social security number allows the IRS to remove the deduction and assess tax as if it were a mathematical or clerical error.

In order to qualify as qualified overtime compensation, the overtime must be reported to the IRS and the taxpayer on an information return (e.g., W-2, 1099s, etc.). Persons reporting compensation to qualified overtime compensation recipients must report the qualified overtime compensation separately from other income on the information return required to be submitted with respect to the recipient.

This deduction phases out beginning at $150,000 modified AGI ($300,000 for joint returns). The deduction is reduced by $100 for each $1,000 by which the taxpayer’s modified AGI exceeds the threshold amount.

This provision applies to taxable years beginning after December 31, 2024, and does not apply to any taxable year beginning after December 31, 2028.

70203 – NO TAX ON CAR LOAN INTEREST

This provision excludes qualified passenger vehicle loan interest from the definition of personal interest. Qualified passenger vehicle loan interest is defined as any interest paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December

31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. A taxpayer must include the vehicle identification number (VIN) on his or her tax return.

Qualified passenger vehicle loan interest does not include: (1) a loan to finance fleet sales; (2) a personal cash loan secured by a vehicle previously purchased; (3) a loan incurred for the purchase of a commercial vehicle that is not used for personal purposes; (4) any lease financing; (5) a loan to finance the purchase of a vehicle with a salvage title; or (6) a loan to finance the purchase of a vehicle intended to be used for scraps or parts.

The provision excludes campers and RVs

The provision also enacts new Section 6050AA, providing reporting requirements, including a mandatory return requirement from an individual or institution that receives at least $600 in a calendar year on a specified passenger vehicle loan. Similarly, such individuals or institutions are required to furnish written statements to the payees of the interest.

The amount of interest that can be deducted is limited to $10,000 and will be phased out by $200 for every $1000 of the taxpayer’s modified adjusted gross income in excess of $100,000 for non-joint filers or $200,000 for joint filers.

The provision is effective for indebtedness incurred after December 31, 2024, and for taxable years beginning after December 31, 2024, but before January 1, 2029.

70402 – ENHANCEMENT OF ADOPTION CREDIT

This provision amends Section 23 to make part of the adoption credit refundable. Under Section 23, the taxpayer may receive a credit for qualified adoption expenses up to $16,810. Although the credit was nonrefundable, taxpayers were permitted to carry forward unused credits for up to five years.

This provision makes the adoption credit refundable up to $5,000, annually adjusted for inflation This part of the credit cannot be carried forward.

This provision applies to taxable years beginning after December 31, 2024.

70405 – ENHANCEMENT OF CHILD AND DEPENDENT CARE TAX CREDIT

This provision amends Section 21 to expand the child and dependent care credit. Pursuant to Section 21, taxpayers with qualifying individuals may receive a tax credit for employment-related expenses equal to an applicable percentage. Previously, the applicable percentage was 35% of employment-related expenses reduced by 1% (but not below 20%) for each $2,000 by which the taxpayer's AGI exceeded $15,000

This provision increases the maximum credit to 50% of employment-related expenses. Taxpayers must still reduce this 50% (but not below 35%) by 1% for each $2,000 by which the taxpayer’s AGI exceeds $15,000. Additionally, taxpayers must further reduce the applicable percentage by 1% (but not below 20%) for each $2,000 ($4,000 for joint returns) by which the taxpayer’s AGI exceeds $75,000 ($150,000 for joint returns).

This provision applies to taxable years beginning after December 31, 2025.

70424 – PERMANENT AND EXPANDED REINSTATEMENT OF PARTIAL DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF INDIVIDUALS WHO DO NOT ELECT TO ITEMIZE

This provision permanently provides non-itemizers a cash charitable contribution deduction of up to $1,000 for non-joint filers and up to $2,000 for joint filers.

This provision applies to taxable years beginning after December 31, 2025.

70425

– 0.5 PERCENT FLOOR ON

DEDUCTION OF CONTRIBUTIONS MADE BY INDIVIDUALS

This provision creates a new limitation on the Section 170 charitable contribution deduction for individual taxpayers who itemize, by imposing a floor equal to 0.5% of the taxpayer’s contribution base (i.e., pre-NOL AGI) for the taxable year. In applying the floor, the provision also sets forth an ordering rule for taking specific types of contribution described in Section 170(b) into account under the floor (e.g., certain contributions of capital gain property first, cash contributions last). Deductions limited by this floor are only carried forward if the taxpayer’s charitable deductions for the year are otherwise limited under Section 170 (for example, contributions of capital gain). The provision also makes

permanent TCJA’s increased contribution limit of 60% for cash gifts made to qualified charities for taxpayers who itemize.

This provision applies to taxable years beginning after December 31, 2025.

70204 – TRUMP ACCOUNTS AND CONTRIBUTION PILOT PROGRAM

This provision creates a tax-advantaged savings vehicle, treated as an individual retirement account under Section 408(a), for minors under age 18 under a new Section 530A. Contributors may contribute a maximum of $5,000 per year, adjusted annually for inflation beginning in 2028, to the account until the beneficiary reaches 18 years old. Such contributions are nondeductible and are not counted toward the contribution limits applicable to other individual retirement plans before the calendar year in which the Trump account beneficiary attains age 18.

Trump accounts must meet the following requirements:

• The account must be created by the Secretary for the exclusive benefit of an eligible individual. Alternatively, the account may be created in the U.S. for an eligible individual who has not attained age 18, or such individual’s beneficiaries, if the account is funded by a qualified rollover contribution.

• The account is designated at the time of its establishment as a Trump account.

• Individuals may contribute to Trump accounts beginning July 4, 2026. Excess contributions are subject to a tax increase of 100% of the amount of net income attributable to such excess contributions.

• Except for qualified rollover contributions and qualified ABLE rollover contributions, no distribution is permitted before the beneficiary reaches 18 years old.

An “eligible individual” is someone who has not attained age 18 before the close of the calendar year and who has been issued a social security number before the election date An election to establish the Trump account must be made either by the Secretary or by another authorized person before the account can be created. Trump accounts must be invested in “eligible investments,”

which are any low-fee, non-leveraged mutual funds or exchange traded funds meeting various conditions.

A $5,000 aggregate limitation on annual contributions exempts certain contributions, including qualified rollover contributions, qualified general contributions, and pilot program payments under Section 6434. For purposes of applying Section 72 to Trump account distributions, the investment in the contract does not include any qualified general contributions or government contributions under Section 6434 (below). Qualified general contributions are generally contributions made by entities described in Section 170(c)(1) or 501(c)(3) to a qualified group (for example, children within a school district). Additionally, any employer contribution excluded from gross income under Section 128 is excluded from investment in the contract.

Qualified rollover contributions are not includable in gross income. A qualified rollover contribution is an amount paid in a direct trustee-to-trustee transfer from a Trump account to another Trump account, both of which are maintained for the same beneficiary. The amount transferred must equal the entire amount of the Trump account from which the payment is made. A qualified ABLE rollover contribution is an amount paid during the year in which the account beneficiary attains age 17 in a direct trustee-to -trustee transfer from a Trump account to an ABLE account for the same beneficiary.

If by reason of the account beneficiary’s death before age 18, the Trump account ceases to qualify as such, and the entire fair market value, less the investment in the contract, is included in the beneficiary’s gross income if paid to the estate or included in the recipient’s gross income if paid to an individual.

This provision further provides that gross income of an employee does not include employer payments to the Trump account of such employee or their dependents if the amounts are paid pursuant to a Trump account contribution program. Such a program is a separate written plan of an employer for the exclusive benefit of their employees. The maximum annual employercontribution exclusion is limited to $2,500, adjusted for inflation annually beginning in 2028.

This provision implements the “Trump Accounts Contribution Pilot Program” under Section 6434 to

provide a one-time $1,000 government contribution for each qualifying Trump account beneficiary.

• An eligible child is an individual born between December 31, 2024, and January 1, 2029, and who is a U.S. citizen.

• The account beneficiary must have a social security number.

This provision additionally introduces Section 6659, providing penalties for negligence and fraud relating to Section 6434 claims.

This provision applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights - Trump accounts introduce a novel structure for early-stage asset accumulation, combining personal, employer, and governmental contributions in a tax-advantaged wrapper that is largely unconstrained by traditional retirement account rules. However, these accounts are not without tradeoffs. The multi-source contribution framework introduces coordination challenges that require careful tracking and documentation to properly distinguish contribution types, accurately determine basis, and ensure compliance with applicable contribution limits. Excluded contributions do not increase basis, potentially triggering income recognition on distributions; investment options are narrowly restricted until age 18; and premature death of the beneficiary will trigger immediate income recognition While Trump accounts may complement a broader portfolio of planning tools, practitioners must weigh the benefits of early compounding and tax-free buildup against the risks of adverse tax treatment, loss of flexibility, and coordination complexity within a comprehensive estate, financial, or education planning strategy.

70403 – RECOGNIZING INDIAN TRIBAL GOVERNMENTS FOR PURPOSES OF DETERMINING WHETHER A CHILD HAS SPECIAL NEEDS FOR PURPOSES OF THE ADOPTION CREDIT

See Recognizing Indian Tribal Governments for Purposes of Determining Whether a Child has Special Needs for Purposes of the Adoption Credit below, under Miscellaneous

70109 – EXTENSION AND MODIFICATION OF LIMITATION ON CASUALTY LOSS DEDUCTION

See Extension and Modification of Limitation on Casualty Loss Deduction below, under Disaster Relief and Casualty Losses

PASSTHROUGHS

70105 – EXTENSION AND ENHANCEMENT OF DEDUCTION FOR QUALIFIED BUSINESS INCOME

This provision permanently extends the 20% deduction for qualified business income, including the deduction for REIT dividends, qualified publicly traded partnership income, and for income attributable to the domestic production activities of certain agricultural or horticultural cooperatives.

The deduction for qualified business income is subject to several limitations. The deduction may not exceed 20% of qualified business income, but there are also limitations based on W-2 wages and capital investment, which phase in over a range of income above the threshold amount of taxable income. The provision will increase the phase-in income limits from $50,000 to $75,000 for non-joint filers and from $100,000 to $150,000 for joint filers.

Finally, the provision introduces an inflation-adjusted minimum deduction of $400 for taxpayers who have at least $1,000 of qualified business income from one or more active trades or businesses in which they materially participate (within the meaning of Section 469(h)).

This provision applies to taxable years beginning after December 31, 2025.

7060 1 – MODIFICATION AND EXTENSION OF LIMITATION ON EXCESS BUSINESS LOSSES OF NONCORPORATE TAXPAYERS

This provision amends Section 461(l) to extend and modify the limitation on excess business loss deductions. Under Section 461(l) as currently in effect for 2025, noncorporate taxpayers may use deductions incurred in a trade or business in excess of their gross trade or business income in the tax year to offset up to $313,000 ($626,000 in the case of a joint return) of nonbusiness income. These limits are inflation-adjusted annually. Any trade or business deductions in excess of those thresholds are excess business losses that become part of the taxpayer’s NOL carryforwards. The excess business

loss provision was set to expire for tax years beginning after December 31, 2025.

This provision makes permanent the Section 461(l) limitation on deductions for excess business losses and applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights – The provision continues the current law treatment of carried over excess business losses as NOL carryforwards, which is beneficial to taxpayers with significant nonbusiness income. Previous versions of the provision would have treated carried over excess business losses as additional business deductions incurred in the succeeding taxable year, which would have potentially created a business loss in those subsequent years the use of which against non-business income would have been limited by the inflationadjusted cap. This would have significantly curtailed a taxpayer’s ability to use the carried over excess business losses to offset nonbusiness income.

70602

– TREATMENT OF

PAYMENTS FROM PARTNERSHIPS TO PARTNERS FOR PROPERTY OR SERVICES

This provision amends Section 707 to provide clarification that the Section, which provides for the recharacterization of certain partnership transactions as “disguised” sales of property or payments for services, is self-executing in the absence of regulations

Section 707(a)(2)(A) provides that if a partner performs services for a partnership and there is a related allocation and distribution to that partner, and when viewed together are properly treated as an arrangement between the partnership and someone acting not in their capacity as partner, the transaction is treated as a payment for services. In 2014, Treasury released Proposed Regulations [REG-115452-14] under this Section, which were aimed at providing guidance on when an arrangement is treated as a disguised payment for services, but they have not been finalized.

Section 707(a)(2)(B) provides that if there is a transfer of money or property to a partnership by a partner and a related transfer of money or property to that partner, and when viewed together, the transfers are in substance a sale, the transaction is recharacterized as such (i.e., a “disguised sale”). This provision applies to

both disguised sales of property and disguised sales of partnership interests. Regulations have been issued for disguised sales of property. However, no such regulations currently exist for disguised sales of partnership interests, as the IRS withdrew its proposed regulations in 2009.

Some practitioners have argued that in the absence of regulations, disguised payments for services under Section 707(a)(2)(A) and disguised sales of partnership interests under Section 707(a)(2)(B) are inapplicable because the statute begins with, “Under regulations prescribed by the Secretary” and regulations have not been issued for disguised sales for services or disguised sales of partnership interests. This provision clarifies the language of Section 707(a)(2) to instead say, “Except as provided by the Secretary,” indicating that the statute is self-executing

This provision is not retroactive and only applies to payments made after July 4, 2025.

70524 – INCOME FROM HYDROGEN STORAGE, CARBON CAPTURE ADDED TO QUALIFYING INCOME OF CERTAIN PUBLICLY TRADED PARTNERSHIPS TREATED AS CORPORATIONS

Pursuant to Section 7704, publicly traded partnerships must derive 90% or more of their gross income from qualifying sources. This provision expands the definition of qualifying income to include income and gains derived from the following:

• The transportation or storage of sustainable aviation fuel,

• The transportation or storage of compressed or liquified hydrogen,

• The generation, availability for such generation, or storage of electric power at a qualified carbon capture facility that produces carbon oxide not less than 50% of which is qualified carbon oxide under Section 45Q,

• The capture of carbon dioxide by such facility,

• The production of electricity from any advanced nuclear facility, and

• The operation of geothermal energy property.

This provision applies to taxable years beginning after December 31, 2025.

CORPORATIONS & THEIR SHAREHOLDERS

70431 – EXPANSION OF QUALIFIED SMALL BUSINESS STOCK GAIN EXCLUSION

Section 1202 provides an exclusion from income for up to $10 million in gain from the sale of “qualified small business stock” (QSBS) that is held by a non-corporate taxpayer for more than five years (the per-issuer limitation). An eligible taxpayer may exclude anywhere from 50% to 100% of the gain from a sale of QSBS, depending upon when the stock was acquired (the exclusion percentage). Among the requirements applicable for stock to be considered QSBS, the issuer of such stock must not have had aggregate gross assets exceeding $50 million at any time from August 10, 1993, through the date of issuance of the relevant stock being tested for QSBS status (including the value of any assets contributed in exchange for such stock).

This provision changes the exclusion percentage for certain stock, increases the amount of the per-issuer limitation on gain that can be excluded from income on sales of such stock, and increases the aggregate gross assets threshold for constituting a qualified small business. The provision retains the 50% to 100% exclusion percentages that are currently applicable to stock issued on or before July 4, 2025, however, it “phases in” an increasing exclusion percentage for stock issued after July 4, 2025. Gain from such QSBS held for at least three years will be 50% excludable. The QSBS gain will be 75% or 100% excludable if the taxpayer held the QSBS for at least four or five years, respectively. The change in the exclusion percentage is effective for tax years beginning after July 4, 2025.

Moreover, the provision increases the per-issuer limitation for stock issued after July 4, 2025, to $15 million. Consistent with prior Section 1202, the limitation is reduced by eligible gain taken into account under Section 1202 on previous dispositions of stock of the issuer. The $15 million limitation is increased annually for inflation. The change in the per-issuer

limitation is effective for tax years beginning after July 4, 2025

Additionally, the provision increases the aggregate gross assets threshold to $75 million. The threshold is increased annually for inflation.

The change in the aggregate gross assets threshold is applicable to stock issued after July 4, 2025

Citrin Cooperman Insights - The amendments are a welcome improvement to Section 1202. The per-issuer limitation and the aggregate gross assets threshold have been unchanged since they were enacted in 1993, and in particular the increase in the aggregate gross assets threshold can be expected to enable more small businesses to qualify under the provision, which can be expected to spur greater individual investment in those businesses. However, taxpayers who hold pre-enactment QSBS should carefully plan any dispositions to maximize the benefits of the higher per-issuer limitation. Those looking to sell existing QSBS should be aware that their eligible gain from such sales (and any previous sales) will reduce the gain that may be excludible on sales of QSBS stock of that issuer that are acquired after July 4, 2025 Also, taxpayers should be reminded that existing QSBS remains subject to the $10 million per-issuer limitation; only stock issued after July 4, 2025 qualifies for the higher $15 million limitation.

70523 – INTANGIBLE DRILLING AND DEVELOPMENT COSTS TAKEN INTO ACCOUNT FOR PURPOSES OF COMPUTING ADJUSTED FINANCIAL STATEMENT INCOME

C Corporations subject to taxation under the corporate AMT are taxed based on their respective adjusted financial statement income (AFSI). This provision reduces AFSI by any allowed deductions under Section 263(c) relating to incurred expenses for drilling and development of oil, gas, and geothermal wells, as well as certain qualified expenditures under Section 59(e)(2).

This provision applies to taxable years beginning after December 31, 2025.

70426 – 1- PERCENT FLOOR ON DEDUCTION OF CHARITABLE CONTRIBUTIONS MADE BY CORPORATI ONS

See 1-Percent Floor on Deduction of Charitable Contributions Made by Corporations below, under Charitable Contributions and Philanthropy

GENERAL BUSINESS PROVISIONS

70301 – FULL EXPENSING FOR CERTAIN BUSINESS PROPERTY

This provision permanently extends the first-year bonus depreciation amendments to Section 168 under the TCJA.

Taxpayers are generally allowed a deduction for depreciation with respect to property used in a trade or business or held for the production of income The TCJA permitted taxpayers to immediately deduct the full adjusted basis of qualified property acquired and placed in service after September 27, 2017, and before 2023. This bonus depreciation allowance phased down beginning in 2023 by 20% annually. Thus, taxpayers may immediately deduct 40% of property placed in service in 2025. Bonus depreciation is currently scheduled to phase out entirely for property placed in service after 2026. Similar rules apply to aircraft and qualified property with a longer production period.

This provision permanently extends the 100% bonus depreciation allowance for property acquired and placed in service on or after January 19, 2025.

70302 – FULL EXPENSING OF DOMESTIC RESEARCH AND EXPERIMENTAL EXPENDITURES

This provision creates Section 174A and amends various sections to suspend TCJA amendments to Section 174 concerning domestic research and experimental (R&E) expenditures deductions. Prior to the TCJA, taxpayers were permitted to immediately deduct R&E expenditures incurred in connection with a trade or business. Taxpayers could alternatively elect to capitalize and amortize such expenditures over a period of not less than 60 months

Research and experimental expenditures incurred in connection with a trade or business are costs incident to the development or improvement of a product, as well as the costs of obtaining a patent. Such expenditures also include costs incurred in connection with the development of any software. Expenditures for the acquisition or improvement of land or property used in connection with R&E and subject to Section 167 depreciation or 611 depletion are not R&E expenditures.

The TCJA amended Section 174 and disallowed immediate R&E deductions. Rather, the TCJA required taxpayers to charge R&E expenditures to capital accounts and permitted amortized deductions of such domestic expenditures ratably over five years The amortization period for foreign R&E expenditures was extended to 15 years.

This provision exempts domestic R&E expenditures from Section 174, generally returning such expenditures to pre-TCJA treatment. Taxpayers may thus immediately deduct domestic R&E expenses. Taxpayers may instead capitalize and amortize such expenditures over a period of not less than 60 months, beginning with the month in which the taxpayer first realizes benefits from the expenditures. Alternatively, taxpayers are permitted to capitalize and ratably deduct domestic R&E expenses, but not foreign R&E expenses, under Section 59 over ten years. If the taxpayer disposes of the property for which any domestic R&E expenditure is incurred during the period in which such expenditure is allowed as an immediate deduction, the expense must be amortized

Domestic R&E expenditures are R&E expenditures incurred in the United States (U.S.), Puerto Rico, or any possession of the U.S. Taxpayers are still prohibited from deducting land subject to Section 167 or 611. Additionally, taxpayers are not permitted to deduct expenditures incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral.

This provision amends Section 280C to require taxpayers to reduce their domestic R&E expenditures by the amount of research credit allowed under Section 41(a).

Any election under this provision is considered a change in method of accounting under Section 481 on a cutoff basis. This provision applies permanently beginning in the taxable year starting after December 31, 2024 Small businesses with annual gross receipts of $31 million or less are permitted to retroactively apply this provision to expenses incurred after 2021. Moreover, all taxpayers may accelerate the remaining deductions for expenditures incurred between 2022 and 2024 over a one-year or two -year period.

70303 – MODIFICATION OF LIMITATION ON BUSINESS INTEREST

This provision increases the maximum amount of interest expenses that businesses may deduct. Businesses are generally permitted to deduct interest expenses up to the total of: (1) business interest income; (2) 30% of adjusted taxable income; and (3) floor plan financing

interest. Under this provision, adjusted taxable income does not include deductions allowable for depreciation, amortization, or depletion in taxable years beginning after 2024.

For purposes of the ‘floor plan financing’ exception, the provision also expands the definition of “motor vehicle” by including any trailer or camper designed to provide temporary living quarters for recreational, camping, or seasonal use. The trailer or camper must be designed to be towed by, or affixed to, a motor vehicle.

This provision applies to taxable years beginning after December 31, 2024

70305 – EXCEPTIONS FROM LIMITATIONS ON DEDUCTION FOR BUSINESS MEALS

This provision amends Section 274 to permit business deductions for certain meals provided to employees. Under Section 274, employers are generally not permitted to deduct entertainment, amusement, and recreation expenses. Section 274(n) permits a 50% maximum deduction for the cost of meals provided to employees. The TCJA included Section 274(o), effective in 2026, that will disallow deductions for meals provided to employees for the convenience of the employer.

This provision creates an exception to the deduction denial for meals provided at the convenience of the employer for expenses for goods and services which are sold by the taxpayer in a bona fide transaction for adequate and full consideration. Additionally, this provision creates an exception to the 50% limitation for meals provided on certain fishing boats and at certain fish processing facilities, permitting a 100% deduction for those meals.

This provision applies to amounts paid or incurred after December 31, 2025.

70306 – INCREASED DOLLAR LIMITATION FOR EXPENSING OF CERTAIN DEPRECIABLE ASSETS

This provision increases the amount taxpayers are permitted to expense under Section 179

Currently, a taxpayer may elect to expense the cost of eligible property instead of recovering such cost through depreciation. Previously, the taxpayer could expense up to $1 million of the cost of eligible property. The $1

million maximum would be reduced by the property’s cost in excess of $2.5 million. In 2025, these figures were inflation adjusted to $1.25 million and $3.13 million, respectively.

Property is deductible under Section 179 only if it is eligible property, acquired for business use, acquired by purchase, and not excluded by Section 179. Eligible property includes various depreciable property, such as tangible personal property (not including buildings), single-use agricultural structures, and qualified Section 179 real property. Qualified Section 179 property is qualified improvement property and certain improvements to nonresidential real property. Excluded property includes, inter alia, certain property leased to others and certain property used predominantly outside the U.S.

This provision increases the expense maximum to $2.5 million, reduced by the eligible property’s cost in excess of $4 million. The increased figures apply to property placed in service in taxable years beginning after December 31, 2024, and will be adjusted for inflation annually beginning in 2026.

70307 – SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION PROPERTY

This provision adds a new type of property, qualified production property, to Section 168, and provides 100% first year depreciation for such property. “Qualified production property” generally is nonresidential real property—

• used by the taxpayer as an integral part of a “qualified production activity”;

• placed in service in the U.S. or any U.S. possession;

• the original use of which commences with the taxpayer;

• the construction of which begins after January 19, 2025, and before January 1, 2029;

• which is designated by the taxpayer through an election; and

• which is placed in service before January 1, 2031

Nonresidential real property acquired by purchase (rather than newly constructed by the taxpayer) after January 19, 2025, and before 2029 may also qualify as qualified production property if, among other things, the property was not previously used by the taxpayer (or certain related persons), or used in a qualified production activity

by any person between January 1, 2021, and May 12, 2025.

“Qualified production activity” is the manufacturing, production, or refining of a qualified product. Qualified production activity must result in a substantial transformation of the property comprising the product.

• “Production” includes only agricultural production and chemical production activities.

• A “qualified product” is any tangible personal property, excluding food and beverages prepared in the same building as the retail establishment in which they are sold.

Qualified production property does not include any portion of nonresidential real property used for functions unrelated to the manufacturing, production, or refining of tangible personal property. Such excluded property includes, for example, property used for offices, administrative services, R&D, lodging, parking, and sales activities. Qualified production property also does not include any property to which the alternative depreciation system under Section 168(g) applies.

For determining Section 55 alternative minimum taxable income, the qualified production property deduction would be allowed without any adjustment under the AMT rules.

If, within 10 years of placing the qualified production property in service, such property ceases to be used in a qualified production activity and is used by the taxpayer in a nonqualifying productive use, the property is treated as disposed of on the date it is first used by the taxpayer in the nonqualifying productive use, and the taxpayer is required to include in income the entire originally expensed amount as Section 1245 recapture in that year The property’s basis and future depreciation deductions are thereafter adjusted to reflect the recapture amount.

This provision applies to property placed in service after July 4, 2025.

Citrin Cooperman Insights - The provision is clearly intended to promote the construction of new factories and production facilities within the US as part of the Trump Administration’s push to boost US manufacturing. The “stick”, of course, is that if the qualified production

property ceases to be used in a qualified production activity and is used for a nonqualifying productive use within 10 years, the amount expensed is recovered as ordinary recapture income in the year the nonqualifying use begins.

This recapture provision could be constitutionally problematic, as the required income inclusion doesn’t bear any relationship to the fair market value of the property at the time recapture is triggered (the property could in fact be worth far less than the recapture amount), and does not rely on the existence of any discernible realization event as a prerequisite to its application. Thus, it may be questionable whether this recapture provision taxes “income” within the contemplation of the 16th Amendment. While the tax basis of the property is increased by the recapture amount, thus only affecting the timing of income by enabling the taxpayer to recover it as depreciation for tax purposes, this feature alone may not be sufficient to overcome the fact that no realization event is required to recapture the deduction in the first instance, and that computation of the recapture amount bears no relation to the property's fair market value.

Further, no provision in the Act addresses treatment of property used for multiple purposes, for example, a portion of a shop floor occasionally used for R&D activities. While such use would not constitute a use in a qualified production activity, a question could arise whether it would cause all, or a portion, of the property to cease being qualified production property, thereby triggering recapture.

Another unanswered question is whether expansion of or substantial renovations to existing structures could qualify for benefits of the provision. Presumably such newly expanded or renovated property could satisfy the requirements to constitute qualified production property, even if the preexisting components would not. Implementing regulations will be needed to provide clarity on these, and other, issues.

The provisions related to purchased property that would qualify for the benefits of the Section will put a premium on diligence in connection with any acquisition to ensure that the seller did not use the property in what would otherwise have been a qualified production activity

during the 2021-2025 window period set forth in the statute.

70421 – PERMANENT RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES

See Permanent Renewal and Enhancement of Opportunity Zones below, under Real Estate

70603 – EXCESSIVE EMPLOYEE REMUNERATION FROM CONTROLLED GROUP MEMBERS AND ALLOCATION OF DEDUCTION

See Excessive Employee Remuneration from Controlled Group Members and Allocation of Deduction below, under Executive Compensation and Employee Benefits

INTERNATIONAL

70311 – MODIFICATIONS RELATED TO FOREIGN TAX CREDIT LIMITATION

When determining the foreign tax credit (“FTC”) limitation of a taxpayer, the taxpayer is generally required to categorize its foreign-source income into statutory and residual “baskets”. The taxpayer is then generally required to allocate and apportion its deductions amongst its U.S.-source income and foreignsource income in the respective baskets to which the expenses definitely relate, with the remainder being ratably apportioned to all gross income on some reasonable basis. Most deductions are not subject to prescribed rules for allocation and apportionment. However, certain types of deductions, such as interest, research and expenditures, and stewardship expenses, are subject to specific rules that are provided in regulations.

A foreign source income basket that is of primary importance to many affected taxpayers is the global intangible low-taxed income (“GILTI”) basket. This provision modifies the general rules for the allocation and apportionment of deductions to income in the GILTI basket for the purpose of determining a taxpayer’s GILTI basket FTC limitation.

The provision limits the deductions of a U.S. shareholder that are allocable to gross income in the GILTI basket to

the following: (1) the deduction against GILTI that is provided in Section 250(a)(1)(B); (2) the deduction for state, local and foreign taxes imposed on GILTI amounts that is provided in Section 164(a)(3); and (3) with the exception of interest expense and research and experimental expenditures, which shall never be allocated or apportioned against foreign source net CFC tested income, any other deduction that is solely and directly allocable to the taxpayer’s GILTI amount Any deductions that may otherwise have been allocated or apportioned to gross income in the GILTI basket will instead be allocated or apportioned to U.S.-source gross income.

Additionally, the provision addresses a long-standing issue by ensuring that foreign taxes on certain basis differences (which don’t give rise to U.S. income) are treated as general basket income, rather than foreign branch basket income. This change aligns with what many taxpayers have sought since the TCJA introduced the foreign branch basket.

This provision applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights - Taxpayers that have historically had excess FTCs in the GILTI basket that have tended to go unused, thereby resulting in overall tax leakage, should reevaluate their FTC expense allocation methods in order to assess whether this provision will have the effect of increasing their FTC capacity in the GILTI basket and thereby reduce future tax leakage

70312 - MODIFICATIONS TO DETERMINATION OF DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE TO TESTED INCOME

Section 960(d)(1) generally provides that a domestic corporation that is a U.S. shareholder of a controlled foreign corporation (“CFC”) is deemed to have paid an amount of CFC foreign income taxes that are paid or accrued with respect to the CFC’s tested income (“tested foreign income taxes”) The amount is determined by multiplying the aggregate tested foreign income taxes paid or accrued by each tested income CFC that are attributable to its tested income by 80% (“applicable percentage”) of its tested income inclusion percentage (“inclusion percentage”). For this purpose, foreign

income taxes attributable to tested income of a tested loss CFC are excluded from the aggregate foreign income tax amount Further, the inclusion percentage is determined as the ratio of the domestic corporation’s GILTI divided by the aggregate amount of its pro rata share of CFC tested income. Similar to the exclusion of tested foreign income taxes of a tested loss CFC, a tested loss CFC’s tested loss is itself excluded from the aggregate amount of its pro rata share of CFC tested income (i.e., only CFC tested income is taken into account)

The provision increases the applicable percentage from 80% to 90%, thereby increasing the amount of the tested foreign income taxes that are available as potentially creditable foreign income taxes in the GILTI basket. However, the provision also makes two additional changes. First, it modifies Section 78 by excluding from the gross-up amount certain foreign taxes that relate to CFC distributions already excluded from U.S. income under Section 959(a) or (b). Second, it disallows a foreign tax credit for 10% of both direct and certain deemed paid foreign income taxes. This limitation applies to taxes associated with CFC distributions that are excluded under Section 959(a) because the income was previously included in the U.S. shareholder’s GILTI.

The change to the deemed paid foreign tax percentage applies to taxable years beginning after December 31, 2025. The disallowance of 10% of foreign income taxes attributable to distributions of GILTI previously-taxed earnings and profits that would otherwise be eligible for a Section 901 foreign tax credit applies to foreign income taxes paid or accrued with respect to distributions of GILTI previously-taxed earnings and profits created by reason of an amount deemed included in a taxpayer's gross income after June 28, 2025.

Citrin Cooperman Insights – Due to the introduction of the 10% reduction of otherwise available foreign income taxes associated with certain distributions of amounts that are excludable from gross taxable income under Section 959(a), taxpayers that have an excess limitation account described in Section 960(c)(2) in the GILTI basket may nevertheless suffer incremental tax leakage in connection with distributions of CFC GILTI PTEP.

70313 - SOURCING CERTAIN INCOME FROM THE SALE OF INVENTORY PRODUCED IN THE UNITED STATES

For the purpose of determining a taxpayer’s foreign tax credit limitation in a particular foreign source income basket, it is essential to first determine whether an item of gross income has U.S or foreign source The rules that govern the determination of source of an item of gross income vary according to the character of the gross item of income. Specific to income from the sale or exchange of inventory property produced by a taxpayer, source is determined solely on the basis of the location of the production activities that produced the inventory property. Generally, income from the sale of inventory property produced by a taxpayer in the United States is considered to have U.S. source, while income from the sale of inventory property produced by a taxpayer outside the United States is considered to have foreign source Therefore, the relevant sourcing rules do not look to other activities of the taxpayer to determine whether any portion of the gross item of income from the sale of inventory property produced by the taxpayer would more appropriately be considered as having foreign source.

In light of the potential for double taxation that may be suffered by a U.S. taxpayer that produces inventory in the United States for sale outside of the United States, the provision modifies the applicable sourcing rules solely for purposes of determining a taxpayer’s foreign tax limitation (i.e., the modification is not applicable for other operative sections of the Code). The limited modification provides that, if a U.S. person maintains an office or other fixed place of business in a foreign country, the portion of taxable income from the sale or exchange of inventory property produced by the taxpayer in the United States, the sale of which is properly attributable to the foreign office or place of business of the taxpayer, shall be considered as having foreign source to an extent that does not exceed 50% of the total taxable income from the sale or exchange of the item of inventory property.

This provision applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights – This change appears to acknowledge potentially punitive outcomes resulting from the TCJA’s changes to Section 862(b)(2) Prior to the changes, the source of income from the sale of inventory property was treated as partially from within and partially from outside the U.S. based on the production and sales activities of the taxpayer. Taxpayers were able to look to guidance provided in prior regulations that provided elective methods for determining the source of the income in order to minimize or eliminate double-taxation on this type of income. Although not a full return to prior rules, this change may provide FTC relief to some taxpayers that are burderned by double-taxation on their sales of U.S.produced inventory property to foreign customers through their foreign offices or fixed places of business.

70321 - MODIFICATION OF DEDUCTION FOR FOREIGN - DERIVED DEDUCTION ELIGIBLE INCOME AND NET CFC TESTED INCOME

Section 951A requires a U.S. shareholder of a controlled foreign corporation to include its global intangible lowtaxed income (“GILTI”) amount in its gross income. The GILTI amount is the excess, if any, of (i) the U.S. shareholder’s net CFC tested income over (ii) its net deemed tangible income return. For tax years beginning prior to January 1, 2026, and subject to certain limitations, for the purpose of computing its tax liability, a domestic corporation and individual U.S. shareholder that make a Section 962 election may deduct 50% of the GILTI amount and 50% of the Section 78 gross-up for deemed paid foreign income taxes attributable to the GILTI amount if the taxpayer elects to take advantage of the foreign tax credit. However, the 50% rate is scheduled to be reduced to 37.5% for tax years beginning after December 31, 2025. This provision makes permanent a slightly reduced 40% rate that would yield a target effective rate of 14% for all years beginning after December 31, 2025.

Section 250(a)(1)(A) provides a foreign-d erived intangible income (“FDII”) deduction to C corporations in connection with their eligible gross income. For tax years beginning prior to January 1, 2026, and subject to certain limitations, for the purpose of computing its tax liability, a C corporation may calculate a FDII deduction at a rate of 37.5%. The 37.5% rate is scheduled to be reduced to 21.875% for tax years beginning after December 31,

2025. The provision would make permanent a slightly reduced 33.34% rate that would yield a target effective rate of 14% for all taxable years beginning after December 31, 2025.

70322 – DETERMINATION OF DEDUCTION ELIGIBLE INCOME

Section 250(1)(a)(A) provides that a domestic corporation’s tentative FDII deduction is determined using a prescribed formula. The amount of the deduction is the product of a ratio that is applied against the domestic corporation’s deemed intangible income (“DII”) for the relevant tax period. The ratio represents the domestic corporation’s foreign-derived deduction eligible income (“FDDEI”) amount relative to its deduction eligible income (“DEI”). DEI is the gross income of the domestic corporation as reduced by certain specified categories of gross income that include deemed income inclusions under subpart F, Section 956, and GILTI, as well as other categories of gross income including financial services income, certain dividend income, domestic oil and gas extraction income, and foreign branch income. The gross deduction eligible income is then further reduced by deductions that are properly allocable and apportionable to that gross income amount. Therefore, to the extent that an item of gross income, as reduced by allocable and apportionable deductions, is excluded from DEI, and thus also FDDEI, the FDII deduction is thereby also reduced.

This provision further reduces DEI and FDDEI by also excluding from gross income for the purpose of determining DEI any income or gain that arises in connection with a deemed or actual sale or disposition of property by a domestic corporation of intangible property, as defined in Section 367(d)(4) and any other property of a type that is subject to depreciation, amortization, or depletion by the seller. These changes apply to sales or dispositions occurring after June 16, 2025.

However, the provision also modifies the rules for the allocation of deductions against gross income for the purpose of determining the DEI of a domestic corporation. In lieu of applying general rules of expense allocation and apportionment, a domestic corporation shall instead only reduce its gross deduction eligible

income by those deductions that are properly allocable to the item(s) of gross income However, for this purpose, a taxpayer’s interest expense and research or experimental expenditures shall not be allocated or apportioned against gross deduction eligible income. These changes apply to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights – Taken together, these changes reduce the DEI gross income base on which a FDII deduction may be determined, while also potentially reducing the portion of a taxpayer’s deductions that may be allocated to such income in order to arrive at DEI and FDDEI of the taxpayer Thus certain taxpayer’s may benefit from these changes, while others may see a reduction to their FDII deduction benefit relative to their historical norms. To the extent that a taxpayer intends to take or otherwise has the potential to take a FDII deduction, the taxpayer’s modeling should be carefully revisited in order to understand the potential implications of these changes.

70323 – RULES RELATED TO DEEMED INTANGIBLE INCOME

A U.S. shareholder determines its GILTI amount for its tax year as the excess of the shareholder’s net CFC tested income over its net deemed tangible income return (“NDTIR”). Subject to certain reductions, a U.S. shareholder’s NDTIR is 10% of the aggregate amount of the shareholder’s pro rata share of the qualified business asset investment (“QBAI”) of each CFC with respect to which it is a U.S. shareholder. A U.S. shareholder’s pro rata share of QBAI is determined with reference to the adjusted tax basis of each CFC’s depreciable “specified tangible property” used in its trade or business, as determined at each quarter end and averaged for the tax year, and including only the specified tangible property of CFCs having tested income for the relevant period.

A similar concept is applied by a domestic corporation for the purpose of determining its FDII deduction. The domestic corporation’s DII represents that excess of its DEI over its deemed tangible income return (“DTIR”), where the DTIR is the amount that is 10% of the domestic corporation’s QBAI for the tax year.

The provision eliminates the 10% deemed return on tangible assets (previously used to reduce both GILTI and

FDII) by repealing the concepts of NDTIR and DTIR. This change increases the amount of income subject to GILTI, because there is no longer a carveout for routine returns. At the same time, it expands the base for the FDII deduction, potentially making more income eligible. While mechanically similar, the impact differs depending on whether the taxpayer is computing GILTI or FDII.

This provision applies to taxable years beginning after December 31, 2025.

70331 – MODIFICATIONS TO BASE EROSION MINIMUM TAX AMOUNT

This provision extends the application of the base erosion and anti-abuse tax (“BEAT”) under Section 59A, which requires that certain domestic corporations calculate a base erosion alternative tax amount that is the excess of a 10% tax rate that is applied to a modified taxable income of the taxpayer over the taxpayer’s regular tax liability for the tax year, but not less than zero For a domestic corporation to be subject to BEAT, among other things, the taxpayer must have a “base erosion percentage" of more than 3% (or 2% in limited circumstances involving banks and registered securities dealers) for the tax year. For the purpose of determining a domestic corporation’s base erosion percentage, payments to foreign related parties that meet certain limited criteria are excluded from the calculation.

This provision makes limited modifications to the BEAT regime. These include an increase to the applicable BEAT tax rate to 10.5%, as well as other correcting and conforming adjustments to the relevant statutory language

This provision applies to taxable years beginning after December 31, 2025.

70341 - COORDINATION OF BUSINESS INTEREST LIMITATION WITH INTEREST CAPITALIZATION PROVISIONS

Subject to certain exceptions, the ability of a taxpayer to deduct business interest expense in a tax year may be limited under Section 163(j) To the extent that the business interest expense limitation applies, the taxpayer’s interest expense deduction is generally limited to (i) its business interest income for the tax period, (ii)

30% of its adjusted taxable income (“ATI”) for the tax year, but not less than zero, and (iii) its floor plan financing interest for the tax period To the extent that any amount of business interest expense is disallowed as a deduction for the tax period, it may be carried forward indefinitely for potential use in a future tax period

This provision makes certain changes to the calculation of the Section 163(j) limitation by providing that, subject to the exceptions in the next sentence, the limitation is calculated before the application of any interest capitalization rules, that is, by including capitalized interest within the measure of deductible interest expense, and further that the amount allowed as a deduction for the year is first applied to capitalized interest, and thereafter to other interest expense. Further, the provision provides that any interest that is required to be capitalized under Section 263(g) or 263A(f) shall not be treated as business interest expense for the purposes of Section 163(j)

This provision applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights - Many taxpayers that are electively capitalizing interest under other non-excepted provisions of the Internal Revenue Code (e.g., Section 266) will likely be adversely affected by these changes, as they will see an increase to their interest expense that may be subject to the limitation. However, changes to the computation of ATI to subtract depreciation, amortization, and depletion (discussed above), thereby providing a higher ATI against which to compute the limitation, would tend to mitigate the impact of requiring capitlized interest to be including in interest expense under the limitation.

70342 - DEFINITION OF ADJUSTED TAXABLE INCOME FOR BUSINESS INTEREST LIMITATION

A taxpayer’s adjusted taxable income (“ATI”), for purposes of the Section 163(j) limitation, takes into account certain required adjustments to the taxpayer’s tentative taxable income, as determined prior to the business interest expense deduction limitation. This generally includes a reduction for deemed income inclusions arising in connection with subpart F, Section 956, GILTI, and the Section 78 gross-up for foreign taxes. Treasury has been studying whether and the extent to

which a taxpayer may increase its ATI for these deemed income inclusion amounts. However, this provision provides that a taxpayer shall exclude such amounts, as well as the portion of the associated deductions allowed under Section 245A(a), by reason of Section 964(e)(4), and Section 250(a)(1)(B), from its ATI.

This provision applies to taxable years beginning after December 31, 2025.

70351 - PERMANENT EXTENSION OF LOOK - THRU RULE FOR CONTROLLED FOREIGN CORPORATIONS

Section 954(c)(6) provides the “CFC look-through rule” which excludes from a CFC’s subpart F foreign personal holding company income its items of dividend, interest, rent and royalty income that are received or accrued by the CFC from another related CFC, but only to the extent that each such item of income is attributable or properly allocable to income of the other related CFC that is itself neither subpart F income nor U.S. effectively connected income of the other related CFC. Whereas the CFC lookthrough rule has been extended numerous times, this provision makes Section 954(c)(6) permanent.

This provision applies to taxable years of foreign corporations beginning after December 31, 2025.

7035 2 - REPEAL OF ELECTION FOR 1 - MONTH DEFERRAL IN DETERMINATION OF TAXABLE YEAR OF SPECIFIED FOREIGN CORPORATIONS

As a general rule, specified foreign corporations that have a majority U.S. shareholder are required to adopt that majority U.S. shareholder’s taxable year for U.S. income tax purposes. However, a limited one-month deferral (i.e., the adoption of a specified foreign corporation taxable year that begins one month prior to the majority U.S. shareholder’s taxable year) may be elected by a specified foreign corporation. This provision repeals the limited one-month deferral with the result that all specified foreign corporations are required to have a taxable year that conforms to that of their majority U.S. shareholder, if applicable.

This provision applies to taxable years of specified foreign corporations beginning after November 30, 2025.

7035 3 - RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.

Section 958 provides rules for determining stock ownership of a foreign corporation that are used for the purpose of establishing whether a foreign corporation is a controlled foreign corporation (“CFC”), as defined in Section 957. The classification of a foreign corporation as a CFC has importance for many provisions of the Code.

The rules provided in Section 958 are applied with reference to general constructive ownership rules prescribed in Section 318, although with certain modifications The constructive ownership rules are complex in their application and frequently yield unexpected results. This can include a foreign corporation that has no direct or indirect U.S. shareholder being classified as a CFC by reason of its shares being considered as constructively owned by a U.S. person that does not otherwise have a direct or indirect U.S. ownership interest in the foreign corporation. This is the result of the repeal of former Section 958(b)(4) as part of the TCJA, which provision generally prevented the application of the “downward attribution” rule for purposes of determining whether a foreign corporation is a CFC This provision reinstates Section 958(b)(4) for the purpose of determining whether a U.S. person is considered to own shares of a foreign corporation for the purpose of determining whether the foreign corporation is a CFC

However, the provision also adds new Section 951B That Section requires that, in limited circumstances involving a foreign controlled U.S. shareholder (“FCUSS”), the rule of downward attribution will nevertheless apply to treat the FCUSS as a U.S. shareholder of a foreign controlled foreign corporation (“FCFC”) solely for purposes of the CFC deemed income inclusion rules, such as subpart F, Section 956, and GILTI. To the extent that an FCUSS is treated as a U.S. shareholder of the FCFC, the FCFC will not be classified as a CFC However, even without a direct or indirect ownership interest in the CFC, the U.S. subsidiary (FCUSS) is treated as a U.S. shareholder for this purpose and must include in its U.S. taxable income its pro rata share of the CFC’s income, as determined under U.S. tax principles (as if it were an actual owner)

The new provision sets forth requirements that prevent the rule from applying to relationships where there’s no possibility of deemed or actual common control. For the new provision to apply, the FCUSS must be a U.S. person that would be a U.S. shareholder with respect to the FCFC where, when applied, downward attribution from one or more foreign persons would cause the FCUSS to be considered as owning more than 50% of the FCFC However, the provision would not apply to a foreign corporation that is classified as a CFC for other reasons.

This provision applies to taxable years of foreign corporations beginning after December 31, 2025.

Citrin Cooperman Insights – While the return of Section 958(b)(4) and the general pro hibition on the downward attribution of stock ownership for the purpose of determining whether a foreign corporation is a CFC is very welcome, a significant number of corporation taxpayers will be affected by new Section 951B The assessment of foreign-controlled group structures and obtaining information required to determine the U.S. taxpayer’s deemed income inclusion may be very challenging, as may be explaining the new rule to relevant stakeholders

70354 - MODIFICATIONS TO PRO RATA SHARE RULES

A U.S. shareholder that owns stock of a foreign corporation on the last day of the foreign corporation’s U.S. taxable year, and which foreign corporation was a CFC on any day of that taxable year, is required to include the U.S. shareholder’s pro rata share of CFC’s income, including subpart F income, Section 956 inclusion amount, and GILTI tested income or loss. The amount of the U.S. shareholder’s subpart F income inclusion for the taxable year represents the amount of the CFC’s subpart F income that would be distributable to the U.S. shareholder as of the last day of the CFC’s taxable year after being reduced by (i) subpart F income attributable to any portion of the taxable year that the foreign corporation was not a CFC and (ii) the amount of dividend income, subject to limitation, that is deemed or actually paid to any other person (i.e., other than the U.S. shareholder) that owned the shares of the CFC at another time during the taxable year. Similar rules apply for the purpose of determining the amount of GILTI

tested income or loss to be allocated to a U.S. shareholder of a CFC for purposes of determining the U.S. shareholder’s GILTI inclusion amount for its taxable year.

This provision modifies the rules by which a U.S. shareholder’s pro rata share of CFC income is determined. In contrast to strict reference to ownership of an interest in a CFC as of the last day of its taxable year, each U.S. shareholder that has an ownership interest in the CFC during its taxable year is required to include that U.S. shareholder’s pro rata share of the CFC’s subpart F income for the CFC’s taxable year irrespective of whether the U.S. shareholder has an ownership interest in the CFC on the last day of the CFC’s taxable year. A similar approach is used for the purpose of determining a U.S. shareholder’s pro rata share of CFC GILTI tested income and loss. However, only a U.S. shareholder that is a shareholder on the last day of the CFC’s taxable year may have a deemed income inclusion under Section 956 with respect to that CFC. The provision provides regulatory authority to the Secretary of the Treasury to issue regulations that will address such matters as elections or requirements for taxpayers to close the taxable year of a CFC at the time of a direct or indirect disposition of its stock by a U.S. shareholder. Additionally, the provision provides coordination language for the treatment of dividends issued by CFCs on or before June 28, 2025, for purposes of Section 951(a)(2)(B) as in effect prior to July 4, 2025

This provision applies to taxable years of foreign corporations beginning after December 31, 2025.

Citrin Cooperman Insights – Where there was a change of ownership of a CFC during a taxable year, the prior rules were complex in their application and generally required a certain amount of cooperation between the parties involved. The new rules will likely have a similar effect, while potentially adding complexity in the determination of pro rata shares of CFC deemed income inclusions, the making of potentially relevant elections, and other considerations.

ESTATE AND GIFT TAX

70106 – EXTENSION AND ENHANCEMENT OF INCREASED ESTATE AND GIFT TAX EXEMPTION AMOUNTS

This provision amends 2010(c)(3) to permanently raise the federal estate, gift, and generation-skipping transfer (GST) tax basic exclusion amount to $15,000,000 per individual, indexed annually for inflation.

The amendment replaces the prior framework, which set the basic exclusion amount to $5,000,000 and temporarily doubled it $10,000,000 under the TCJA. After adjusting for inflation, the exclusion amount stood at $13,990,000 for 2025. That temporary increase was scheduled to expire at year-end, reverting to a lower inflation-adjusted figure beginning in 2026. The new law eliminates the $5,000,000 base and the scheduled sunset of the TCJA increase, establishing $15,000,000 as a permanent floor.

The new statutory baseline applies to taxable years beginning after December 31, 2025, and offers greater certainty for high-net-worth families engaging in longterm wealth transfer planning.

Citrin Cooperman Insights - This legislative change reopens the planning landscape for individuals who had fully utilized their exemptions, enabling up to $1.01 million (or $2.02 million for married couples) in additional transfer capacity beginning in 2026. Teams should carefully evaluate how the increased exemption affects available planning opportunities, including the potential for additional lifetime transfers and the funding of existing or new trusts. A comprehensive review of existing assumptions, strategic plans, and implementation pipelines is essential to ensure full alignment with the revised exemption framework and to optimize wealth transfer outcomes.

EXECUTIVE COMPENSATION AND EMPLOYEE BENEFITS

70112 – EXTENSION AND MODIFICATION OF QUALIFIED TRANSPORTATION FRINGE BENEFITS

In addition to extending various provisions for the treatment of certain fringe benefits, this provision eliminates the qualified bicycle commuting reimbursement exclusion for employees, as originally

suspended under TCJA Prior to the TCJA, qualified bicycle commuting reimbursements were considered qualified transportation fringe under Section 132(f)(1)(D).

Qualified bicycle commuting reimbursements covered the purchase of a bicycle and bicycle improvements, repair, and storage if the bicycle was regularly used for travel between the employee’s residence and place of employment. The maximum exclusion was $20 per month.

This provision applies to taxable years beginning after December 31, 2025.

70113

– EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION AND EXCLUSION FOR MOVING EXPENSES

See Extension and Modification of Limitation on Deduction and Exclusion for Moving Expenses above, under Individuals

70201 - NO TAX ON TIPS

See No Tax on Tips above, under Individuals

70401

– E NHANCEMENT OF EMPLOYERPROVIDED CHILD CARE CREDIT

This provision amends Section 45F to expand the employer-provided childcare credit. Previously, employers could receive a credit equal to 25% of their childcare expenditures and 10% of their childcare resource and referral expenditures up to $150,000. This provision raises the credit rate of childcare expenditures to 40% or 50% for eligible small businesses. It further raises the maximum credit to $500,000 or $600,000 for small businesses, adjusted for inflation beginning in 2027.

• Eligible small businesses are businesses that meet the Section 488(c) gross receipts test over a five-year period. A corporation or partnership does not qualify as an eligible small business if its average annual gross receipts total over $25,000,000 over the fiveyear period prior to the taxable year in which the credit is claimed.

This provision also amends Section 45F(c)(1)(A) to include in childcare expenditures the expenses of intermediate entities that contract with qualified childcare facilities to provide childcare services. It additionally amended Section 45F(c)(2) to permit qualified childcare facilities to be jointly owned by the taxpayer and other persons.

This provision applies to amounts paid or incurred after December 31, 2025.

70304 – EXTENSION AND ENHANCEMENT OF PAID FAMILY AND MEDICAL LEAVE CREDIT

This provision amends Section 45S to modify and extend the TCJA’s paid family and medical leave credit Pursuant to Section 45S, an employer may claim a tax credit for wages paid to qualifying employees on family or medical leave. To qualify for the credit under the TCJA, the employer was required to have a written policy in place that provided for at least two weeks of paid family and medical leave annually to all qualifying full-time employees (prorated for part-time employees). Such pay could be no less than 50% of the employees’ normal wages.

The minimum credit was 12.5% of paid leave wages for up to 12 weeks per year. The percentage was increased by 0.25% up to 25% for each percentage point by which the employee’s rate of payment exceeded 50%. A qualifying employee was an employee who had been employed by the employer for at least one year and compensated equal to or less than 60% of the income of a highly compensated employee. Moreover, paid leave by state or local governments or required by state or local law was disregarded in determining the amount of paid family and medical leave provided by the employer.

This provision makes several modifications to Section 45S:

• Rather than a percentage of employee wages, employers may apply the premiums paid on employees’ paid leave insurance policies towards the credit, disregarding whether the employees were actually on family and medical leave. Such premium payments may not be deducted if taken by the employer as credits.

• Paid leave by state or local governments or required by state or local law is taken into account in determining the amount of paid and family leave provided by the employer, but not in determining the amount of credit under this Section.

• Employers may elect to apply leave wages paid to employees who worked for them for six months instead of one year towards the credit.

• Employers are required to cover part-time employees under the policy only if such employees work at least 20 hours per week.

This provision applies to taxable years beginning after December 31, 2025.

7060 3 – EXCESSIVE EMPLOYEE REMUNERATION FROM CONTROLLED GROUP MEMBERS AND ALLOCATION OF DEDUCTION

This provision amends Section 162(m) to apply an aggregation rule to the $1 million limit on deductible compensation of covered employees of publicly held corporations. Previously, control group members of publicly held corporations could deduct a maximum of $1 million of covered employee remuneration annually. Covered employees consist of the principal executive officer, principal financial officer, and three highest compensated officers. Any employee who was a covered employee in the preceding year beginning after 2017 is also a covered employee. In 2027, the eight highest paid officers will be covered employees.

The provision’s aggregation rule combines the members of a control group under Section 414 such that no more than $1 million per covered employee may be deducted under Section 162(m). If more than one member of the controlled group pays a specific covered employee and the aggregate amount of such remuneration exceeds $1 million, the $1 million deduction is proportionately allocated among such control group members based on the share of compensation distributed.

This provision applies to taxable years beginning after December 31, 2025.

70412 – EXCLUSION FOR EMPLOYER PAYMENTS OF STUDENT LOANS

See Exclusion for Employer Payments of Student Loans below, under Education-Related Provisions.

BUSINESS, ENERGY, CLIMATE, AND ENVIRONMENTAL CREDITS

70308 – ENHANCEMENT OF ADVANCED MANUFACTURING CREDIT

This provision increases the credit amount available to taxpayers under Section 48D.

Currently, eligible taxpayers are afforded a credit equal to 25% of the qualified investment with respect to any advanced manufacturing facility. Advanced manufacturing facilities are defined as facilities for which the primary purpose is the manufacturing of semiconductors or semiconductor manufacturing equipment. Taxpayers deemed to be a foreign entity of concern are not eligible for the credit.

This provision increases the amount of the credit from 25% of the qualified investment to 35%. This change takes effect for advanced manufacturing facilities that are placed in service after December 31, 2025.

70501 – TERMINATION OF PREVIOUSLY - OWNED CLEAN VEHICLE CREDIT

This provision terminates the previously owned clean vehicle credit under Section 25E for any qualifying vehicles purchased after September 30, 2025. Section 25E currently provides eligible, qualified buyers with a tax credit of 30% of the sale price of the vehicle up to a maximum of $4,000, provided that the sale price of the used vehicle is less than $25,000. Qualifying taxpayers are eligible for the credit only if their modified adjusted gross income does not exceed $150,000 for joint returns, $112,500 for head of household, and $75,000 for others. Currently, the credit is set to expire after December 31, 2032.

70502 – TERMINATION OF CLEAN VEHICLE CREDIT

This provision eliminates the clean vehicle credit (CVC), as provided under Section 30D, for all vehicles purchased after September 30, 2025.

Section 30D currently provides eligible taxpayers with up to a $7,500 tax credit if purchasing a qualifying new clean vehicle (electric, plug-in hybrids, and fuel cell vehicles). Fuel cell vehicles without batteries are eligible for the full $7,500, however, eligible vehicles that possess a battery split the credit into two equal credits of $3,750 based on a vehicle’s ability to satisfy threshold requirements for critical minerals and battery components.

70503 – TERMINATION OF QUALIFIED COMMERCIAL CLEAN VEHICLES CREDIT

Under Section 45W, businesses are currently eligible for a qualified commercial vehicle tax credit if purchasing new plug-in hybrid vehicles, new electric vehicles, or new fuel cell vehicles. Qualified commercial electric or plug-in hybrid vehicles must have a battery capacity of at least 7 kilowatt hours if the gross vehicle weight rating (GVWR) is less than 14,000 pounds. Otherwise, the battery capacity must be at least 15 kilowatt hours. Additionally, vehicles must be either mobile machinery as defined in Section 4053(8) or manufactured primarily for use on public streets, roads, and highways and have at least four wheels.

For vehicles with a GVWR of less than 14,000 pounds, the credit has a maximum value of $7,500. Heavier vehicles may be eligible for a credit with a maximum value of $40,000.

This provision terminates the Section 45W credit for vehicles purchased after September 30, 2025.

70504 – TERMINATION OF ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY CREDIT

This provision eliminates the alternative fuel vehicle refueling property credit (AFVRPC) provided under Section 30C by requiring that qualifying property, such as plug-in vehicle charging stations, be placed in service by June 30, 2026. To qualify, property must store or dispense electricity or clean fuel, which includes any fuel, 85% of the volume of which consists of one or more of ethanol, natural gas, compressed natural gas, liquified natural gas, liquified petroleum gas, hydrogen. Additionally, clean fuel may include any mixture which consists of two or more of biodiesel, diesel fuel, or

kerosene, with at least 20% of the mixture consisting of biodiesel.

In addition, to qualify for the credit, property must be placed in service in an eligible non-urban or low-income community census track. Individuals are eligible for an AFVRPC equal to 30% of the purchase and installation costs, up to $1,000, of qualifying property installed on a personal residence. Businesses who meet the prevailing wage and apprenticeship requirements are eligible for an AFVRPC equal to 30% of the purchase and installation costs, up to $100,000, of qualifying property installed at a taxpayer’s business. Businesses who do not meet the prevailing wage and apprenticeship requirements are eligible for an AFVRPC equal to 6% of the purchase and installation costs, up to $100,000. Currently, the AFVRPC is set to expire after December 31, 2032.

This provision eliminates the credit for property placed in service after June 30, 2026.

70505 – TERMINATION OF ENERGY EFFICIENT HOME IMPROVEMENT CREDIT

Under Section 25C, individuals may receive a credit equal to up to 30% of the sum of the purchase and installation costs of qualified energy efficiency improvements, residential energy property expenditures, and home energy audits. Homeowners may qualify for making qualified energy efficiency improvements, which include insulation materials or systems, exterior windows, and exterior doors. Taxpayers purchasing qualifying energy property, such as a central air conditioner or an electric or natural gas heat pump water heater, on or in connection with a dwelling unit may also qualify for an EEHIC. Additionally, homeowners and renters who purchase a home energy audit may qualify for an EEHIC. The EEHIC is currently set to expire after December 31, 2032.

In general, the EEHIC shall not exceed $1,200 for any taxable year. The credit allowed with respect to any item of qualified energy property may not exceed $600 for any taxable year. For EEHICs related to home energy audits, the total amount of the credit shall not exceed $150. Taxpayers purchasing qualifying electric or natural gas heat pumps, heat pump water heaters, or biomass stoves and boilers may qualify for an additional $2,000 EEHIC in addition to the $1,200 limitation.

This provision eliminates the credit for property placed in service after December 31, 2025.

70506 – TERMINATION OF RESIDENTIAL CLEAN ENERGY CREDIT

Section 25D currently provides tax credits equal to the sum of the applicable percentages of qualifying solar electric property expenditures, solar heating property expenditures, fuel cell property expenditures, small wind energy property expenditures, geothermal heat pump property expenditures, and battery storage technology expenditures. The credit is nonrefundable, but unused credit amounts may be carried over to the succeeding taxable year. Qualifying purchases must be installed on or in connection with a dwelling unit in the United States to be used as a residence by the taxpayer.

The applicable percentage for qualifying purchases is:

• 30% for property placed in service after December 31, 2016, and before January 1, 2020

• 26% for property placed in service after December 31, 2019, and before January 1, 2022

• 30% for property placed in service after December 31, 2021.

This provision terminates the credit for any expenditures made after December 31, 2025

70507 – TERMINATION OF ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION

Currently, Section 179D allows qualifying taxpayers to claim a deduction potentially equal to the cost of the eligible property. The deduction cannot exceed the cost of the property or the product of the applicable dollar amount and the total square footage of the building. The deduction provides for a prevailing wage and apprenticeship bonus if the taxpayer complies with the statutory requirements. Eligible property must be installed on or in a building located in the United States as part of the interior light systems, the heating, cooling, ventilation, and hot water systems, or the building envelope. Additionally, eligible property must be installed as part of a plan designed to reduce the total annual energy and power costs by 25% or more.

• In the case of a building originally placed in service less than five years before the establishment of any qualified retrofit plan, or in the case of any building newly constructed, the decrease in energy and power costs is measured against a reference building which meets the minimum requirements of Reference Standard 90.1.

• In the case of a building originally placed in service at least five years before the establishment of a qualified retrofit plan, a taxpayer may elect to pursue an alternative calculation. The alternative calculation provides a deduction based on the decrease in “energy use intensity” rather than energy costs. The decrease is measured against the baseline energy use intensity of the relevant building.

This provision terminates the credit for property beginning construction after June 30, 2026.

70508 – TERMINATION OF NEW ENERGY EFFICIENT HOME CREDIT

Section 45L provides a tax credit to both builders of ENERGY STAR certified single-family and multi-family homes and manufacturers of qualified new energy efficient homes. Single family residential or manufactured homes are eligible for credits of $2,500 or $5,000, with the latter requiring homes to meet the requirements of the Zero-Energy Ready Home Program. Dwelling units that are part of a multifamily home are eligible for credits of $500 or $1,000, with the latter again requiring satisfaction of the Zero-Energy Ready Home Program. Multifamily dwelling units may receive credits equal in value to those of single family residential or manufactured homes if they satisfy prevailing wage requirements.

This provision eliminates the credit for homes acquired after June 30, 2026.

70509 – TERMINATION OF COST RECOVERY FOR QUALIFIED CLEAN ENERGY FACILITIES, PROPERTY, AND TECHNOLOGY

Section 168 previously permitted taxpayers with qualifying clean energy generating property under Section 45Y or 48E to accelerate the cost recovery of the

energy generation systems over only five years. Not only has the provision removed the clean energy property from the scope of Section 168, but it has applied this change retroactively to projects that began construction at any time after December 31, 2024.

70510 – MODIFICATIONS OF ZERO - EMISSION NUCLEAR POWER PRODUCTION CREDIT

This provision places additional restrictions on eligibility for the credit depending on foreign involvement.

Under Section 45U, qualified taxpayers are eligible for tax credits worth up to 1.5 cents per kilowatt hour of electricity produced at a qualified nuclear power facility and sold to an unrelated person (.3 cents per kilowatt hour if the taxpayer fails to meet prevailing wage requirements). Qualified facilities must not be an advanced nuclear facility as defined under Section 45J and must have been placed in service prior to the enactment of the 2022 Inflation Reduction Act The credit is set to expire in taxable years beginning after December 31, 2032.

For taxable years beginning after July 4, 2025, this provision prohibits taxpayers from using nuclear fuel produced by, purchasing from, substituting nuclear fuel through, or trading with specified foreign entities or foreign -influenced entities. Taxpayers attempting to claim the credit must certify that they meet the above requirements.

70511 – TERMINATION OF CLEAN HYDROGEN PRODUCTION CREDIT

The Section 45V Clean Hydrogen Production Credit provides qualifying taxpayers with a credit during a tenyear period beginning the date a qualified clean hydrogen facility is placed in service. The credit value is based on the kilograms of qualified clean hydrogen produced at a qualified hydrogen production facility. This provision terminates the credit for hydrogen production facilities beginning construction after December 31, 2027.

70512 – PHASE - OUT AND RESTRICTIONS ON CLEAN ELECTRICITY PRODUCTION CREDIT

The Section 45Y clean electricity production credit is one of two technology-neutral credits that establishes a framework for taxpayers to claim a credit calculated based on the amount of electricity produced by whichever clean energy production system the taxpayer chose to implement. As originally written, the 45Y credit could be claimed annually for a 10-year period.

This provision accelerates the termination of the Section 45Y clean electricity production tax credit by redefining the term “applicable year,” within the statute For wind and solar energy facilities, this provision accelerates the phase out schedule for the credit, such that for any wind or solar facilities placed in service after December 31, 2027, no 45Y credit is available. In addition, the provision places restrictions on certain residential wind and solar energy leasing agreements.

Significantly, the provision enacts a network of wideranging restrictions relating to the involvement of prohibited foreign entities in electricity production. Broadly speaking, taxpayers are forbidden from receiving material assistance from prohibited foreign entities. The prohibited foreign entities may be either (i) a specified foreign entity, or (ii) a foreign -influenced entity, but in addition to the definitions for each of the two categories, Congress also implemented specific rules for foreigncontrolled entities, foreign-influenced entities, publicly traded entities, licensing agreements, related parties, and parameters determining effective control.

This provision enumerates a list of ways in which taxpayers may receive material assistance from prohibited foreign entities, which are expressly forbidden:

• Any component, subcomponent, or applicable critical mineral included in a facility that is extracted, processed, recycled, manufactured, or assembled by a prohibited foreign entity.

• Any design of a facility or expansion which is based on any copyright or patent held by a prohibited foreign entity.

• Any design of a facility or expansion which is based on any know-how or trade secret provided by a prohibited foreign entity.

• Assembly parts or constituent materials are not material assistance provided that such parts or

materials are not acquired directly from a prohibited foreign entity.

• If taxpayers have entered into a contract which would otherwise cause the taxpayer to violate the material assistance provision, a taxpayer may be exempted from the provision provided the contract was entered into before June 16, 2025, and the facility is placed into service before January 1, 2030

To ensure compliance with these new provisions, this provision imposes a number of corresponding reporting requirements. If anyone is determined to have completed one of the reporting forms with false information, this individual now faces a penalty equal to 10% of the tax savings attributable to the inaccuracy, or $5,000, whichever is greater. While the provision instructs the Treasury Department to publish regulations providing further guidance regarding the new foreign assistance prohibition, the Treasury Regulations will, of course, require time to prepare. Considering the complexity and nuance included in this provision, it is highly recommended that any taxpayers claiming the Section 45Y credit consult with a trusted tax adviser.

This provision also limits the transferability of the energy tax credits under Section 6418 to specifically prohibit the transfer of credits to specified foreign entities.

70513 – PHASE - OUT AND RESTRICTIONS ON CLEAN ELECTRICITY INVESTMENT CREDIT

The Section 48E clean electricity investment credit is the second technology-neutral credit, in which taxpayers are provided a credit calculated as a percentage of the qualified costs expended to place the energy project in service. The base credit amount is 6%, but for taxpayers who successfully qualify for the prevailing wage and apprenticeship, domestic content, low-income community, and energy community bonuses, the credit amount can climb as high as 50%. Unlike the Section 45Y credit, the Section 48E credit is claimed for only the year the energy project is placed in service.

With respect to the Section 48E credit, the provision first terminates the credit for wind and solar projects that are not placed in service by December 31, 2027. The provision also denies credit eligibility for projects

structured under wind and solar residential leasing arrangements.

The newly enacted rules banning material assistance by taxpayers from prohibited foreign entities, which was explained in more detail in the preceding provision, were similarly included in the revisions to the Section 48E credit as well. Additionally, the provision places explicit restrictions on eligibility in certain instances of foreign involvement. For instance, any qualified facilities or energy storage technology that receives material assistance from a prohibited foreign entity in the construction of such facilities or technology are ineligible for the credit if the construction of the facility or property begins after December 31, 2025. Further, the provision restricts foreign involvement by:

• Disallowing the credit for any taxable year beginning after July 4, 2025, if the taxpayer is a specified foreign entity or foreign-influenced entity.

• Disallowing the credit for any taxable year beginning two years after July 4, 2025, if the taxpayer makes a payment of dividends, interest, compensation for services, rentals or royalties, guarantees, or any other fixed, determinable, annual, or periodic amount to an individual prohibited foreign entity in an amount equal to or greater than 5% of the total of such payments which are related to the production of electricity or storage of energy or to more than one prohibited foreign entity in an amount aggregating to a total equal to or greater than 15% of all such payments.

The provision makes slight changes to the domestic content requirements relating to the required percentage of manufactured products. Originally, to be eligible for the domestic content bonus, qualifying facilities or energy storage technology were required to source at least 40% (20% in the case of offshore wind facilities) of the manufactured products whose components were manufactured, produced, or sourced from the United States in the construction of the facility or technology. Now, the required percentage of manufactured products whose components are produced, manufactured, or sourced from the United States that qualifying facilities and energy storage technology must use is equal to:

• At least 40% (20% in the case of an offshore wind facility) if construction began prior to June 16, 2025.

• At least 45% (27.5% in the case of an offshore wind facility) if construction began prior to January 1, 2031, but after June 16, 2025.

• At least 50% (35% in the case of an offshore wind facility) if construction begins in the calendar year 2026.

• At least 55% if construction begins after 2026.

The proposed changes to 48E take place in taxable years beginning after July 4, 2025. The proposed changes to the domestic content requirements retroactively take effect on June 16, 2025.

70514 – PHASE - OUT AND RESTRICTIONS ON ADVANCED MANUFACTURING PRODUCTION CREDIT

This provision expedites the expiration of the advanced manufacturing credit for wind energy components, introduces phase-outs for critical minerals, and restricts eligibility for the credit depending on the involvement of prohibited foreign entities.

Section 45X permits qualified taxpayers to claim credits equaling an amount relative to the number of eligible components produced by the taxpayer and sold to an unrelated person. Eligible components include solar modules, wind energy components, battery cells, inverters, applicable critical minerals, among other products considered integral to clean energy production and storage systems. The specific credit amount varies with each eligible component, but some key examples are:

• In the case of a solar module, an amount equal to 7 cents multiplied by the capacity of such module.

• In the case of a battery cell, an amount equal to $35 multiplied by the capacity of such battery cell.

• In the case of any applicable critical mineral, an amount equal to 10% of the costs incurred by the taxpayer with respect to production of such material.

Section 45X contains a phase out provision limiting the value of the credit, starting with eligible components sold after 2029. The provision creates a new framework for the phase out of the credit with respect to critical minerals, however:

• For critical minerals produced and sold in 2031, the phase out percentage is 75%.

• For critical minerals produced and sold in 2032, the phase out percentage is 50%.

• For critical minerals produced and sold in 2033, the phase out percentage is 25%.

• For critical minerals produced and sold after 2033, no credit is allowed.

Additionally, the provision terminates the credit for wind energy components that are produced and sold after December 31, 2027.

Like the changes to other energy tax credits, the modifications to 45X include limits pertaining to certain instances of foreign involvement. First, eligible components which include any material assistance from prohibited foreign entities are ineligible for the advanced manufacturing production credit starting for tax years beginning after July 4, 2025. Further, the provision removes eligibility for the credit if the taxpayer is a specified foreign entity or foreign-influenced entity starting in taxable years beginning after July 4, 2025. Taxpayers should be aware that the legislative language used to define “material assistance” is exceptionally broad, and it is advisable that concerned taxpayers consult tax professionals to assist navigating the complex rules.

70515 – RESTRICTION ON THE EXTENSION OF ADVANCED ENERGY PROJECT CREDIT PROGRAM

Section 48C provides qualifying advanced energy projects a credit equal to 30% of the qualified investment for the project. Qualifying advanced energy projects must:

• Re-equip, expand, or establish an industrial or manufacturing facility for the production or recycling of various clean energy properties (i.e., fuel cells, hybrid vehicles, carbon capture technology),

• Re-equip an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20%, or

• Re-equip, expand, or establish an industrial facility for the processing, refining, or recycling of critical minerals.

The IRS had previously allocated the entirety of the $10 billion set aside by Congress for the 48C credit to

qualifying projects. However, 48C mandated that these funds be redirected to other qualifying projects if a project that previously received 48C credits lost its certification required to remain eligible. This provision mandates that funds in these circumstances not be redistributed to other projects, effectively removing any possibility of new eligibility and terminating the 48C credit.

This provision took effect on July 4, 2025.

70521 – EXTENSION AND MODIFICATION OF CLEAN FUEL PRODUCTION CREDIT

Under Section 45Z, qualifying taxpayers are eligible for clean fuel production credits equal to the applicable amount per gallon with respect to any qualifying transportation fuel, multiplied by the emissions factor for the fuel. If a quality facility meets prevailing wage and apprenticeship requirements, then the applicable amount is $1.00. Otherwise, the applicable amount is $.2, and the applicable amount is adjusted annually for inflation. Qualifying transportation fuel must be produced by the taxpayer at a qualifying facility and sold to an unrelated person for use by the purchaser in the production of a fuel mixture, for use in a trade or business, or for future retail sale. While the credit was originally scheduled to expire for fuels sold after December 31, 2027, Congress has now moved the expiration date to December 31, 2029.

Additionally, the provision restricts eligibility for the credit in instances of foreign involvement. Specifically, taxpayers characterized as specified foreign entities are ineligible for the credit altogether. Also, taxpayers characterized as foreign -influenced entities are similarly ineligible for the credit starting in taxable years two years after July 4, 2025.

Not only does the provision revise the Section 45Z credit, but it also modifies the excise tax credit available under Section 6426(k) to prevent perceived “double-dipping.”

In particular, the provision the excise credit for fuels sold after September 30, 2025, and decreases the total amount of the 45Z credit for fuels sold before September 30,2025, by the amount of the credit received under section 6426(k). Moreover, the provision removes the special rates for sustainable aviation fuel under Section 45Z, applying instead the base rates used for other

qualifying transportation fuels. Amendments to the special rates apply to fuels sold starting in 2026.

In an effort to prevent double credits generally, the legislation includes a provision disallowing eligibility for the 45Z credit if a transportation fuel is derived from another transportation fuel for which a credit under 45Z is allowed.

70522 – RESTRICTIONS ON CARBON OXIDE SEQUESTRATION CREDIT

This provision adds further restrictions on eligibility for the credit under Section 45Q in relation to foreign involvement and increases the base amount of the credit for certain carbon capture facilities.

Currently, Section 45Q provides eligible taxpayers with credits proportional to the total metric tons of qualified carbon oxide captured by the taxpayer at a qualified facility. The total value of the credit is calculated for any taxable year as follows:

• $20 per metric ton of captured qualified carbon oxide which is disposed of by the taxpayer in a secure geological storage and not used for a commercial purpose.

• $10 per metric ton of captured qualified carbon oxide which is used by the taxpayer for a purpose of which a commercial market exists.

• $17 per metric ton of captured qualified carbon oxide which is disposed of by the taxpayer in a secure geological storage and not used for a commercial purpose.

• $17 per metric ton of captured qualified carbon oxide which is used by the taxpayer for a purpose of which a commercial market exists.

• For taxpayers who meet prevailing wage and apprenticeship requirements, the credit amount is multiplied by five. Additionally, starting in 2027, credits derived from qualified facilities placed in service on or after the date of the Bipartisan Budget Act of 2018 are multiplied by the inflation adjustment factor.

This provision prohibits taxpayers who are defined as specified foreign entities or foreign-influenced entities from claiming the credit starting July 4, 2025

70605 – ENFORCEMENT PROVISIONS WITH RESPECT TO COVID - RELATED EMPLOYEE RETENTION CREDITS

See Enforcement Provisions with Respect to COVIDRelated Employee Retention Credits below, under IRS Information Reporting and Tax Administration

TAX - EXEMPT ORGANIZ A TIONS

7041 5 – MODIFICATION OF EXCISE TAX ON INVESTMENT INCOME OF CERTAIN PRIVATE COLLEGES AND UNIVERSITIES

This provision increases the excise tax on applicable educational institutions with a new rate structure. The tiered rate structure begins at: 1.4% of the net investment income for an institution with a student adjusted endowment from $500,000 to $750, 000; 4% of the net investment income for an institution with a student adjusted endowment over $750,000 to $2 million; and 8% of the net investment income for an institution with a student adjusted endowment over $2 million.

The provision also modifies the term “applicable educational institution” to mean an eligible education institution: (1) that has at least 3,000 (previously 500) tuition-paying students during the preceding taxable year; (2) more than 50% of the tuition-paying students of which are located in the United States; (3) that is not generally a state college or university; and (4) the student adjusted endowment of which is at least $500,000.

The definition of net investment income is revised to include interest income from student loans made by the institution and federally-subsidized royalty income.

Finally, the provision requires applicable educational institutions which file an annual Form 990, to include in such form the number of tuition-paying students and the daily average number of full-time students attending the

institution as determined for purposes of the Section 4968 calculations

The increased excise tax will apply to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights – The change in rates and definition of net investment income likely will result in increased taxes for applicable educational institutions. The increase in the number of tuition-paying students required to be an applicable educational institution may benefit smaller institutions with large endowments.

70416 – EXPANDING APPLICATION OF TAX ON EXCESS COMPENSATION WITHIN TAX - EXEMPT ORGANIZATIONS

This provision expands the definition of “covered employee” under Section 4960(c)(2) to include any employee or former employee who was such an employee during any taxable year beginning after December 31, 2016. Prior to the amendment, a covered employee was defined as one of the five highest compensated employees of an applicable tax-exempt organization for the taxable year, or an employee who was a covered employee of the organization for any preceding taxable year beginning after December 31, 2016.

Under Section 4960(c)(2), an excise tax is imposed on employers who pay over $1 million in remuneration or an excess parachute payment to a covered employee.

This provision applies to taxable years beginning after December 31, 2025.

Citrin Cooperman Insights – While the update may likely mean that more employees must be considered for purposes of the tax on excess remuneration, it should simplify the determination of which employees are considered to be covered employees.

70428 – NONPROFIT COMMUNITY DEVELOPMENT ACTIVITIES IN REMOTE NATIVE VILLAGES

Under current law, commercial operations, even when operated by nonprofits, risk generating unrelated

business taxable income (UBIT) or jeopardizing their exempt status if not closely tied to the organization’s mission. This provision clarifies that certain fisheryrelated commercial activities conducted by tax-exempt organizations affiliated with the Western Alaska Community Development Quota (CDQ) program will be treated as substantially related to their exempt purpose for federal income tax purposes. Consequently, it helps preserve the organizations’ tax-exempt status and shields associated income from unrelated business income tax (UBIT).

• The provision applies to activities such as harvesting, processing, transportation, and sale of fish from the Bering Sea and Aleutian Islands, when conducted by CDQ groups described in the Magnuson-Stevens Act. These activities will be treated as furthering the organization’s charitable mission under Section 501(c), provided they align with one or more of the congressionally defined goals of the CDQ program (e.g., economic development, employment, or subsistence fishing).

• If a qualifying CDQ entity owns a subsidiary that conducts these activities, it may transfer the subsidiary’s assets back to the exempt parent without triggering gain or recognition of income, so long as the transfer occurs within 18 months of July 4, 2025. In addition, income earned by the exempt parent from the transferred business will remain exempt from federal income tax after the transfer. This provision went into effect on July 4, 2025, and will remain in effect during the existence of the western Alaska community development quota program.

CHARITABLE CONTRIBUTIONS AND PHILANTHROPY

70411 – TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO SCHOLARSHIP GRANTING ORGANIZATIONS

This provision creates a new nonrefundable income tax credit for charitable contributions made by U.S. citizens and residents to scholarship granting organizations. The tax credit is generally equal to the qualified contributions made by the taxpayer during the taxable year but may not exceed the greater of 10% of the taxpayer's adjusted

gross income or $5,000. Any tax credit claimed under this Section 25F must be reduced by the amount permitted as a credit on any State tax return of the taxpayer for qualified contributions during the taxable year.

Key Qualification Criteria:

• An eligible student must be a member of a household with an income which is not greater than 300% of the area median gross income for the previous calendar year and eligible to enroll in a public elementary or secondary school.

• A qualified contribution includes only cash and publicly traded securities.

• A scholarship granting organization must be a public charity, substantially all of its activities must consist of providing scholarships for qualified elementary or secondary education expenses of eligible students, and it must maintain separate accounts exclusively for tracking qualified contributions separately from other funds. The organization must also provide scholarships to at least 10 students who do not all attend the same school, verify annual household income for eligible students, and meet various other requirements such as obtaining annual financial statement audits. There are also restrictions on who may receive scholarships from the organization based on their relationship to disqualified persons of the organization.

Any expense taken as a credit under this Section cannot also be taken as a charitable contribution deduction under Section 170. Credits exceeding the taxpayer’s limit are carried forward up to five years.

The credit is also subject to a volume cap which is generally allocated on a first-come, first-served basis so depending on the popularity of the credit, it may be further limited based on availability.

Amounts received from a scholarship granting organization for qualified elementary or secondary education expenses of an eligible student will be excluded from the taxable income of that student and/or the taxpayer claiming such person as a dependent.

Newly created Section 4969 regulates the operations of scholarship granting organizations. A scholarship granting organization must satisfy a required distribution amount.

• Key elements of the distribution requirement include:

o The distribution amount is calculated as 100% of the total receipts of the scholarship granting organization for the taxable year less the portion of such receipts that are retained for reasonable administrative expenses for the taxable year (safe harbor is 10% of receipts) or are elected to be carried to the succeeding taxable year (cannot exceed 15% of receipts) plus the amount of carryover from the preceding year, if any.

o Distributions include amounts which are formally committed but not distributed and may include contributions set aside for eligible students for more than one year.

o The distribution deadline for receipts is the first day of the third taxable year following the taxable year in which such receipts are received by the scholarship granting organization.

This provision applies to taxable years ending after December 31, 2026.

70426 – 1- PERCENT FLOOR ON DEDUCTION OF CHARITABLE CONTRIBUTIONS MADE BY CORPORATIONS

Previously, corporations were generally permitted to deduct all charitable contributions up to 10% of taxable income, and any contributions in excess of this limitation could be carried forward for up to five years.

This provision now establishes a minimum threshold, such that the aggregate total of a corporation’s charitable donations must exceed 1% of the corporation’s taxable income to be eligible for a deduction. The 10% upper limit remains in effect, as well as the five-year carry forward rule. Qualified conservation contributions made by certain farmers and ranchers are exempted from the 1% floor.

The amount of charitable contributions disallowed by the 1% floor may be carried forward only from years in which the corporation’s charitable contributions were greater than 10% of taxable income.

This provision applies to taxable years beginning after December 31, 2025.

70429 – ADJUSTMENT OF CHARITABLE DEDUCTION FOR CERTAIN EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE WHALING

Unlike ordinary fishing operations, subsistence whaling conducted by Alaska Natives is not treated as a trade or business. Consequently, expenses are not deductible under Section 162. The activity is ceremonial, community-oriented, and performed under the oversight of the Alaska Eskimo Whaling Commission (AEWC). The catch is distributed among the community and not sold for profit. To recognize the economic burden borne by these individuals who must fund equipment for sanctioned hunts, Congress enacted Section 170(n) in 2004 to allow a charitable deduction equivalent for these out-of-pocket expenses

• Eligible taxpayers must be recognized whaling captains by the AEWC.

• Deductible “whaling expenses” include boats, weapons, gear, provisions, and distribution of the catch

• The deduction is capped (now raised from $10,000 to $50,000) and is claimed as a charitable contribution, not a business expense.

• Taxpayers must maintain detailed substantiation records as directed by IRS guidance

This provision applies to taxable years beginning after December 31, 2025.

70424 - PERMANEN T AND EXPANDED REINSTATEMENT OF PARTIAL DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF INDIVIDUALS WHO DO NOT ELECT TO ITEMIZE

See Permanent and Expanded Reinstatement of Partial Deduction for Charitable Contributions of Individuals who do not Elect to Itemize above, under Individuals

70425 - 0.5 PERCENT FLOOR ON DEDUCTION OF CONTRIBUTIONS MADE BY INDIVIDUALS

See 0.5 Percent Floor on Deduction of Contributions Made by Individuals above, under Individuals

70428 – NONPROFIT COMMUNITY DEVELOPMENT ACTIVITIES IN REMOTE NATIVE VILLAGES

See Nonprofit Community Development Activities in Remote Native Villages above, under Tax-Exempt Organizations

EDUCATION

- RELATED PROVISIONS

70412 – EXCLUSION FOR EMPLOYER PAYMENTS OF STUDENT LOANS

This provision amends Section 127 to make permanent and adjust for inflation the student loan payment exclusion for qualified educational assistance. Pursuant to Section 127, qualified educational assistance may be excluded from employee income up to $5,250. A qualified educational assistance program is a separate written plan of an employer for the exclusive benefit of their employees. Educational assistance includes, among others, tuition, fees, and books, but excludes tools or supplies that may be retained by the employees after completion of the course. No more than 5% of the amount paid by the employer for educational assistance during the year may be provided for the class of shareholders or owners. Previously under Section 127, student loan payments qualified as educational assistance only if they were made before 2026. The provision also adjusts for inflation the $5,250 exclusion maximum in any taxable year starting after 2026

This provision applies to payments made after December 31, 2025.

70413 – ADDITIONAL EXPENSES TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF 529 ACCOUNTS

This provision expands the Section 529(c)(7) term “qualified higher education expense” to include elementary and secondary public, private, and religious school expenses for: curricular materials; books or other instructional materials; online education materials; tutoring tuition; fees for certain tests; fees for dual enrollment in institutions of higher education; and educational therapies for students with disabilities. This provision applies to distributions made after July 4, 2025.

Regarding elementary school expenses, Section 529(c)(7) previously extended the qualified higher education expense only to “expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”

This provision also modifies the annual limit on such expenses from $10,000 to $20,000 and applies to taxable years beginning after December 31, 2025.

70414 – CERTAIN POSTSECONDARY CREDENTIALING EXPENSES TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF 529 ACCOUNTS

This provision expands the definition of “qualified higher education expenses” under Section 529(e) to include qualified postsecondary credentialing expenses. These expenses include:

• Tuition, fees, books, supplies, and equipment required for enrollment in postsecondary credentialing programs, or any other expense that would be covered under Section 529(e)(3)(A) if incurred in connection with enrollment at an eligible educational institution; Fees for testing required to obtain or maintain a recognized postsecondary credential; and

• Fees for continuing education required to maintain a recognized postsecondary credential.

A “recognized postsecondary credential program” is any program for obtaining a recognized postsecondary credential if the program is listed under Section 122(d) of the Workforce Innovation and Opportunity Act or the Web Enabled Approved Management System (WEAMS) Public directory. A postsecondary credential program may alternatively qualify if it provides education that prepares individuals to take a reputable examination or is identified by the Secretary, in consultation with the Secretary of Labor, as being a reputable program for obtaining a recognized postsecondary credential.

• A “recognized postsecondary credential” is any: industry-recognized postsecondary employment credential; certificate of completion of a certified apprenticeship; occupational or professional license recognized by a State or the Federal Government; or postsecondary credential as defined in Section 3(52) of the Workforce Innovation and Opportunity Act.

This provision applies to distributions made after July 4, 2025.

70606 – SOCIAL SECURITY NUMBER REQUIREMENT FOR AMERICAN OPPORTUNITY AND LIFETIME LEARNING CREDITS

This provision requires taxpayers claiming the American Opportunity Tax Credit or Lifetime Learning Tax Credit to include their social security number on their tax return. If the credit covers qualified tuition or related expenses

of an individual other than the taxpayer or the taxpayer’s spouse, the name and social security number of such individual must be included as well. To receive the American Opportunity Tax Credit, the taxpayer must include the employer identification number of any institution to which the taxpayer paid qualified tuition and related expenses on their tax return.

This provision applies to taxable years beginning after December 31, 2025.

70110 – TERMINATION OF MISCELLANEOUS ITEMIZED DEDUCTIONS OTHER THAN EDUCATOR EXPENSES

See Termination of Miscellaneous Itemized Deductions Other than Educator Expenses above, under Individuals.

70115 – EXTENSION AND ENHANCEMENT OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE ACCOUNTS

See Extension and Enhancement of Increased Limitation on Contributions to ABLE Accounts above, under Individuals.

70116 – EXTENSION AND ENHANCEMENT OF SAVERS CREDIT ALLOWED FOR ABLE CONTRIBUTIONS

See Extension and Enhancement of Savers Credit Allowed for ABLE Contributions above, under Individuals.

70117 – EXTENSION OF ROLLOVERS FROM QUALIFIED TUITION PROGRAMS TO ABLE ACCOUNTS PERMITTED

See Extension of Rollovers From Qualified Tuition Programs to ABLE Accounts Permitted above, under Individuals.

70119 – EXTENSION AND MODIFICATION OF EXCLUSION FROM GROSS INCOME OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH OR DISABILITY

See Extension and Modification of Exclusion From Gross Income of Student Loans Discharged on Account of Death or Disability above, under Individuals

70411 – TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO SCHOLARSHIP GRANTING ORGANIZATIONS

See Tax Credit for Contributions of Individuals to Scholarship Granting Organizations above, under Charitable Contributions and Philanthropy.

HEALTH - RELATED PROVISIONS

71307 – ALLOWANCE OF BRONZE AND CATASTROPHIC PLANS IN CONNECTION WITH HEALTH SAVINGS ACCOUNTS

This provision amends Section 223 to permit bronze and catastrophic plans to be considered high deductible health plans (HDHPs), and thus eligible for HSA status. HSAs are tax-advantaged accounts that taxpayers may use to pay qualified medical expenses. Pursuant to Section 223, the taxpayer is eligible to contribute to an HSA under certain conditions, including having an HDHP.

An HDHP is a health plan with a minimum annual deductible of $1,650 for self-coverage ($3,300 for family coverage). The health plan generally must not cover health services before the deductible is met. Additionally, the sum of the health plan’s annual deductible and other annual out-of-pocket expenses required to be paid under the plan (other than premiums) for coverage benefits must not exceed $8,550 for self-coverage ($16,600 for family coverage).

Under the Patient Protection and Affordable Care Act, health plans categorized by actuarial value (AV) are sold on individual exchanges. Individual exchanges are virtual marketplaces where taxpayers can purchase private health insurance. Plans sold on exchanges must meet certain criteria, including meeting a minimum AV. A plan’s AV is the estimate of the plan’s percentage of total average costs for covered benefits paid by the plan. Plans sold on exchanges are categorized by metals. Silver, gold, and platinum plans have AVs of at least 70%, and bronze plans have AVs of about 60%. While bronze plans offer the lowest monthly premiums, they maintain the highest out-of-pocket costs. Because these costs can exceed the maximum qualifying out-of-pocket costs for HDHP eligibility, bronze plans may fail to be considered HSA eligible under Section 223.

Another type of plan sold on individual exchanges is a catastrophic plan, which has a high deductible equal to

out-of-pocket costs. These plans are limited to individuals under 30 years old or who cannot afford other health insurance. Catastrophic plans fail to qualify for HSA status, as their out-of-pocket costs exceed the HSA-eligible limit.

This provision amends the definition of “high deductible health plan” to include bronze and catastrophic plans, making them HSA eligible even if they fail the HDHP criteria.

This provision applies to months beginning after December 31, 2025.

71308 – TREATMENT OF DIRECT CARE PRIMARY SERVICE ARRANGEMENTS

This provision amends Section 223 to permit direct primary care (DPC) service arrangement payments to be considered qualified medical expenses. HSAs are taxadvantaged accounts that taxpayers may use to pay qualified medical expenses. Pursuant to Section 223, HSA distributions are excluded from the account beneficiary's gross income when used exclusively for qualified medical expenses. HSA distributions used otherwise are included in the account beneficiary’s gross income and usually subject to a 20% penalty.

According to this provision, a DPC service arrangement is an “arrangement under which such individual is provided medical care (as defined by Section 213(d)) consisting solely of primary care services provided by primary care practitioners . . . if the sole compensation for such care is a fixed periodic fee.” Previously, these fees were not qualified medical expenses because they were considered insurance payments, which are explicitly excluded from qualified medical expenses This provision would permit DPC fees to be considered qualified medical expenses up to $150 per month for individual coverage ($300 if coverage covers more than one person). This provision excludes the following from qualified medical expenses for primary care services: procedures that require the use of general anesthesia; prescription drugs other than vaccines; and laboratory services not typically administered in an ambulatory primary care setting.

This provision applies to months beginning after December 31, 2025, and adjusts the $150 and $300 limits for inflation beginning in 2027.

70404 – ENHANCEMENT OF THE DEPENDENT CARE ASSISTANCE PROGRAM

This provision amends Section 129 to increase the amount of dependent care assistance that taxpayers may exclude from gross income.

Section 129 grants taxpayers an exclusion from gross income for amounts paid by their employer for dependent care assistance under a dependent care assistance program. Previously, taxpayers were permitted to exclude up to $5,000 ($2,500 for married individuals filling separately) of dependent care assistance from gross income. This provision increases the maximum exclusion to $7,500 ($3,750 for married individuals filing separately) and applies to taxable years beginning after December 31, 2025.

70115 – EXTENSION AND ENHANCEMENT OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE ACCOUNTS

See Extension and Enhancement of Increased Limitation on Contributions to ABLE Accounts above, under Individuals.

70116 – EXTENSION AND ENHANCEMENT OF SAVERS CREDIT ALLOWED FOR ABLE CONTRIBUTIONS

See Extension and Enhancement of Savers Credit Allowed for ABLE Contributions above, under Individuals.

70117 – EXTENSION OF ROLLOVERS FROM QUALIFIED TUITION PROGRAMS TO ABLE ACCOUNTS PERMITTED

See Extension of Rollovers From Qualified Tuition Programs to ABLE Accounts Permitted above, under Individuals.

70304 – EXTENSION AND ENHANCEMENT OF PAID FAMILY AND MEDICAL LEAVE CREDIT

See Extension and Enhancement of Paid Family and Medical Leave Credit above, under Executive Compensation and Employee Benefits.

70403 – RECOGNIZING INDIAN TRIBAL GOVERNMENTS FOR PURPOSES OF DETERMINING

WHETHER A CHILD HAS SPECIAL NEEDS FOR PURPOSES OF THE ADOPTION CREDIT

See Recognizing Indian Tribal Governments for Purposes of Determining Whether a Child has Special Needs for Purposes of the Adoption Credit below, under Miscellaneous.

REAL ESTATE

70421 – PERMANENT RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES

This provision creates a new permanent framework for qualified opportunity zones (QOZs) while also narrowing the definition of what qualifies as an opportunity zone under Section 1400Z.

Under the TCJA, QOZs were created to incentivize development and investment into low-income communities. Initially, governors of each state could nominate up to 25% of low-income communities within their state to be designated QOZs. These low-income communities were then certified by the Secretary of Treasury, and the designations are currently set to expire starting in 2029.

Taxpayers can invest in QOZs through qualified opportunity funds (QOF), which are investment vehicles that hold at least 90% of their assets in QOZs. To qualify for the associated tax incentives, following the sale of an appreciated asset a taxpayer has 180 days to reinvest the realized capital gains into a qualified opportunity fund. The basis of a taxpayer’s investment into a qualified opportunity fund is initially equal to zero but may increase due to tax benefits related to investments in QOZs. Those tax benefits are as follows:

• Temporary deferral of capital gains through 2026.

• A step-up in tax basis of 10% for investments held for five years and an additional step-up of 5% if held for seven years.

• No capital gains tax on the appreciation of the qualified investment fund itself if the investment is held for longer than ten years.

Taxpayers currently must pay the deferred tax in tax year 2026 or in the tax year for which their investment in a qualified opportunity fund is sold, whichever comes first.

The provision makes the following changes to the existing rules regarding opportunity zones, many related to the provisions now being permanent.

• New QOZ designations last ten years, with the first round of designations to be made on July 1, 2026 and every ten years thereafter

• Census tracts contiguous with low-income communities can no longer be designated as a QOZ if the tract itself is not categorized as a low-income community.

• The special rule for opportunity zones in Puerto Rico is repealed.

• Deferred gain recognized the earlier of when the interest in the QOF is sold or 5 years from the date of the investment in the QOF

• Adds a new “qualified rural opportunity fund” (QROF) which provides greater tax benefits than investments in non-rural areas.

This provision also added specific definitions of terms for purposes of determining which tracts qualify as an opportunity zone. The provisions add a new definition of “low-income communities” which compares income in the census tract to statewide median income (special rule for metropolitan areas) or looks to the poverty rate of the census tract as well as statewide median income.

The provision also changes the amount of deferred gain that must be recognized. Under the changes, the amount of tax the taxpayer recognizes is the excess of the lesser of the deferred gain or the fair market value as of the recognition date over the taxpayer’s basis in the investment. Although the taxpayer’s initial basis in the investment is zero, if the investment is held the full 5 years, the taxpayer’s basis is increased to 10% (30% for investments in a qualified rural opportunity zone) of the amount of the deferred gain The taxpayer’s basis is increased by any recognized gain.

The provision also contains a special rule for investments held at least 10 years Under this rule, the taxpayer’s basis in its QOF investment will be equal to the fair market value as of the date the investment is sold for taxpayers who hold the investment at least 10 years (but less than 30 years). For taxpayers who hold the investment at least 30 years, the taxpayer’s basis will be

equal to the fair market value of the investment on the date that is 30 years after the date of the investment. Lastly, the provision also creates significant reporting requirements for QOFs and QROFs, which must be done electronically. QOFs and QROFs will be required to file annual information returns relating to their QOZ businesses and QOZ business properties. The provision adds a penalty for funds who fail to timely and accurately meet their reporting requirements. The penalty is equal to $500 per day with a maximum of $10,000 ($50, 000 for large QOFs) for any single return The penalty is increased to $2,500 per day (with a maximum of $50,000 or $250,000 for large QOFs) if the failure is intentional. These amounts are adjusted for inflation. There will be no penalty if the taxpayer has reasonable cause for the failure. These changes are effective beginning in 2026.

In addition to the substantive changes, the provision also appropriates $15 million until September 30, 2028, for the IRS to make annual reports to Congress containing detailed data on QOFs and QROFs

70435 – EXCLUSION OF INTEREST ON LOANS SECURED BY RURAL OR AGRICULTURAL REAL PROPERTY

New Section 139L provides an exclusion from gross income for 25% of the interest earned on certain real estate loans secured by rural or agricultural property. The exclusion applies only to interest received by a “qualified lender” on “qualified real estate loans” made after July 4, 2025. The provision is intended to encourage lending in rural and agricultural markets by reducing the effective tax burden on interest income from such loans.

• Qualified lenders include banks and savings associations with FDIC-insured deposits, regulated insurance companies, and certain U.S.-organized affiliates of bank or insurance holding companies, as well as Farm Credit System institutions with respect to loans secured by agricultural real estate. Qualified real estate loans are defined as loans (or leasehold mortgages with lien status) secured by rural or agricultural real property, which includes land used for farming, aquaculture, fishing, or seafood processing. Importantly, the benefit is unavailable for loans to specified foreign entities or for refinancings of pre-enactment loans.

• The provision coordinates with existing rules under Section 265, which generally disallow interest deductions on debt incurred to purchase or carry investments that produce tax-exempt income. Without coordination, lenders could be denied deductions on a disproportionate amount of their borrowing costs. Section 139L clarifies that only 25% of the income from a qualifying loan is treated as tax-exempt for purposes of applying Section 265, thereby ensuring that the related disallowance rules apply proportionately and do not create broader deduction limitations than intended

This provision applies to taxable years ending after July 4, 2025.

Citrin Cooperman Insights - By limiting the exclusion to 25% of the interest and requiring proportional coordination with Section 265, the final version of Section 139L offers a more measured and administrable tax benefit than prior proposals. For example, a broader 2003 proposal from Sen. Chuck Hagel (R-NE) would have excluded 100% of interest on agricultural loans and included loans secured by rural residences. Those features were not retained in the current provision.

70437 – TREATMENT OF CAPITAL GAINS FROM THE SALE OF CERTAIN FARMLAND PROPERTY

Under newly enacted Section 1062 (previous Section 1062 has been renumbered to Section 1063), certain taxpayers are permitted to defer payment of federal income tax attributable to gains recognized on the sale of qualified farmland to an active farmer. Unlike the traditional installment sale regime under Section 453 which defers recognition of gain itself until payment is received, this provision does not alter the timing of income recognition. Instead, it allows for the payment of income tax arising from the gain to be spread equally over four years.

Specifically, a taxpayer may elect to pay the portion of their net income tax attributable to gain from the sale or exchange of “qualified farmland property” to a “qualified farmer” in four equal annual installments. The first installment is due on the normal filing deadline (without regard to extensions) for the year of sale, with each subsequent installment due one year after the preceding installment on the corresponding filing deadline. This

approach offers liquidity relief without changing the underlying inclusion of the gain in taxable income in the year of sale.

• Acceleration rules apply in the event of nonpayment, death (for individuals), or business cessation, liquidation, or similar events (for C corporations, trusts, or estates). However, acceleration may be avoided if a buyer in an asset sale assumes the payment obligation under an agreement with the IRS.

• To qualify, the property must be located in the United States and must have been used or leased for farming purposes for substantially all of the prior ten-year period and must be subject to a post-sale restriction prohibiting non-farm use for at least ten years. Farmland owned through partnerships or S corporations may also qualify, with use and leasing activity attributed to partners or shareholders. The buyer must be a “qualified farmer,” defined by reference to the Food Security Act of 1986 as an individual actively engaged in farming.

• The election must be made on a timely filed return and is made at the partner or shareholder level in the case of passthrough entities. Taxpayers must attach a copy of the enforceable farmland use restriction to the return for the year of sale.

This provision applies to sales or exchanges in taxable years beginning after July 4, 2025.

70422 – PERMANENT ENHANCEMENT OF LOWINCOME HOUSING TAX CREDIT

Taxpayers may claim the low-income housing tax credit annually for 10 years if they have incurred the costs of building or rehabilitating rental housing that is occupied by low-income tenants. The rental property must have received a credit allocation from the state to be eligible for the federal tax credit, or the property must have been financed using tax-exempt bonds. The state-issued credit allocations are subject to an annual housing credit ceiling. Meanwhile, the use of bonds to finance the housing projects limits flexibility for taxpayers because principal payments are due on bonds within a reasonable timeframe to redeem the bonds. The provision has permanently decreased the state allocation ceiling

multiple from 1.125 to 1.12 and decreased the bondfinancing threshold by 25% for any projects financed with bonds issued after December 31, 2025.

This provision applies to buildings placed in service in taxable years beginning after December 31, 2025

70423 – PERMANENT EXTENSION OF THE NEW MARKETS TAX CREDIT

The New Markets Tax Credit (NMTC), originally enacted in 2000, is designed to stimulate private investment in low-income communities by providing tax credits to investors in qualified community development entities (CDEs). These CDEs, in turn, invest in businesses, real estate projects, and community facilities in economically distressed areas

• This provision makes the NMTC program permanent by amending Section 45D(f)(1)(H) to remove the current expiration after 2025. It ensures that the annual $5 billion allocation of NMTC authority continues indefinitely for each calendar year beginning after 2019.

• In addition, the provision imposes a five-year limitation on the carryforward period for unused NMTC allocation authority. While prior law allowed indefinite carryforward, the amendment provides that any excess allocation must now be used within five calendar years, with all pre-2026 excess amounts deemed to have occurred in 2025 for this purpose.

These changes are effective for calendar years beginning after December 31, 2025.

70430 – EXCEPTION TO PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING FOR CERTAIN RESIDENTIAL CONSTRUCTION CONTRACTS

This provision expands the exception from the percentage-of-completion method (PCM) of accounting under Section 460 for long-term construction contracts. Under prior law, only “home construction contracts” were fully exempt from the PCM. These contracts were narrowly defined to include construction of dwelling units in buildings containing four or fewer units, including certain associated site improvements.

• The amendment replaces the term “home construction contract” with the broader concept of “residential construction contract,” thereby extending the PCM exception to a wider range of residential building projects, including larger multifamily developments

• For these newly eligible contracts, the gross receipts threshold is also liberalized. While prior law required taxpayers to meet the Section 448(c) gross receipts test based on a two-year lookback, the revised rule permits a three-year lookback for residential construction contracts that do not qualify as home construction contracts.

This provision applies to contracts entered into in taxable years beginning after July 4, 2025

70439 – RESTORATION OF TAXABLE REIT SUBSIDIARY ASSET TEST

This provision increases the limit on the value of a REIT’s assets that may consist of securities in one or more taxable REIT subsidiaries (TRSs) from 20% to 25%. The expanded threshold under Section 856(c)(4)(B)(ii) gives REITs greater flexibility to engage in complementary business activities (e.g., tenant services or international operations) through TRSs without risking their REIT status. By relaxing the asset test constraint, the change is expected to simplify compliance, reduce reliance on parallel C corporation structures, and give REITs more room to respond to evolving market demands.

This provision applies to taxable years beginning after December 31, 2025.

70108 – EXTENSION AND MODIFICATION OF LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENT INTEREST

See Extension and Modification of Limitation on Deduction for Qualified Residence Interest above, under Individuals

DISASTER RELIEF AND CASUALTY LOSSES

70438 – E XTENSION OF RULES FOR TREATMENT OF CERTAIN DISASTER - RELATED PERSONAL CASUALTY LOSSES

This provision extends temporary relief from the general limitations imposed on personal casualty loss deductions

under the Internal Revenue Code. Ordinarily, personal casualty and theft losses are deductible only if the taxpayer itemizes, each loss exceeds a $100 floor, and total losses exceed 10% of adjusted gross income. These limitations are found in Section 165(h), and such losses typically do not benefit taxpayers who claim the standard deduction.

Recent disaster legislation temporarily relaxed these rules for qualified disaster losses by removing the 10% of AGI threshold, increasing the per-loss floor to $500, and allowing the deduction even for taxpayers who do not itemize (effectively treating th ese losses as above-theline deductions under Section 62). This provision extends that favorable treatment to apply to losses arising from Presidentially declared disasters occurring through 60 days after July 4, 2025. Individuals impacted by such disasters may continue to claim these deductions under more generous rules.

This provision went into effect on July 4, 2026.

70109 – EXTENSION AND MODIFICATION OF LIMITATION ON CASUALTY LOSS DEDUCTION

This provision makes permanent the TCJA requirement that Section 165 personal casualty loss deductions be attributable to federally declared disasters. Additionally, such deductions are permitted for state-declared disasters. Taxpayers are still permitted to deduct personal casualty losses not attributable to federally or state-declared disasters to the extent the taxpayer incurs personal casualty gains.

This provision applies to taxable years beginning after December 31, 2025

IRS INFORMATION REPORTING AND TAX ADMINISTRATION

70432 – REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY NETWORK TRANSACTIONS

This provision repeals the changes to Section 6050W regarding information reporting requirements for third party settlement organizations (TPSOs).

Under the American Rescue Plan Act of 2021, Section 6050W was amended to lower the de minimis reporting threshold of TPSOs to exclude only payments to payees, relating to transactions for the sale of goods and services, totaling less than $600 in a calendar year.

The provision replaces that provision with a new Section 6050W(e) under which TPSOs are only required to file Form 1099-K for payments to participating payees if transactions exceed $20,000 and the aggregate number of such transactions exceeds 200 in a calendar year. Additionally, the provision exempts TPSOs that do not cross the de minimis threshold from backup withholding requirements under Section 3406 (unless the payee exceeded the threshold in the prior year).

The changes to the de minimis threshold requirements apply to all returns for calendar years beginning after December 31, 2021, and the changes to backup withholding requirements apply to calendar years beginning after December 31, 2024.

70433 – INCREASE IN THRESHOLD FOR REQUIRING INFORMATION REPORTING WITH RESPECT TO CERTAIN PAYEES

This provision increases the threshold amount for business payments that a business is required to file an information return for under Section 6041 and 6041A (such as the Form 1099-MISC or 1099-NEC, which are typically triggered when a business pays an independent contractor or service provider $600 or more in a year).

Currently, businesses are required to file information reports for business payments of $600 or more. Under the provision in HR 1, this threshold permanently increases to $2,000 and is adjusted annually for inflation starting in 2027. Additionally, backup withholdings are not required for payments under Section 6041 if they do not meet the $2,000 minimum threshold.

This provision applies to payments made after December 31, 2025.

70605 – ENFORCEMENT PROVISIONS WITH RESPECT TO COVID - RELATED EMPLOYEE RETENTION CREDITS

This provision increases penalties on “COVID-ERTC promoters” who fail to satisfy due diligence requirements, extends the assessment period for the employee retention tax credit (ERTC), provides additional time for taxpayers to obtain refunds due to previously reduced wage deductions in the event an ERTC claim is denied, and bars the IRS from issuing any employee

retention tax credits or refunds for claims filed after January 31, 2024.

Under current law, employers were entitled to employee retention credits (which could be refundable) against employee tax from the second quarter of 2020 through the third quarter of 2021. The amount of the credit is equal to a percentage of the qualified wages with respect to each employee of a taxpayer for the respective calendar quarter. To claim the credit, eligible employers must have suffered a full or partial suspension of operations due to a government order or had a specified reduction in gross receipts as compared to 2019.

As enacted by the new provision, “COVID-ERTC promoters” who fail to comply with due diligence requirements in relation to any COVID-ERTC document are subject to penalties in the amount of $1,000 per violation. Currently, tax preparers are subject to penalties equal to $500 per failure to comply with due diligence requirements. Certified professional employer organizations, as defined under Section 7705, are exempt from the definition of a COVID-ERTC promoter. This penalty applies to any aid, assistance, or advice provided after July 4, 2025

Also, the provision amends the penalty under Section 6676 for erroneous claims for refunds or credits to include employee tax in addition to income tax. Section 6676 applies a penalty in the amount equal to 20% of the amount of the claim for credit or refund in excess of the allowable credit or refund.

Additionally, the provision bars the IRS from issuing any new credits or refunds unless the ERTC claim was filed on or before January 31, 2024. The provision also extends the time period for the assessment of amounts attributable to the ERTC to six years after the date on which the claim for a credit or refund is made or when the return was filed. Similarly, if the claimed ERTC credit is denied, the provision extends the period of limitations on filing refunds claims attributable to any previouslyreduced wage expenses related to the ERTC claim until six years after the original return was filed (or deemed filed) or the date the refund is made (presumably for partial denials) Importantly, this provision applies only to credits or refunds claimed under Section 3134 rather than Section 2301 of the CARES Act.

70525 – ALLOW FOR PAYMENTS TO CERTAIN INDIVIDUALS WHO DYE FUEL

Prior to passage of the Act, taxpayers subject to an improperly assessed fuel excise tax under Section 4081 for fuel transported via commercial vehicles had no mechanism to seek a refund of the tax. Despite being transported by a commercial vehicle, fuels used for agricultural or off-road purposes are not subject to excise taxes, pursuant to Section 4082, and the newly created Section 6435 now provides for refunds of the improperly assessed and paid excised taxes.

This provision applies to eligible fuels removed on or after 180 days after July 4, 2025.

70604 – EXCISE TAX ON CERTAIN REMITTANCE TRANSFERS

This provision establishes an excise tax on remittance transfers, now codified under Section 4475. It imposes a 1% tax on cash transfers and transfers deemed to be similar to cash, such as money orders or cashier’s check. A remittance transfer is a transfer initiated by someone in the United States to someone in a foreign country. Congress specifically noted that the Treasury Department may determine additional means of transfer not listed in the statute are also subject to the tax. In so noting, the provision specifically exempts transfers from qualifying accounts held in or by a financial institution and those transfers funded by debit or credit cards issued in the United States. The remittance transfer provider must collect the tax from the sender and send the accumulated taxes to the government quarterly. Failure to collect the tax at the time of the transfer results in a shift in the tax liability to the remittance transfer provider.

This provision applies to transfers made after December 31, 2025.

70607 – TASK FORCE ON THE REPLACEMENT OF DIRECT FILE

This provision appropriates $15 million to the Department of the Treasury to study alternatives to the IRS’s Direct File program and report its findings to Congress within 90 days of July 4, 2025. The report is expected to assess both the feasibility and public receptivity of replacing Direct File with an enhanced

public-private solution. This provision signals a potential policy pivot away from IRS-administered e-file solutions in favor of expanding partnerships with private-sector providers, subject to cost-effectiveness and taxpayer approval.

The mandated report may serve as a roadmap for either sunsetting or reshaping Direct File programs, depending on its findings.

MISCELLANEOUS PROVISIONS

70118 – EXTENSION OF TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN THE SINAI PENINSULA AND ENHANCEMENT TO INCLUDE ADDITIONAL AREAS

This provision amends the TCJA to extend and expand the special tax treatment of servicemembers working in qualified hazardous duty areas.

Under the TCJA, the Sinai Peninsula would no longer have been considered a qualified hazardous duty area after 2025. This provision permanently classifies the Sinai Peninsula, along with Kenya, Mali, Burkina Faso, and Chad, as qualified hazardous duty areas.

This provision takes effect on January 1, 2026.

70309 – SPACEPORTS ARE TREATED LIKE AIRPORTS UNDER EXEMPT FACILITY BOND RULES

This provision expands the definition of “exempt facility bonds” under Section 142(a)(1) to include spaceports, placing them alongside airports as eligible facilities for tax-exempt private activity bond financing. It also includes a special rule for spaceport property located on land leased by a governmental unit from the United States. Such property will be treated as “owned” by the governmental unit for purposes of meeting the ownership requirement under Section 142(b)(1)(A), provided the lease and any subleases satisfy applicable criteria. This allows spaceport infrastructure located on federal land to qualify for tax-exempt bond financing.

Proposals to treat spaceports like airports for financing purposes have circulated since the early 1990s. This provision revives and modernizes that concept, reducing financing barriers for commercial launch infrastructure and supporting continued growth in the space economy.

This provision applies to obligations issued after July 4, 2025.

70403 – RECOGNIZING INDIAN TRIBAL GOVERNMENTS FOR PURPOSES OF DETERMINING WHETHER A CHILD HAS SPECIAL NEEDS FOR PURPOSES OF THE ADOPTION CREDIT

Pursuant to Section 23, the taxpayer is granted a tax credit for adopting a “child with special needs.” To qualify as a “child with special needs,” a state must determine that the child cannot be placed with adoptive parents without adoption assistance. This provision permits Indian tribal governments to also determine whether a child is a “child with special needs.”

This provision applies to taxable years beginning after December 31, 2024.

SPIRITS

70427 – PERMANENT INCREASE IN LIMITATION ON COVER OVER OF TAX ON DISTILLED

This provision increases the cover over of tax on distilled spirits shipped from Puerto Rico or the U.S. Virgin Islands. Currently, the cover over of tax paid to Puerto Rico or the U.S. Virgin Islands is the lesser of $10.50 or the tax imposed under Section 5001. This provision permanently increases the former amount to $13.25, applicable to distilled spirits brought into the United States after December 31, 2025

70434 – TREATMENT OF CERTAIN QUALIFIED SOUND RECORDING PRODUCTIONS

This provision adds qualified sound recording productions to the list of items the cost of which a taxpayer may elect to deduct under Section 181 and, as explained further below, to expense under Section 168(k), rather than capitalize and recover through depreciation.

Currently, qualified film or television productions, as well as qualified live theatrical productions, are included under Section 181 Qualified sound recording productions that are produced in the United States are added under the provision, with taxpayers eligible to deduct up to $150,000 in associated costs The provision defines qualified sound recording production by reference to US copyright law; i.e., works that result from

the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.

Section 181 currently includes a termination subsection, providing that the section does not apply to qualifying productions that commence after December 31, 2025. The amendment to Section 181 for qualified sound recording productions takes effect in taxable years ending after the enactment date, providing only a limited window for taxpayers hoping to claim the Section 181 deduction. However, the amendment also adds qualifying sound recording productions to the list of qualifying property eligible for bonus depreciation under IRC Section 168(k).

70436 – REDUCTION OF TRANSFER AND MANUFACTURING TAXES FOR CERTAIN DEVICES

This provision amends Sections 5811 and 5821 to eliminate the transfer and manufacturing taxes on certain firearms. Previously, “firearms” included, among other devices, short-barreled rifles, short-barreled shotguns, and silencers All firearms, with exceptions, were subject to a $200 transfer tax and $200 creation tax.

This provision limits the transfer and manufacturing taxes to machine guns and destructive devices. All other devices are fully exempt from the taxes. This change applies to calendar quarters beginning more than 90 days after July 4, 2025.

70531 – MODIFICATIONS TO DE MINIMIS ENTRY PRIVILEGE FOR COMMERCIAL SHIPMENTS

This provision repeals a key exception to the U.S. de minimis customs rule, which currently allows goods valued at $800 or less to enter the country duty-free and without formal customs procedures. Specifically, the provision eliminates the exemption for commercial shipments under Section 321(a)(2) of the Tariff Act of 1930, effective July 1, 2027. Once in effect, all commercial shipments (regardless of value) will be subject to standard customs treatment.

In addition, the provision imposes new civil penalties on any person who improperly utilizes the de minimis

privilege in connection with goods that violate other U.S. customs laws. Penalties may be assessed up to $5,000 for a first violation and $10,000 for each subsequent violation. This penalty regime becomes effective 30 days after July 4, 2025, but is repealed once the underlying commercial shipment exception is formally eliminated on July 1, 2027.

Citrin Cooperman Insights - Although this measure amends customs law rather than the Internal Revenue Code, it was included in the provision due to its anticipated revenue effects and its alignment with broader federal enforcement priorities. By restricting duty-free entry for high-volume commercial importers (e.g., those leveraging foreign fulfillment networks) Congress intends to close a perceived compliance gap that undermines both customs enforcement and domestic retail competitiveness.