On Thursday, May 22, the U.S. House of Representatives passed H.R. 1, The One Big Beautiful Bill Act, a sweeping reconciliation package that includes, but is not limited to, tax reforms, a debt ceiling increase, housing tax credit reform, and a boost in defense and border security spending. While the legislation is expected to take a new shape once it is received by the Senate, it remains likely that many of the NLBMDA-supported provisions will remain in the bill. NLBMDA has provided a breakdown of the key provisions impacting the LBM industry below. Once the House and Senate reach agreement on differences, NLBMDA will publish a detailed breakdown and host a webinar with a section-by-section analysis of what is likely to be the most impactful legislation passed by the 119th Congress.

Tax Reforms

Absent Congressional action this year, many of the key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) were slated to expire at the end of this year. This legislation extends those expiring provisions and includes adjustments to some tax provisions, including the State and Local Tax (SALT) deduction.

• 100% Bonus Depreciation (Full Expensing)
One of the most significant provisions for LBM dealers in TCJA was the establishment of 100% bonus depreciation for qualified property placed into service between 2017 and 2026. The provision significantly reduces a business’s tax liability in the purchase year. Beginning in 2022, 100% bonus depreciation began a 5-year phase-out with the bonus percentage decreasing by 20% each year. H.R. 1 retroactively reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025. Under the bill, a business would be able to take advantage of full expensing until January 1, 2030. Senate Republicans have expressed interest in making this tax provision permanent, a measure that NLBMDA has strongly supported.

• Section 199A Permanence
TCJA created the Section 199A deduction to ensure tax parity between pass-through businesses and C Corporations, which received a lower 21% rate. The deduction is a critical tax tool for millions of small businesses and, absent action by Congress, would sunset at the end of this year. H.R. 1 increases the deduction for qualified business income (QBI) to 23% (from 20%) and makes the deduction permanent.

• State and Local Tax (SALT) Reform
Perhaps the most contentious provision debated among House Republicans was an increase of the SALT deduction. The deduction is a valuable tool for LBM dealers living in high-tax states like New York, Connecticut, and California. The legislation increases the SALT cap from $10,000 to $40,000, with new limits included for taxpayers making over $500,000.

• Estate Tax Reform
While this legislation falls short of fully repealing the estate tax, lawmakers have proposed raising the exemption from $13.99 million to $15 million, adjusted for inflation thereafter.

Housing Tax Credit

H.R. 1 includes a series of NLBMDA-supported housing credit provisions. If enacted, the new housing credit provisions would lead to the creation or preservation of an estimated 527,700 homes over the next decade.

• Restoring the 12.5% Housing Credit Allocation Increase
In 2018, Congress passed a four-year 12.5% increase of the 9% LIHTC credit, a highly competitive tax credit that supports new home construction. The 12.5% increase expired in 2021, and NLBMDA has been a leader in advocating for its return. H.R. 1 would restore the 12.5% Housing Credit allocation increase for 2026–2029, a key step toward delivering more affordable housing in the United States.

• Lowering the 50% Private-Activity Bond Threshold Test
In addition to the 9% LIHTC credit, a 4% credit exists that provides less subsidy but is a critical resource that enables housing rehabilitation and preservation projects. To secure the 4% credit, projects must have at least 50% of the financing come from private activity bonds (PABs), which are themselves a finite resource. This legislation would lower the PAB threshold to 25% for obligations made after December 31, 2025, and before January 1, 2030. This measure would result in more LIHTC construction by allowing states to stretch their bond authority and reduce competition for the 9% credit.

Next Steps

Speaker Mike Johnson (R-LA) delivered on his promise to have the House of Representatives vote on reconciliation legislation prior to the Memorial Day recess. Senate Republicans have already stated that the Senate will undergo a thorough section-by-section review of the bill. They are likely to address deep cuts made by the House bill to several Inflation Reduction Act (IRA) clean energy tax credits, including the proposed elimination of the 45L energy-efficient homes tax credit. Senate Republicans have also expressed internal disapproval over proposed cuts to Medicaid. The Congressional Budget Office estimates 7.6 million Americans would lose Medicaid coverage due to stringent work requirements included in the legislation.

There remains a long road ahead for Congress’ once-in-a-decade legislation, which must pass both chambers with historically narrow majorities. Adding pressure, Congress must also address the debt ceiling, which the U.S. is expected to reach between mid-July and early August, according to an estimate released by the U.S. Department of Commerce.

NLBMDA will continue to closely monitor this legislation as it moves through the Senate and will continue actively engaging lawmakers to ensure NLBMDA-supported priorities and provisions make it to the President’s desk.

For questions, contact Matthew Delaney, NLBMDA’s Government Affairs Coordinator at mdelaney@dealer.org.