On Friday, the U.S. House of Representatives passed the Build Back Better (BBB) reconciliation package in a partisan vote.

All but one Democrat voted for the BBB package and every Republican voted against it. The roughly $1.75 trillion tax and social spending package now heads to the U.S. Senate where its fate remains uncertain.

While the House-passed legislative text represents the most recent version, the contents of the package are likely to change when the BBB is considered in the Senate.

Additionally, it remains unclear if the package has the necessary Democratic party support in the Senate chamber. Both Sen. Joe Manchin (D-West Virginia) and Sen. Kyrsten Sinema (D-Arizona) have noted their concerns about the contents of the package and the speed it is moving through Congress. In order for the BBB bill to pass the Senate, every Senate Democrat would have to support the package.

In terms of raising revenue, the latest version of BBB has some significant differences from what the House Ways and Means Committee passed out of committee earlier this year. Over the last several months, the Big “I" has strongly advocated against numerous tax increases and other policies that would cause significant harm to Big “I" members. Advocacy efforts included sending several letters to Capitol Hill, meeting with numerous members of Congress and their staff both virtually and in person and launching grassroots campaigns toward targeted members of the Ways and Means Committee.

These advocacy efforts proved successful on many fronts and several damaging provisions have been dropped from the legislation. While previous versions of the package capped the 20% small business deduction, the latest version includes no changes to the deduction.

Additionally, all tax rate increases on both the corporate side and the individual side (impacting Big “I" members organized as pass-through businesses) of the tax code have been dropped from the BBB. The latest legislation also does not increase the capital gains tax, makes no changes to stepped-up basis, and also makes no changes to the estate/gift tax.

An expansive new tax information reporting regime that would have required financial institutions and other providers of financial services to track and submit information to the IRS on the inflows and outflows of every account above a de minimis threshold of $10,000 during the year has also been dropped.

The Big “I" advocated against all of these misguided tax proposals.

While the Big “I" had a number of successes on the tax front, it wasn't all good news. The BBB would still expand the 3.8% net investment income tax to income derived in the ordinary course of a trade or business for a single filer with a modified adjusted gross income (AGI) over $400,000, a joint filer with a modified AGI over $500,000, a married person filing a separate return with a modified AGI over $250,000, or a trust with modified AGI over $13,000. The plan does clarify that this tax doesn't apply to wages on which Social Security and Medicare payroll taxes, such as Federal Insurance Contributions Act (FICA) taxes, are already imposed.

In further efforts to raise revenue, the legislation would also impose a new surtax on taxpayers, including pass-through business owners, whose AGI exceeds certain thresholds. Specifically, the BBB would impose a 5% surtax on a taxpayer's AGI exceeding $10 million and an 8% surtax on AGI exceeding $25 million. While these thresholds will not impact many pass-through owners, it is important to note that these high thresholds do not apply to income from businesses that are held in trust. For businesses that do have ownership held in trust, the thresholds are actually only $200,000 and $500,000, respectively.

The legislation would also permanently disallow excess business losses. Under current law, business owners can't deduct losses exceeding $250,000 for single filers or $500,000 for joint filers. However, any excess losses can be treated as a net operating loss in later tax years. This business loss limitation rule is currently set to expire in 2027. However, the BBB would make it permanent starting in 2022.

The package would also institute a 15% corporate minimum tax on large corporations and a 1% surcharge on corporate stock buybacks. Additionally, the framework includes a global minimum tax and a penalty rate for foreign corporations based in non-compliant countries. The legislation would also raise $400 billion in revenue by increasing funding for the IRS to “close the tax gap."

The most recent BBB text also included some important changes for Big “I" members unrelated to the tax code. Earlier versions of the legislation included language that would have given the Department of Labor the authority to “monitor state workers compensation programs." The Big “I" and others in the insurance industry advocated against the inclusion of the language and it was taken out of the BBB text.

Original versions of the BBB also included language that would have forced small businesses to automatically enroll their employees in retirement plans. Specifically, the proposal would have required employers that have been in existence for at least two years, do not sponsor a retirement plan and employ five or more people to automatically enroll their employees in individual retirement accounts (IRAs) or 401(k)-type. This provision has also been stripped from the most recent legislation.

The BBB also included some provisions on flood insurance. It would forgive $20.5 billion in National Flood Insurance Program (NFIP) debt, provide $600 million to support flood mapping, and give FEMA $600 million to set up a means-tested assistance program for NFIP policyholders with household incomes up to 120% of area median income.

As the reconciliation package continues to make its way through Congress, the Big “I" will update members on important changes and provide details on the association's advocacy efforts to push back against the package's most onerous small business policies.

Wyatt Stewart is Big “I" assistant vice president of federal government affairs.