Cordasco & Company

Corporate business owners: Is your salary reasonable in the eyes of the IRS?

Determining “reasonable compensation” is a critical issue for owners of C corporations and S corporations. If the IRS believes an owner’s compensation is unreasonably high or low, it may disallow certain deductions or reclassify payments, potentially leading to penalties, back taxes and interest. But by proactively following certain steps, owners can help ensure their compensation is seen as reasonable and deductible.

Different considerations for C and S corporations

C corporation owners often take large salaries because they’re tax-deductible business expenses, which reduce the corporation’s taxable income. So, by paying themselves higher salaries, C corporation owners can lower corporate taxes. But if a salary is excessive compared to the work performed, the IRS may reclassify some of it as nondeductible dividends, resulting in higher taxes.

On the other hand, S corporation owners often take small salaries and larger distributions. That’s because S corporation profits flow through to the owners’ personal tax returns, and distributions aren’t subject to payroll taxes. So, by minimizing salary and maximizing distributions, S corporation owners aim to reduce payroll taxes. But if the IRS determines a salary is unreasonably low, it may reclassify some distributions as wages and impose back payroll taxes and penalties.

The IRS closely watches both strategies because they can be used to avoid taxes. That’s why it’s critical for C corporation and S corporation owners to set compensation that reflects fair market value for their work.

What the IRS looks for

The IRS defines reasonable compensation as “the amount that would ordinarily be paid for like services by like enterprises under like circumstances.” Essentially, the IRS wants to see that what you pay yourself is in line with what you’d pay someone else doing the same job.

Factors the IRS examines include:

Duties and responsibilities,
Training and experience,
Time and effort devoted to the business,
Comparable salaries for similar positions in the same industry and region, and
Gross and net income of the business.

Owners should regularly review these factors to ensure they can defend their pay levels if challenged.

How to establish reasonable compensation

Several steps should be taken to establish reasonable compensation:

1. Conduct market research. Start by gathering data on what other companies pay for similar roles. Salary surveys, industry reports and reputable online compensation databases (such as the U.S. Bureau of Labor Statistics) can provide valuable benchmarks.

Document your findings and keep them on file. This shows that your compensation decisions were informed by objective data, not personal preference.

2. Keep detailed job descriptions. A well-written job description detailing your duties and responsibilities helps justify your salary. Outline the roles you perform, such as CEO-level strategic leadership, day-to-day operations management and specialized technical work. The more hats you wear, the stronger the case for higher compensation.

3. Maintain formal records. Hold regular board meetings and formally approve compensation decisions in the minutes. This adds an important layer of corporate governance and shows the IRS that compensation was reviewed and approved through an appropriate process.

4. Document annual reviews. Perform an annual compensation review. Adjust your salary to reflect changes in the business’s profitability, your workload or industry trends. Keep records of these reviews and the rationale behind any changes.

Strengthen your position

Determining reasonable compensation isn’t a one-time task — it’s an ongoing process. We can help you benchmark your pay, draft necessary documentation and stay compliant with tax law. This not only strengthens your position against IRS scrutiny but also supports your broader business strategy.

If you’d like guidance on setting or reviewing your compensation, contact us.

After a person dies, his or her debts live on

One question the family of a deceased person often asks is: What happens to debt after a person dies? It’s important to realize that a person’s debt doesn’t simply vanish after his or her death.

An estate’s executor or beneficiaries generally aren’t personally liable for any debt. The estate itself is liable for the deceased’s debt. This is true regardless of whether the estate goes through probate or a revocable (or “living”) trust is used to avoid probate. Contrary to popular belief, assets held in a revocable trust aren’t shielded from creditors’ claims.

Assets and debts

Generally, an estate’s executor is responsible for managing the deceased’s assets and debts. A personal representative can also carry out this task.

With respect to debt, the executor should take inventory of the deceased’s debts, evaluate their validity and order of priority, and determine whether they should be paid in full or allowed to continue to accrue during the estate administration process. In some cases, debt that’s tied to a particular asset — a mortgage, for example — may be assumed by the beneficiary who inherits the asset.

Certain assets are exempt, however. These include most retirement plan accounts, life insurance proceeds received by a beneficiary and jointly held property with rights of survivorship that passes automatically to the joint owner.

Also, assets held in certain irrevocable trusts, such as domestic asset protection trusts, may be shielded from creditors’ claims. The extent of this protection depends on the type of trust and applicable law in the jurisdiction where the trust was created.

Assuming the deceased had a will, the estate’s assets generally are used to pay any debts in this order:

Assets that pass under the will’s residual clause — that is, assets remaining after all other bequests have been satisfied,
Assets that pass under general bequests, and
Assets that pass under specific bequests.

Note that some states have established homestead exemptions or family allowances that prohibit the sale of certain assets to pay debts. These provisions are designed to give a deceased’s loved ones a minimal level of financial security in the event the estate is insolvent.

When debts are greater than the estate’s value

If an estate’s debts exceed the value of its assets, certain debts have priority and the estate’s executor must pay those debts first. Although the rules vary from state to state, a typical order of priority is:

Estate administration expenses (such as legal and accounting fees),
Reasonable funeral expenses,
Certain federal taxes or obligations,
Unreimbursed medical expenses related to the deceased’s last illness,
Certain state taxes or obligations (including Medicaid reimbursement claims), and
Other debts.

Secured debts, such as mortgages, usually aren’t given high priority. This is because the recipient of the property often assumes responsibility for the debt and the creditor can take the collateral to satisfy its claim.

Seek professional guidance

Managing debt in an estate can be complex, especially if the estate is insolvent. If you’re the executor of an estate, consult with us. We can help guide you through the process.

Can you turn business losses into tax relief?

Even well-run companies experience down years. The federal tax code may allow a bright strategy to lighten the impact. Certain losses, within limits, may be used to reduce taxable income in later years.

Who qualifies?

The net operating loss (NOL) deduction levels the playing field between businesses with steady income and those with income that rises and falls. It lets businesses with fluctuating income to average their income and losses over the years and pay tax accordingly.

You may be eligible for the NOL deduction if your deductions for the tax year are greater than your income. The loss generally must be caused by deductions related to your:

Business (Schedules C and F losses, or Schedule K-1 losses from partnerships or S corporations),
Casualty and theft losses from a federally declared disaster, or
Rental property (Schedule E).

The following generally aren’t allowed when determining your NOL:

Capital losses that exceed capital gains,
The exclusion for gains from the sale or exchange of qualified small business stock,
Nonbusiness deductions that exceed nonbusiness income,
The NOL deduction itself, and
The Section 199A qualified business income deduction.

Individuals and C corporations are eligible to claim the NOL deduction. Partnerships and S corporations generally aren’t eligible, but partners and shareholders can use their separate shares of the business’s income and deductions to calculate individual NOLs.

What are the changes and limits?

Before the Tax Cuts and Jobs Act (TCJA), NOLs could be carried back two years, forward 20 years, and offset up to 100% of taxable income. The TCJA changed the landscape:

Carrybacks are eliminated (except certain farm losses).
Carryforwards are allowed indefinitely.
The deduction is capped at 80% of taxable income for the year.

If an NOL carryforward exceeds your taxable income of the target year, the unused balance may become an NOL carryover. Multiple NOLs must be applied in the order they were incurred.

What’s the excess business loss limitation?

The TCJA established an “excess business loss” limitation, which took effect in 2021. For partnerships and S corporations, this limitation is applied at the partner or shareholder level, after the outside basis, at-risk and passive activity loss limitations have been applied.

Under the rule, noncorporate taxpayers’ business losses can offset only business-related income or gain, plus an inflation-adjusted threshold. For 2025, that threshold is $313,000 ($626,000 if married filing jointly). Remaining losses are treated as an NOL carryforward to the next tax year. In other words, you can’t fully deduct them because they become subject to the 80% income limitation on NOLs, reducing their tax value.

Important: Under the Inflation Reduction Act, the excess business loss limitation applies to tax years through 2028. Under the TCJA, it had been scheduled to expire after December 31, 2026.

Plan proactively

Navigating NOLs and the related restrictions is complex, especially when coordinating with other deductions and credits. Thoughtful planning can maximize the benefit of past losses. Please consult with us about how to proceed in your situation.

“One Big Beautiful Bill” Clears the Senate: A Closer Look at What’s Inside and the Path Forward in the House

The U.S. Senate has passed President Donald Trump’s monumental “One Big Beautiful Bill Act” following a dramatic 50-50 standoff that was ultimately resolved by Vice President JD Vance’s tie-breaking vote. This comprehensive domestic policy package now returns to the House of Representatives, where its prospects remain uncertain despite a Republican majority. The bill’s future hinges on overcoming intraparty divisions and legislative obstacles. This Bill’s journey has continued to surprise us, so we do not see the House preventing its ultimate passage.

The Senate Vote and the Bill’s Legislative Journey
The Senate’s approval was achieved after nearly two full days of debates, procedural confrontations, and a lengthy “vote-a-rama” over dozens of amendments. In one of the more theatrical moments, Senate clerks were required to read all 940 pages of the bill aloud, as Democrats sought to delay proceedings. Among Republicans, only Senators Susan Collins, Thom Tillis, and Rand Paul opposed the legislation. The bill now returns to the House, where a razor-thin Republican majority and strong ideological differences make its path forward anything but certain.

Major Tax Provisions of the “One Big Beautiful Bill”

The following are the highlights of what we consider to be the major tax provisions in this Bill. This is not an exhaustive list. We will provide more detailed information once a final Bill is passed.

Individual Tax Provisions

Income Tax Rates and Structure

Permanent Extension of TCJA Tax Brackets
· Current rates maintained: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
· Effective date: Permanent extension beginning January 1, 2026
Standard Deduction Enhancement
· Senate version: Increases to $16,000 (single), $32,000 (married filing jointly), $24,000 (head of household)
· House comparison: Added $1,000/$2,000 temporary boost through 2028
· Effective date: Permanent extension with increases beginning 2026
· Additional feature: Enhanced inflation adjustment mechanism

Family-Related Tax Benefits

Child Tax Credit Expansion
· Senate amount: $2,200 per child (up from current $2,000)
· House comparison: $2,500 through 2028
· Effective date: Increases to $2,200 beginning 2025, indexed for inflation starting 2026
· Permanency: Senate version makes expansion permanent
· Limitation: Maintains income phase-outs and Social Security number requirements
Senior Tax Deduction
· Senate amount: $6,000 additional deduction for seniors earning up to $75,000
· House comparison: $4,000 deduction
· Effective date: Available beginning tax year 2025
· Eligibility: Low- and middle-income seniors with specific income thresholds

Alternative Minimum Tax (AMT)

Permanent AMT Relief
· Exemption amounts: Maintains higher TCJA exemption levels
· Phase-out thresholds: $500,000 (single), $1 million (married)
· Effective date: Permanent extension preventing 2026 reversion
· Indexing: Separate inflation adjustment mechanism

State and Local Tax (SALT) Deduction

Temporary SALT Cap Increase
· Senate cap: $40,000 (increased from $10,000)
· Duration: Five years (2025-2029), reverting to $10,000 in 2030
· Income limitation: Phase-down for taxpayers earning over $500,000
· House comparison: Permanent $40,000 cap with different phase-out structure

Campaign Promise Tax Provisions

No Tax on Tips
· Senate deduction: Up to $25,000 annually
· Eligible industries: Traditional and customarily tipped occupations
· Effective dates: Tax years 2025 through 2028
· Phase-out: Begins at $150,000 AGI ($300,000 for joint filers)
No Tax on Overtime
· Senate deduction: Up to $12,500 ($25,000 for joint filers)
· Coverage: Premium portion of overtime compensation
· Effective dates: Tax years 2025 through 2028
· Phase-out: Same income thresholds as tip deduction
Auto Loan Interest Deduction
· Amount: Up to $10,000 deduction
· Eligibility: New vehicles with final assembly in the United States
· Effective dates: Tax years 2025 through 2028
· Income limits: Phase-out beginning at $100,000 (single), $200,000 (joint)

Estate and Gift Tax

Enhanced Estate Tax Exemption
· Exemption amount: $15 million per individual (up from $13.99 million)
· Effective date: Beginning 2026
· Indexing: Permanent inflation adjustment
· Impact: Prevents scheduled reversion to approximately $7 million in 2026

Charitable Giving Provisions

Universal Charitable Deduction
· Senate amount: $1,000 above-the-line deduction ($2,000 for joint filers)
· House comparison: $150 temporary deduction through 2028
· Effective date: Senate version permanent, House version temporary
· Eligibility: Available to all taxpayers, not just itemizers
Corporate Charitable Giving Floor
· Requirement: Minimum 1% of taxable income threshold
· Maximum: 10% annual deduction cap maintained
· Impact: May discourage smaller corporate donations

Business Tax Provisions

Pass-Through Business Deduction (Section 199A)
· Senate Version: 20% Rate Maintained
· Rate: Remains at 20% (versus House proposal of 23%)
· Minimum deduction: New $400 minimum for taxpayers with at least $1,000 QBI
· Effective date: Permanent extension beginning January 1, 2026
· Threshold increases: Phase-in limits raised to $75,000 ($150,000 joint)
Business Interest Deduction (Section 163(j))
· EBITDA Standard Restoration
· Calculation method: Returns to more favorable EBITDA from EBIT
· Senate approach: Permanent restoration (versus House temporary through 2029)
· Effective date: Beginning after December 31, 2024
· Capitalized interest treatment: Special rules for required capitalization
Depreciation and Expensing
· 100% Bonus Depreciation
· Senate approach: Permanent restoration to 100%
· House comparison: Temporary through 2029
· Effective date: Assets placed in service after January 19, 2025
· Current law: 40% in 2025, scheduled to phase down to 0%
Research and Development Expensing
· Restoration: Full immediate expensing for domestic R&D
· Current law: Must amortize over 5 years since 2022
· Senate duration: Permanent restoration
· Retroactive: Small businesses (under $31m in revenue) effective after December 31, 2021. Requires an amended return.
· Foreign R&D: Continues 15-year amortization requirement
Section 179 Expensing Enhancement
· Maximum deduction: Increased from $1.25 million to $2.5 million
· Phase-out threshold: Raised from $3.13 million to $4 million
· Key difference: Cannot create losses (unlike bonus depreciation)

Corporate Tax Provisions

Qualified Small Business Stock (QSBS)
·        Enhanced exclusion: Tiered system based on holding period
·        3-year hold: 50% exclusion (up to $15 million, increased from $10 million)
·        4-year hold: 75% exclusion
·        5-year hold: 100% exclusion
·        Effective date: QSBS acquired after enactment

Revenue Impact and Fiscal Effects

Total Tax Cuts
· Overall cost: $4.5 trillion in tax reductions
· Major components: Individual rate extension ($2.2 trillion), standard deduction ($1.4 trillion), AMT relief ($1.4 trillion)
· Business provisions: Additional $165 billion annually in business tax breaks

Deficit Impact
· CBO projection: $3.3 trillion added to national debt over 10 years
· Interest costs: Total fiscal impact could reach $3.9 trillion
· Dynamic effects: Potential GDP reduction of 4.6% over 30 years

Border Security and Immigration
· $46 billion for continued border wall construction
· $45 billion to expand migrant detention to 100,000 beds
· 10,000 new ICE agents by 2029
· $10 billion for state border security initiatives
· $3.5 billion in reimbursements to state and local governments

Spending Reductions and Social Program Reforms
· Medicaid spending cut by $930 billion over a decade; tighter eligibility and work requirements imposed
· Stricter SNAP (food stamp) qualifications
· Repeal of green energy incentives (as detailed above)

Agricultural and Rural Support Measures
· Increased crop price supports for major commodities
· Expanded disaster assistance for farmers
· Extension of sugar support program through 2031
· $25 billion rural hospital stabilization fund

Additional Noteworthy Provisions
· $100 billion increase in defense spending over ten years for modernization and veteran healthcare
· 20% reduction in IRS funding plus numerous labor reduction impacts in the bill
· $30 billion in new funding for nationwide school choice and STEM education
· $15 billion for affordable housing construction and rental assistance
· Regulatory reductions for small businesses and accelerated infrastructure permitting

Debt Ceiling Increase
· National debt ceiling raised by $5 trillion, exceeding the House’s initial $4 trillion proposal

Fiscal Impact

The Congressional Budget Office estimates the bill would increase the national debt by approximately $3.3 trillion over ten years, with total costs possibly reaching $3.9 trillion after accounting for interest. Critics and supporters alike acknowledge the legislation’s transformative scope and lasting fiscal implications.

Challenges and Prospects in the House

The bill’s passage through the Senate marks only the first stage of what promises to be a contentious legislative journey. Speaker Mike Johnson’s narrow majority must contend with strong opposition from both conservative and moderate factions within the party, as well as external lobbying and public campaigns. Key disagreements—especially over the scope and effects of the tax reforms—may determine whether this vast legislative package becomes law or stalls amid political infighting.

Looking Forward

The fate of the “One Big Beautiful Bill” will reveal much about the power dynamics in the new Congress and the Republican Party’s unity. With trillions of dollars in tax cuts, spending changes, and new programs at stake, the coming weeks will likely set the tone for Trump’s second-term domestic agenda and its impact on American households, businesses, and communities nationwide.

We will continue to monitor the passage of this Bill and its impact on your specific situation. We would anticipate the ultimate passage of some form of this Bill. We will provide a detailed analysis once passed into law.

Senate Parliamentarian Delivers Devastating Blow to “One Big Beautiful Bill”

The following is written as of June 27, 2025, so by time you read this it will be completely outdated.

As we predicted, the Senate parliamentarian had other plans for the Republicans’ grandiose “One Big Beautiful Bill,” delivering a series of blows stripping it of hundreds of billions of dollars in savings and possibly derailing President Trump’s ambitious July 4th deadline. I guess Elon was right it will either be “Big” or “Beautiful” but not both. As the GOP scrambles to salvage their pièce de resistance, the archaic rules of budget reconciliation have surfaced as the ultimate party pooper.

The Byrd Rule: Budget Reconciliation’s Party Pooper

The budget reconciliation process, which allows Congress to pass fiscal legislation with a simple majority and bypass the usual 60-vote filibuster threshold, comes with a catch. The Byrd Rule, named after the late Senator Robert Byrd (D-W.Va.), serves as the budgetary bouncer, ensuring that any extraneous provisions that don’t directly impact federal spending or revenues get the boot. Please see our previous post of the overview of the Reconciliation Process and Byrd Rule.

The Byrd Rule sets six tests to determine whether a provision can crash the reconciliation party. Most crucially, any provision must have a direct budgetary impact, with changes to spending or revenues that are not merely incidental to the policy change. The rule also prevents provisions that increase the federal deficit beyond the 10-year budget window and bars changes to Social Security benefits or payroll taxes.

Senate Parliamentarian Elizabeth MacDonough, the nonpartisan referee since 2012, acts as the ultimate gatekeeper, determining whether provisions pass muster. Her decisions, while not technically binding, carry enormous weight and are rarely overturned. The process of reviewing and dismissing violating provisions, affectionately known as a “Byrd bath,” results in rejected items being labeled “Byrd droppings.”

Major Excluded Provisions and Their Costs

Health and Human Services Provisions

The parliamentarian’s most significant ruling was a hilariously brutal takedown of Medicaid provider taxes, nixing a provision that would have capped states’ ability to use healthcare provider taxes for additional federal Medicaid funding. This provision alone was set to save a whopping $250 billion over the next decade. The ruling effectively torpedoed one of the GOP’s largest spending reduction mechanisms, leaving a gaping hole in the bill’s financial structure.

Additionally, MacDonough unceremoniously rejected several other Medicaid-related provisions:

Medicaid eligibility restrictions for non-citizens
Prohibition on using Medicaid funds for gender-affirming care
Changes to Children’s Health Insurance Program (CHIP) coverage for unauthorized immigrants

Nutrition Assistance Programs

Initially, the parliamentarian ruled against the Senate’s plan to shift SNAP (Supplemental Nutrition Assistance Program) costs to states based on their payment error rates. This provision would have saved an estimated $41 billion over ten years in the revised Senate version, down from $128 billion in the original House proposal. However, Republicans managed to tweak this provision to comply with Senate rules, retaining the savings.

Financial Regulatory Provisions

MacDonough gleefully struck down several provisions targeting financial regulatory agencies:

Consumer Financial Protection Bureau (CFPB): A provision to eliminate the CFPB’s funding by capping it at zero percent of Federal Reserve operational costs, which would have saved an estimated $6.4 billion
Office of Financial Research: Elimination of funding for this Treasury Department office
Public Company Accounting Oversight Board: Complete elimination of this securities oversight body
Federal Reserve staff cuts: Reducing Federal Reserve employee salaries by $1.4 billion

Federal Workforce and Civil Service Provisions

MacDonough ruled against numerous provisions targeting federal employees:

Requirements for new federal employees to pay nearly 15% of their paychecks toward retirement benefits or serve as at-will employees
$350 filing fee for Merit Systems Protection Board appeals
Charging federal employee unions for the use of agency property and official time
Authority for agencies to unilaterally rescind funds through “cost-cutting” bonuses

Education Provisions

The parliamentarian struck several higher education provisions:

Removal of federal student aid eligibility for certain non-citizen immigrants
Restrictions on student loan repayment plans that cannot be applied to current borrowers
Workforce Pell Grants: Expansion of Pell Grants to unaccredited and for-profit institutions
Prohibition on loan payments during medical/dental residencies from qualifying for Public Service Loan Forgiveness

Environmental and Regulatory Provisions

Multiple environmental and regulatory provisions didn’t make the cut:

Reversal of EPA emissions standards for passenger vehicles
Requirements for the General Services Administration to sell all Postal Service electric vehicles
Expedited environmental reviews under the National Environmental Policy Act
$250 million for Coast Guard station repairs, including South Padre Island facility

Immigration and Border Security

The parliamentarian rejected provisions granting states authority over border security and immigration enforcement, traditionally federal responsibilities. Additionally, a provision to restrict preliminary injunctions against federal government actions was struck down, which would have required litigants to post potentially enormous bonds.

Total Financial Impact

According to budget experts, the parliamentarian’s rulings threaten well over $500 billion in planned spending cuts over the next decade. Matthew Fiedler of the Brookings Institution estimated that the disqualified health provisions alone represent $200 billion to $300 billion in lost savings. Democrats were undoubtedly doing a victory dance, with Senator Ron Wyden noting that “more than $250 billion in health care cuts” were removed from the Republican bill.

Impact on Bill Viability and Timing

Immediate Challenges to July 4 Deadline

The parliamentarian’s rulings have created severe complications for Republican leaders’ ambitious timeline. Senate Majority Leader John Thune had hoped to bring the bill to a vote by the end of June to meet Trump’s July 4 signing deadline. However, the need to find alternative savings mechanisms or accept a larger deficit impact has complicated negotiations. This will potentially loss the Senate’s fiscal hawks who were already not excited about the deficit spending that the original bill created.

The White House has maintained its expectation that the bill will reach Trump’s desk by Independence Day, with Press Secretary Karoline Leavitt stating, “We expect that bill to be on the president’s desk for signature by July Fourth.” However, this timeline appears increasingly unrealistic given the scope of required revisions.

Options for Republican Leadership

Republicans face several difficult choices in responding to the parliamentarian’s rulings:

Strip the provisions entirely: This would eliminate hundreds of billions in savings, making the bill more fiscally irresponsible and jeopardizing key Republican votes needed to pass the Bill.
Revise provisions to comply: Attempt to rewrite rejected provisions in ways that satisfy the Byrd Rule, though this may significantly weaken their impact
Challenge the rulings: Hold floor votes requiring 60 senators to override the parliamentarian’s decisions, which would be impossible given unified Democratic opposition
Overrule the parliamentarian: Establish new precedents through simple majority votes, though Thune has indicated reluctance to pursue this option

Growing Republican Opposition

The parliamentarian’s rulings have exposed deeper tensions within the Republican caucus. Several GOP senators, including Josh Hawley (R-Mo.) and Susan Collins (R-Maine), had already expressed concerns about Medicaid cuts’ impact on rural hospitals. The elimination of these savings may paradoxically help these senators support the bill while creating new problems for fiscal conservatives.

Senator Ron Johnson (R-Wis.) has called the bill “completely unsustainable,” while Senator Rand Paul (R-Ky.) believes there is sufficient Republican opposition to force changes. With Republicans holding only a 53-47 Senate majority, they can afford to lose only three votes.

Some Republican lawmakers have criticized MacDonough directly. Senator Tommy Tuberville (R-Ala.) called for “the WOKE Senate Parliamentarian” to be fired, while Representative Greg Steube (R-Fla.) made similar demands. However, Senate leadership has shown no appetite for such dramatic measures.

Procedural Complications

Beyond the immediate impact of struck provisions, the parliamentarian still faces several critical rulings that could further complicate the bill. Most importantly, MacDonough must decide whether Republicans can use a “current policy baseline” rather than “current law baseline” for calculating the bill’s deficit impact. If rejected, this could create a gap exceeding $3 trillion in the bill’s financing.

We have been very vocal that this “current law baseline” makes no sense and we anticipate the parliamentarian to reject this approach. Please see our prior posts on this major provision. If the parliamentarian shoots down this approach it will certainly derail the viability of this bill passing in our opinion.

The Congressional Budget Office has already estimated that the House-passed version would increase deficits by $2.4 trillion on a conventional basis, or $3.4 trillion including economic feedback effects. The parliamentarian’s rulings have eliminated key offset mechanisms, potentially making these numbers even worse.

Inter-Chamber Tensions

The parliamentarian’s rulings have exacerbated existing tensions between House and Senate Republicans. House members are frustrated that their carefully crafted bill has been substantially altered, with some advocating for a formal conference committee to resolve differences. However, Trump and GOP leaders prefer to avoid such a process due to time constraints.

House Majority Whip Tom Emmer has indicated the House will simply accept whatever the Senate passes, stating, “When it comes over, we’ll pass it.” However, several House Republicans have expressed unwillingness to support the Senate’s changes without significant modifications.

Conclusion

The Senate parliamentarian’s rulings represent a fundamental challenge to Republican efforts to quickly enact Trump’s domestic agenda. By stripping hundreds of billions in spending cuts while maintaining expensive tax provisions, these decisions have made the bill significantly less fiscally responsible and more politically difficult to pass.

The rulings highlight the constraints that procedural rules can place on partisan legislation, even when one party controls both chambers of Congress and the presidency. As Republicans scramble to find alternative approaches or accept a larger deficit impact, the July 4 deadline appears increasingly untenable.

The ultimate fate of the “One Big Beautiful Bill” now depends on whether Republican leaders can navigate these procedural obstacles while maintaining party unity. With fiscal conservatives demanding more spending cuts and moderates concerned about program reductions, the parliamentarian’s rulings have made an already difficult balancing act even more precarious.

We will continue to keep you abreast of these changes and how this Bill progresses through the process. Please let us know if you have any questions or would like to discuss its impact on your specific situation.

Cordasco & Company

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