As the “One Big Beautiful Bill Act” works its way between the House and Senate, the reconciliation bill, and its extensions of the expiring 2017 Tax Cuts and Jobs Act, move one step closer to becoming law.
The bill’s “beauty” is now under examination in the Senate and the process, whether fast or slow, has lawmakers, insiders, media and leaders of family-owned businesses wondering what stays and what gets jettisoned. One goal of the bill is to make the tax bill’s provisions permanent, according to Senate Finance Chair Mike Crapo (R-ID), in discussing the bill’s movement into the Senate.
Under the proposed bill, the estate tax exemption would rise to $15 million for individuals (from $13 million) and $30 million for married couples next year, and it would rise with inflation afterward. The bill would also increase the pass-through business tax deduction from 20% to 23% and it expand the definition of who can qualify. The deduction would be available to owners of sole proprietorships, LLCs and partnerships, and other pass-through entities. Since 80% of family businesses are pass-through entities, this is good news.
But, as it stands, the bill clarifies that pass-through entities are considered a specified service trade or business under section 199A (i.e., businesses in the fields of health, law, accounting, consulting, etc.). As a result, they are denied deductions for state and local income taxes incurred at the entity level and would be required to separately state these payments, essentially eliminating the benefit of these state workarounds for these businesses.
The House version also offers an increase to $40,000 for the SALT (State and Local Taxes) cap starting in 2025, with a phasedown for taxpayers making more than $500,000 a year. The income and deduction caps would increase by 1% each year through 2033 before staying the same thereafter. The bill would also suspend the requirement under Section 174 to capitalize and amortize domestic research and experimental expenditures for amounts paid or incurred in tax years 2025 through 2029, allowing for full deductibility of such domestic outlays.
The Insiders’ View
What this all means for family-owned businesses requires some nuanced thinking, and it’s likely lawmakers will need to contort themselves to make it all add up. According to two Capitol Hill insiders and top tax experts, like Russ Sullivan of Brownstein and Michael Hawthorne of Squire Patton Boggs — both law and government affairs firms — it’s clear things have a way of changing quickly on Capitol Hill.
In a recent roundtable discussion, I had the opportunity to discuss the bill’s status with both and asked them whether they think family businesses should be optimistic. According to Hawthorne, “President Trump is actively engaged in the process and will keep working out disagreements.” “I’m optimistic that by the end of the summer there should be approval,” he said.
But things are different in the Senate, Sullivan warned. “They [the Senate] need 60% acceptance unless it’s a reconciliation bill, which needs 51%,” he says. “The House planned the bill around reconciliation.”
Sullivan knows some senators believe the House bill cuts too deeply into Medicaid but, he says, “other Senators think there should be more spending cuts.” To make matters more complicated, the House will have to vote again on the Senate version of the bill. But there is optimism for family businesses, according to both experts. As it stands, the bill offers a tax cut for every tax bracket, except those making over earning more than $1 million annually. “Family businesses should be optimistic as this bill extends and makes permanent the 2017 Tax Bill and Jobs Act, lowers taxes, improves the estate tax and restores research and development deductions,” says Sullivan. Hawthorne agrees and adds: “Congress is very aware of the need to make things more permanent and certain.”
Winners and Losers
For those in the manufacturing industry, the proposed House bill brings back favorable tax rules, including bonus depreciation for the cost of production upgrades and a temporary research and development tax break. On the losing end, low-income earners will seecuts to Medicaid coverage and SNAP food vouchers. The bill also requires able-bodied recipients up to 64 years old to find work of some kind, and beneficiaries would have to pick up more costs, as would the states.
Private foundations also face an escalating tax based on their size: 2.78% for private foundations with assets between $50 million and $250 million, 5% for entities with assets between $250 million and $5 billion; and 10% for foundations with assets of at least $5 billion, such as the Gates Foundation, a longtime target for Republicans. The bill also raises taxes to 5% on immigrants transferring money (remittances) to foreign countries and restricts health coverage tax credits.
If the tax bill doesn’t provide enough Capitol Hill drama, the Department of Treasury has let Congress know the so-called “X-Date” — the date the U.S. is expected to run out of money — will hit sometime in August. Congressional Republicans are seeking to raise the debt ceiling to about $41 trillion as part of the tax and spending cut package or do away with the debt limit altogether. It should be noted that Treasury Secretary Scott Bessent is asking lawmakers to increase or suspend the debt limit by before the August recess.
Are Tariffs Helping or Hurting?
In a recent “spot poll” by Family Enterprise USA, family-owned businesses leaders weighed in on the Trump Administration’s fluctuating tariff plan. When we asked some 60 family-owned business leaders if “They are affected by tariffs?” Fifty-four percent of family-owned business leaders said they were affected. On the other hand, 46% said they were not. When asked the follow up question: “Are you concerned about tariffs affecting business?” the results were more dramatic. More than 64% said they were concerned, while 36% said they were not.
Meeting with the Congressional Family Business Caucus
The second meeting with members of the Congressional Family Business Caucus took place in May with the theme: “Charitable Giving and Community Involvement.” Part of the meeting is always devoted to hearing from our lawmakers and visiting their offices on Capitol Hill.
During the meeting, Rep. Lou Correa (D-CA) joined the group and thanked the family-owned businesses in attendancefor their work. He stressed the importance of family-owned businesses to the economy and to communities, including job creation and entrepreneurship, noting family-owned businesses “create wealth and opportunity.” Rep. Correa encouraged the family business owners in attendance to continue to educate Members of Congress on their impact to communities.
Part of the meetings included several family-owned business owners speaking on how their business model includes community involvement. Family-owned business owners included Matt Nielsen, of Nielsen-Massey Vanillas; Tara Tanjasiri, ofCrema Artisan Bakers; Rain for Rent’s John-Paul Lake; Preston Root, of theSumner Foundation; David Kelly, Jr., ofKelly Benefits; Becky Renfro-Borbolla, ofRenfro Foods, Inc.; Mike Mitchell, ofThe High Center at Elizabethtown College; and finally, Lyndsi Loumakis, ofISYS Solutions, Inc.
Each family business operator detailed the many charitable works they focus on, including support of education, youth and veterans’ programs, work on the environment and promoting volunteer service among employees. Many of their companies help support homeless individuals, cancer research, animal charities and charitable food banks. Others focus their foundations on supporting local arts, entrepreneurship, supporting sports in underserved communities and initiatives helping children and underprivileged youth.
There was also great interest and questions from the audience, including many on how to leverage family foundations to educate and engage next generation family members, as well as connectivity between nonprofits and family business centers. The Congressional Family Business Caucus is all about educating our lawmakers on the scope, size and importance of family-owned businesses to the U.S. economy, as well as to our communities. Without the presence of family business leaders on Capitol Hill, our important voices will not be heard.
The next Congressional Family Business Caucus will be held Sept. 17, 2025. We welcome your participation. It’s important to make the voice of family businesses heard.