Ag Policy Blog

The U.S. Senate Finance Committee on Monday dropped its tax package to included as part of the "One Big Beautiful Bill" that Republicans in in the Senate look to pass – ideally before July 4.

A few changes jump out that will likely draw some attention from agriculture and biofuel groups.

Looking at the 45Z Clean Fuels Production Tax Credit, the Senate doesn't quite follow the House's lead. Both bills extend the 45Z credit through end of 2031.

The 45Z really falls into a blessed territory because it is among the few tax credits created in the Inflation Reduction Act that survives both the House and the Senate reconciliation bills. Several other green energy tax credits and deductions get wiped out in the bills.

The House bill, however, ends some tax-credit abuse from imported products such as used cooking oil from China. The House bill blocks most foreign feedstocks from qualifying for the credit. Only feedstocks produced or grown in the United States, Canada qualify for the tax credit under the House bill.

The Senate bill would allow refiners to continue using foreign feedstocks, but cuts the credit 20%.

"The provision imposes a 20% haircut on the value of the credit for fuel produced from feedstocks produced or grown outside the U.S., effective for transportation fuel produced after Dec. 31, 2025," the Finance Committee summary stated.

Under the language, blending domestic and foreign feedstocks would lead to a deduction based on the percentage of foreign feedstocks used.

Like the House bill, the Senate bill also limits federal agencies from attributing greenhouse gases to "indirect land use change."

QUALIFIED BUSINESS DEDUCTION

Known as Section 199A, the deduction allows taxpayers to deduct up to 20% of their income from pass-through entities. The deduction has income limits that begin at $394,600 for couples filing jointly or $197,300 for everyone else. The deduction also has rules ties to wages paid and investment capital for the business involved. Deductions are limited to $100,000 for married taxpayers filing jointly and $50,000 for everyone else.

The House bill increases the deduction to 23% with future adjustments for inflation.

The Senate bill does not raise the deduction level, but it raising the deduction limit to $150,000 for married couples and $75,000 for everyone else.

For small businesses, the Senate also sets a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income.

STATE AND LOCAL TAXES (SALT)

The House increases the SALT deduction to $40,000, a concession that was needed to get the votes of Republicans from a few high-tax states to support the reconciliation package.

The Senate bill keeps the $10,000 limit, but makes it permanent. That suggests the SALT provisions will be a sticking point in negotiations between Republicans in the two chambers.

ESTATE TAXES

Like the House, the Senate package would permanently extend the exemption to $30 million for married couples filing jointly and $15 million for everyone else. The exemption would then increase based on inflation.

The Senate does not address the Section 2032A special valuation provision for agriculture despite the introduction of a bill by Sen. Cindy Hyde-Smith, R-Miss., on that specific issue earlier this month.

RURAL BANK LANGUAGE

Like the House, the Senate Finance package includes a provision that would allow rural banks to exclude 25% of gross income from interest derived from qualified real estate loans. The provision applies to real-estate property used for farms, ranches or aquaculture.

RAISE THE DEBT LIMIT

The Senate Finance Committee package also increases the statutory debt limit by $5 trillion as well. In theory, increasing the debt limit by $5 trillion should carry the Trump administration through fiscal year 2028 without having further debt-limit battles in Congress.

Senate Finance Committee section-by-section breakdown: https://www.finance.senate.gov/…

Also see, "Senate Ag Reconciliation Bill Offers Farmers Better Options for 2025 Programs," https://www.dtnpf.com/…

Also see, "Six Tax Changes Made for Farm Businesses in the 'One Big Beautiful Bill'," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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