Senate Unveils Tax and Workforce Provisions in Reconciliation Draft

The Senate Finance Committee released its version of the reconciliation bill this week, charting a different course than the House on several tax and workforce provisions.

Why it matters: Once the Senate passes its version of the bill, the House and Senate need to work out differences before final passage. Final provisions will impact CHROs’ workforce planning, benefits strategy, and executive compensation compliance.

Senate Finance committee’s key workforce and HR-related provisions:

• No HSA or Telehealth Expansion: The Senate dropped the House’s proposed expansion of Health Savings Accounts and extension of telehealth flexibilities, popular provisions create during COVID and extended since.

• Executive Compensation Rule Expanded: The bill retains an expanded excessive executive pay “aggregation rule”—prohibiting companies from deducting compensation over $1 million for employees paid by multiple related entities.

• New Tax Deductions: Adds tax deductions for wages earned through tips and overtime pay, and car loan interest—a potential win for employers with large hourly workforces.

• Tax Code Adjustments: Maintains current federal tax brackets, increases the standard deduction, and formally ends personal exemptions.

• Medicaid Work Requirements: Introduces new eligibility rules requiring work for beneficiaries aged 19 and up—potentially affecting access to care for part-time or low-wage workers.

Zoom out: The Finance Committee’s bill is only one part of a larger reconciliation package. It must be integrated with other Senate committee proposals, including:

• Adjustments to the Pell Grant program under the jurisdiction of the Senate HELP Committee; and

• A sweeping immigration package and fee restructuring under the jurisdiction of the Senate Judiciary Committee.

What’s next: Senate Republicans must vote in near unison on the unified package to bypass a filibuster. 

• The legislation will undergo review by the Senate Parliamentarian to determine if it meets budget reconciliation rules. After a full Senate vote, any differences with the House version will need to be ironed out in conference. 

• House and Senate leaders have a stated goal to finalize and pass a reconciliation bill by the July 4 holiday. 

• The HRPA Team will continue to monitor bill text for workplace related provisions and will update membership on developments.