House Passes Trump Tax Legislation, Which Would Extend OZ Incentive

Following extensive overnight negotiations and significant last-minute amendments to secure support from both conservative and moderate Republicans, the U.S. House of Representatives voted 215-214 this morning to pass budget reconciliation tax legislation. The measure includes provisions to extend the opportunity zones incentive and curtail clean energy tax incentives established under the Inflation Reduction Act of 2022.

For the alternative investment sector, key provisions include a multi-year extension of the current OZ incentive and authorization for new zones beginning in 2027. Additionally, the legislation accelerates phaseouts and imposes new restrictions on clean energy tax credits linked to foreign entities of concern.

The razor-thin vote reflected deep divisions among Republicans, with two GOP members voting against the measure and one voting present. All Democrats opposed the bill. It now heads to the U.S. Senate, where revisions are expected, particularly around clean energy and entitlement spending provisions.

According to the Congressional Budget Office, the legislation would increase the federal deficit by approximately $2.4 trillion to $3.8 trillion over 10 years. Critics argue the bill disproportionately benefits high-income households through tax cuts, while reducing funding for Medicaid and other social safety-net programs. According to the CBO, the bill will cut Medicaid by at least $716 billion over a decade.

Last-minute amendments included:

• SALT deduction cap increase: To gain support from Republicans in high-tax states like California and New York, the cap on the State and Local Tax deduction was raised from $10,000 to $40,000 for households earning under $500,000. This adjustment was crucial in securing votes from centrist Republicans, who had previously demanded a cap of $124,000 for married filers and $62,000 for singles.
• Green energy credit reductions: Renewable energy tax credits now require construction to begin within 60 days of the bill’s enactment and be completed by the end of 2028. More lenient deadlines apply to nuclear energy projects.

As AltsWire has extensively reported, the bill includes several other provisions affecting the alternative investments landscape:

• QBI deduction enhancements: The Section 199A deduction for qualified business income would be permanently increased to 23%, with eligibility extended to business development companies, a notable win for direct lending platforms and interval funds.
• Bonus depreciation and legacy planning: The bill reinstates 100% bonus depreciation through 2029 and raises the estate tax exemption to $15 million per individual.

The Senate is expected to take up the bill using budget reconciliation rules, which allow for passage with a simple majority. However, internal GOP disagreements and concerns over cost projections mean further changes are likely, especially to Medicaid adjustments and clean energy rollbacks.

For a full breakdown of how these tax changes affect the alternative investment space, revisit our initial analysis.

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