A Special Friday Edition of the Cheat Sheet

The Cheat Sheet is a bit delayed this week as we catch up from Fly-In 2025.  Over 70 hardwood industry leaders traveled to Washington, D.C. and met with close to 130 Congressional offices on Wednesday, May 14.  Members of the Hardwood Federation Board of Directors came in a day early to meet with officials from the White House, Commerce, and the U.S. Trade Representative.  Stay tuned for more about the Fly-In, but for now a few pictures of our days in D.C!

Members of the HF Board of Directors at the White House

Congressman Jack Berman (R-MI) with Luke Brogger, Quality Hardwoods; Jim Hourdequin, Lyme Timber; Stehpanie Owen, NWFA; and Jason Gobel, NWH.

Congressman Chris Pappas (D-NH) with Jim Hourdequin, Ashley Johnson, NHLA and Ben Pierce, Holt and Bugby.

Tax Moves Forward…Then Stalls

On Wednesday, the House Ways & Means Committee concluded a markup of its portion of the budget reconciliation bill. The measure was reported out on a party-line vote of 26-19.

Key business tax benefit provisions are included in the bill. They are:

• 100% Bonus Deprecation/Full Expensing: Language allows taxpayers to immediately expense 100 percent of capital investments in machinery and equipment made on or after January 20, 2025, and before January 1, 2030. House GOP leaders entered the reconciliation process hoping to extend this benefit permanently but opted for a 5-year extension based on cost concerns. We understand there is a strong appetite in the Senate to modify this provision to make it permanent.
• Research & Development (R&D) Credit: The provision allows taxpayers to fully write off their R&D costs in the same year in which those costs are incurred. Recall, this benefit expired in 2022. The bill makes the R&D credit retroactive to January 1, 2025, and extends it through December 31, 2030. Again, the Senate is interested in making this benefit permanent.
• Section 199A:  The 20 percent deduction for S-Corporations and other pass-through structures expires at the end of this year. This benefit would not only be made permanent, but it is also increased to 23 percent.
• Section 179: The proposal increases the maximum amount a business may write off certain expenses to $2.5 million and increases the phaseout threshold amount to $4 million.
• EBITDA: The bill restores EBITDA as the measure for calculating business interest expense. The current standard established by TCJA is EBIT, which is not as generous and serves to make  companies less competitive, particularly in a high-interest rate environment.
• Estate and Gift Tax Exemption: The basic estate and gift tax exemption amount and the generation-skipping transfer tax exemption would be permanently increased to $15 million. The Tax Cuts and Jobs Act of 2017 (TCJA) had temporarily increased it to $10 million (adjusted for inflation), but that increase is expiring next year. The $15 million exemption amount would be indexed for inflation after 2025.
• State and Local Tax (SALT) Deduction: Language in the bill raises the SALT deduction cap from $10,000 to $30,000.

This bill and legislation reported by other House committees has been rolled up into a comprehensive 1116-page measure that the House Budget Committee considered this morning.  Unfortunately, disagreements related to  SALT and Medicaid provisions and the defection of key Republicans led to a 16-21 defeat of the bill.  The Budget Committee will reconvene next week to ponder next steps. 

Timber Harvest Boost Also Included in the Tax Bill