Tax Legislation Outlook: TCJA, Budget, Lame Duck

Although the tax news cycle was slow during the Thanksgiving break, the solitude did not last very long. Indeed, as we enter the final weeks of 2024, there are important matters that remain unresolved in Congress. Here are a few stories we are tracking, with an eye towards how tax legislation could take shape in early 2025.

Lame duck session

Congress will hold a lame duck session in December. It’s unlikely we will see any major tax bills pass by the end of the year. Instead, GOP lawmakers appear to be looking ahead and focusing on certain provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) that are set to expire or change by the end of 2025.

Actual outcomes of a lame duck session depend on political dynamics, priorities of the outgoing and incoming lawmakers, and prevailing economic conditions at the time. You should stay informed of legislative developments and be prepared to adapt your tax strategies accordingly.

Fiscal year 2025 budget implications

The federal budget for fiscal year (FY) 2025, which spans from October 1, 2024, to September 30, 2025, will likely play a crucial role in shaping legislative priorities, including potential tax bills. It’s unclear when the FY 2025 budget will be finalized.

On the budget front, House Speaker Mike Johnson (R-La.) has indicated a preference for extending the current continuing resolution involving the FY 2025 budget, which expires on December 20, to March 31, 2025, when Republicans may have more control over the outcome.

President Biden and Senate Democrats may be willing to grant Johnson’s wish if the House agrees to pass disaster legislation to replenish FEMA and SBA relief programs. Biden has already proposed a $98 billion disaster relief package in a November 18 letter to Johnson.

If Johnson is successful at extending the FY 2025 budget discussions, Congress may attempt to pass two tax bills next year through budget reconciliation — one for the FY 2025 budget and another for the FY 2026 budget. Budget reconciliation is a complex legislative procedure that allows the Senate to pass a tax bill by a simple majority, rather than the standard 60-person majority. Under this scenario, Congress could pass a TCJA extenders package — which is where there is broad-based agreement — under one budget resolution, and then pass a separate package containing various other tax proposals, such as President-elect Trump’s campaign pledges of no taxes on tips. Three business tax breaks—research expensing, 100% bonus depreciation, and interest deductions—are expected to play a prominent role in negotiations.

Regular updates and proactive planning will be essential to adapt to any new tax policies emerging from the FY 2025 budget discussions.

TCJA and pay-fors

The December lame duck session may prove to be, in a word, lame. It seems most of DC is setting its sights on 2025 and, in particular, extending the TCJA. And considering the staggering cost of the TCJA extenders, talk around revenue raisers is starting to heat up.

You may recall Trump intends to pay for the TCJA-extenders by repealing all or parts of the Inflation Reduction Act (IRA). Although it’s too soon to tell whether and to what extent the IRA will be repealed, there appears to be growing consensus electric vehicle (EV) tax credits will be on the chopping block.

For an interesting read on potential revenue raisers, check out the $700 Billion of Easy Deficit Reduction proposals offered by the Committee for a Responsible Federal Budget.

How CLA can help you navigate tax legislation

Whether your needs are business or individual, international or local, our tax professionals can help you plan ahead, apply tax planning strategies, and understand applicable laws

Contact us

Leverage opportunities from recent tax legislation changes. Complete the form below to connect with CLA.