House Draft Tax Bill Would Modify Key Energy Tax Credits, Grant Programs and Permitting Process
The U.S. House of Representatives is working to finalize its version of a massive tax and spending bill that Republicans hope to enact on a party-line vote in the coming months. The tax and energy components of the draft include material changes to energy tax incentives, grant programs, and permitting processes, many of which were enacted or modified by the Inflation Reduction Act (IRA) of 2022 to encourage the expansion of green energy investment and production.
Some energy segments fare better than others in the tax title of the House draft. But overall, the changes (outlined below) will negatively impact the development of renewable energy projects in the U.S. Electric vehicle manufacturers and buyers are hard hit by the early termination of popular consumer credits. The solar energy sector will lose a tax credit incentivizing the purchase of solar panels by homeowners, and both solar and battery manufacturers could lose access to key manufacturing credits well before their termination date if they use components or critical minerals imported from certain foreign countries, including China. Another provision accelerates the phase-out of a tax credit for the production of nuclear power to 2032 – earlier than any new projects are expected to come online. That is bad news for technology companies investing in nuclear plants that could provide clean power to meet the needs of high-energy-demand data centers. Oil and gas companies that have invested in green energy might also be disadvantaged by that change and by early termination of the tax credit for hydrogen production. Utilities developing renewable energy say that proposed limits on the transferability of certain tax credits will result in higher customer bills. And foreign investors in U.S. green energy facilities could be impacted by provisions that restrict access to certain credits by entities from foreign adversary nations.
The energy title of the House draft would rescind over $3 billion in unobligated funds from IRA programs under the Department of Energy’s (DOE) State-Based Energy Efficiency Grants and other DOE offices. But it includes several provisions intended to accelerate the permitting process for energy infrastructure projects in the U.S., including a provision to fast-track permitting for certain fossil fuel and pipeline project applicants for a fee equivalent to the lesser of 1 percent of the expected cost of the applicable construction or $10 million. And it includes a provision to fast track the export of natural gas from the U.S. to non-free trade agreement (FTA) countries or to import natural gas from a non-FTA country for a $1 million application fee.
Another provision in the natural resources title of the bill would attempt to streamline federal permitting for U.S. infrastructure projects, including energy projects. That language would allow entities seeking National Environmental Policy Act (NEPA) review to pay for the cost of the required environmental impact statement (EIS) or environmental assessment (EA) plus an additional 25 percent for a guaranteed completion of the review process within six months (for an EA) or a year (for an EIS). The EIS or EA would not be subject to judicial review under NEPA.
The House will amend the draft, including provisions relating to IRA tax credits, before voting on it. And the Senate almost certainly will make additional changes when the bill goes to that chamber for consideration. Barnes and Thornburg’s Government Relations team can provide regular legislative updates to help guide impacted clients’ business planning and assist with strategic engagement in the legislative process.
Inflation Reduction Act Energy Tax Credits and Changes Incorporated in the House Draft Bill
Among other things, the IRA extended and modified certain previously existing energy tax credits, created new green energy tax credits and incentives, and established funding programs designed to increase the production of clean energy, electric vehicles (EVs), clean buildings, and clean manufacturing.
The House draft bill would change the following green energy tax incentives (for details on the listed tax credits, please see the attached document):
Previously Owned Clean Vehicle Credit (IRC sec. 25E)
House Proposed Change: Repeals the credit for vehicles acquired after December 31, 2025.
Clean Vehicle Tax Credit(IRC sec. 30D)
House Proposed Change: Repeals the credit for vehicles placed in service after December 31, 2025, but preserves it through 2026 for manufacturers that have sold 200,000 or fewer covered vehicles from 2010 through 2025.
Commercial Clean Vehicles Tax Credit (IRC sec. 45W)
House Proposed Change: Repeals the credit for vehicles acquired after December 31, 2025. An exception is provided for vehicles placed in service before 2033 if they are acquired pursuant to a written, binding contract entered into beforeMay 12, 2025.
Alternative Fuel Vehicle Refueling Property Credit (IRC sec. 30C)
House Proposed Change: Repeals the credit for property placed in service after December 31, 2025.
Energy Efficient Home Improvement Credit(IRC sec. 25C)
House Proposed Change: Repeals the credit for property placed in service after December 31, 2025.
Residential Clean Energy Credit (IRC sec. 25D)
House Proposed Change: Repeals the credit for property placed in service after December 31, 2025.
New Energy Efficient Home Credit (IRC sec. 45L)
House Proposed Change: Repeals the credit for any qualified home acquired after December 31, 2025. An exception is provided for homes that have commenced construction before May 12, 2025, provided that they are acquired before the end of 2026.
Clean Electricity Production Credit (IRC sec. 45Y) and Clean Electricity Investment Credit (48E)
House Proposed Change: Accelerates the phase-out so that the credits are reduced by 20 percent for facilities placed in service in 2029, by 40 percent for facilities placed in service in 2030, and by 60 percent for facilities placed in service in 2031. The credits zero-out in 2032. Repeals transferability of the credits for facilities and energy storage technology that begins construction two years after the date of enactment. Restricts access to the credits for certain foreign entities, certain facilities that receive material assistance from a prohibited foreign entity, and taxpayers that make applicable payments to certain foreign entities.
Clean Fuel Production Credit (IRC sec. 45Z)
House Proposed Change: Repeals transferability of the credit for fuel produced after December 31, 2027. Restricts access to the credit for certain foreign entities.
Credit for Carbon Oxide Sequestration (IRC sec. 45Q)
House Proposed Change: Repeals transferability for carbon capture equipment that begins construction two years after the date of enactment. Restricts access to the credit for certain foreign entities.
Zero-Emission Nuclear Power Production Credit(IRC sec. 45U)
House Proposed Change: Accelerates the phase-out on the same schedule that is proposed for the Clean Electricity Production and Investment credits. Repeals transferability of the credit for fuel produced after 2027. Restricts access to the credit for certain foreign entities.
Clean Hydrogen Production Credit (IRC sec. 45V)
House Proposed Change: Repeals the credit for facilities that begin construction after 2025.
Advanced Manufacturing Production Credit(IRC sec. 45X)
House Proposed Change: Terminates the credit for wind energy components sold after 2027. Terminates the credit for all other components after 2031. Repeals transferability of the credit for components sold after 2027. Restricts access to the credit for certain foreign entities, taxpayers that make applicable payments to certain foreign entities, and taxpayers that produce components with material assistance from or subject to a licensing agreement with certain foreign entities.
Investment Credit for Certain Energy Property (IRC sec. 48)
House Proposed Change: Accelerates the phase-out on the same schedule that is proposed for the Clean Electricity Production and Investment credits. Restricts access to the credit for certain foreign entities.
State Lawmakers Oppose Proposed 10 Year Freeze on AI Laws + Regulations
On June 3, 2025, a bipartisan group of 260 state lawmakers sent a letter to the U.S. House of Representatives and the U. S. Senate expressing “strong opposition to the provision in Subtitle C, Part 2 of the tax and budget reconciliation bill, which would undermine ongoing work in the states to address the impact of artificial intelligence (AI).”
The letter was in response to a provision in the proposed tax and budget reconciliation bill that seeks to legislate a ten-year freeze on any state or local regulation of AI, in effect preempting states from enacting any laws that would regulate AI.
According to the letter, the preemption would “would cut short democratic discussion of AI policy in the states with a sweeping moratorium that threatens to halt a broad array of laws and restrict policymakers from responding to emerging issues.” Moreover,
[t]he sweeping federal preemption provision in Congress’s reconciliation bill would also overreach to halt a broad array of laws elected officials have already passed to address pressing digital issues. Over the past several years, states across the country have enacted AI-related laws increasing consumer transparency, setting rules for the government acquisition of new technology, protecting patients in our healthcare system, and defending artists and creators. State legislators have done thoughtful work to protect constituents against some of the most obvious and egregious harms of AI that the public is facing in real time. A federal moratorium on AI policy threatens to wipe out these laws and a range of legislation, impacting more than just AI development and leaving constituents across the country vulnerable to harm.
States have always been on the forefront of protecting consumers’ rights and interests. A proposed ten-year ban on states’ ability to determine what its citizens deem appropriate for their protection when it comes to AI is paternalistic and contradictory to the notion of decreasing the federal government to allow states to legislate for its citizens. It is inconceivable how rapidly AI will develop in the next ten years. Hamstringing state legislatures from addressing AI in any way for a decade is not prudent. If you agree, call your members of Congress and urge them to “reject any provisions that preempt state and local AI legislation in this year’s reconciliation package.
Nuclear’s Comeback: What Renewables Professionals Should Know
The clean energy transition isn’t a zero-sum game – it’s a team effort. And one player is stepping back into the spotlight with renewed strength: nuclear energy. With the President’s signing of four new Executive Orders on May 23, 2025, nuclear is poised to play a major role in a future defined by clean, reliable power. From next-generation technologies to small modular reactors (SMRs) that promise flexibility and innovation, nuclear is no longer just a legacy option – it’s shaping up to be one of the most exciting frontiers in clean energy. Now’s the time to pay attention – and maybe even get curious.
The four executive orders signed last week are aimed at rapidly expanding the U.S. nuclear energy industry, including reforms to the Nuclear Regulatory Commission (NRC) to accelerate reactor licensing and reduce bureaucratic barriers. These orders set ambitious goals such as tripling nuclear capacity to 400 gigawatts by 2050, completing ten new large reactor designs by 2030, and achieving operational status for three experimental reactors by July 4, 2026. The directives also focus on strengthening the domestic nuclear fuel supply chain, reviving reprocessing capabilities, and expanding the nuclear workforce. Additionally, the orders promote deployment of advanced nuclear reactors for national security, including powering AI infrastructure and military bases, while positioning U.S. nuclear technology for global export leadership.
The four executive orders include “Reinvigorating the Nuclear Industrial Base,” “Reforming Nuclear Reactor Testing at the Department of Energy,” “Ordering the Reform of the Nuclear Regulatory Commission,” and “Deploying Advanced Nuclear Reactor Technologies for National Security.”
What is Nuclear Energy?
There are two types of nuclear energy – fission and fusion. Nuclear fission is the process of splitting heavy atoms like uranium to release energy, which is how today’s nuclear power plants – including both large reactors and SMRs – generate electricity. Large plants produce massive amounts of power but require complex infrastructure and many years to build, while SMRs are smaller, factory-built, and designed for faster, safer, and more flexible deployment, with several U.S. projects aiming to break ground before 2030. Nuclear fusion, by contrast, tries to replicate the energy of the sun by fusing lighter atoms (like hydrogen) together, but it’s still in the experimental stages – despite recent exciting breakthroughs, we are likely decades away from building fusion power plants at commercial scale (unless quantum computing accelerates that). In short, fission is here now and evolving, while fusion remains a promising but long-term goal.
What are the IRA Nuclear Incentives and how does the “One Big Beautiful Bill” Support Nuclear Energy?
The Inflation Reduction Act introduced new nuclear incentives:
Section 45U (Zero Emission Nuclear Power PTC) – a production tax credit to incentivize the continued operation of existing nuclear power plants, which offers up to $15/MWh for electricity produced and sold from 2024 to 2032, provided prevailing wage requirements are met. However, this tax credit applies only to facilities that were in service before passage of the IRA.
Section 45Y (Clean Electricity PTC) – includes a production tax credit for new nuclear power plants placed in service after December 31, 2024, which offers $0.003/kWh and can increase to $0.015/kWh if prevailing wage and apprenticeship requirements are met. These statutory amounts are subject to annual inflationary adjustments; additional bonuses are available if the facility is located in an energy community or meets domestic content requirements.
Section 48E (Clean Electricity ITC) – includes provisions allowing nuclear facilities to qualify for a 6% investment tax credit, which can increase to 30% if prevailing wage and apprenticeship requirements are satisfied. Additional increases are available if the facility is situated in an energy community or meets domestic content criteria.
HALEU Funding – the IRA allocated $700 million to the Department of Energy (DOE) to develop a domestic supply chain for high-assay low-enriched uranium (HALEU), a specialized fuel. This funding supports research, development and safety initiatives, aiming to reduce reliance on foreign sources and ensure a stable supply for future nuclear technologies.
The “One Big, Beautiful Bill” that recently passed by the House and is under Senate review, bolsters the nuclear energy sector by improving regulatory processes, providing financial incentives, supporting technological advancements, and ensuring long-term liability protections. Although the House bill scales back availability of the 45Y and 48E tax credits for all types of technology, nuclear facilities were treated far better than other types of facilities—qualifying nuclear facilities would remain eligible for those credits as long as construction begins by December 31, 2028. As the bill progresses to the Senate, its potential impact on the U.S. nuclear energy landscape will depend on further legislative negotiations and approvals.
Why Should Renewables Professionals be Thinking about Nuclear?
According to the DOE, nuclear accounted for nearly 50% of the carbon-free electricity generated in the U.S. in 2023. Over the next decade, due to new policies and innovative technology, renewables and nuclear will increasingly compete in the same marketplaces – especially for power purchase agreements, in clean hydrogen hubs, and for credit transfer deals. Several traditional tax equity investors are watching SMRs, which may qualify for the ITC and bonus credits that are very familiar to them. Investors looking to purchase transferable tax credits from zero-carbon sources may soon see nuclear as a credit supplier – or even a financing partner on hybrid projects. You may develop a hybrid facility that combines SMRs with renewables to balance reliability and cost. Even if you never work on a nuclear project, you may share a substation with one, compete for transmission capacity, or trade hydrogen with facilities powered by SMRs. As green capital markets grow more inclusive, developers and financiers with cross-technology fluency will be better positioned to innovate and negotiate.
Is Nuclear Technology Safe?
Safety has long been a major concern with nuclear energy due to high-profile accidents that raised fears about radiation, reactor failure, and long-term waste. However, newer nuclear technologies – especially SMRs and advanced reactors – are designed with passive safety systems that automatically shut down without human intervention or external power. They often use safer coolants, operate at lower pressures, and are built underground or in containment structures that reduce risk in extreme events. Additionally, modern regulatory frameworks and real-time monitoring technology greatly enhance safety oversight compared to past decades. Further, the low-enriched uranium that is used is not suitable for making weapons.
What do the Four New Executive Orders Require?
The orders direct government agencies to aggressively “usher in a nuclear energy renaissance” through reforms to the NRC, involving (i) streamlining its licensing process to incorporate fixed deadlines for review of applications, (ii) undertaking a “review and wholesale revision” of its guidance and regulations with final rules and guidance to be issued within 18 months, (iii) reconsidering the linear no-threshold model for radiation exposure (currently that there is no safe threshold of radiation exposure), (iv) expediting the NRC’s review of reactor designs tested by the Department of Defense (DOD) or DOE, and (iv) reorganizing the NRC to focus on the “expeditious processing of licensing applications and adoption of innovative technology.”
What Every Multinational Company Should Know About … The Likely Landing Spot for the Trump Tariffs
One of the most common questions we get from clients is, “What is the future of the Trump administration’s tariff strategy?” With President Trump having issued over 50 tariff proclamations — a six-month sprint of more major changes to the tariff system than occurred over the prior 90 years — it can be hard to keep in mind that there will eventually be a landing spot for the tariffs. That landing spot likely will be along the lines of some combination of baseline global and sectoral tariffs, alongside a varying country-by-country tariff regime in place of the former slate of low and similar tariffs for all WTO signatories. So as an aid to helping importers risk-plan for the uncertain international trade and tariff environment, here are 16 fearless attempts to step back from the day-to-day static of new tariff proclamations to try to predict the likely landing place for the tariffs.
Where Are We Going on the Tariffs?
Fearless Guess #1: Plan for Permanent Global Tariffs. The Trump administration seems to view the global 10% tariff as a long-term revenue measure and the “price of admission” for companies to sell into the U.S. market. Even the United Kingdom, which is one of the few countries that has a trade deficit with the United States, announced a negotiated framework settlement that preserves the 10% global tariff. The same was true for the 90-day pause for China, which eliminated the high reciprocal tariff rates but still left the global 10% tariff in place. Our best guess is that the U.S. government will become accustomed to collecting an additional $300 billion or more in tariffs and will maintain this as an ongoing revenue source, regardless of who occupies the White House in four years.
Fearless Guess #2: The Tariffs Continue Despite the Court of International Trade Ruling. The U.S. Court of International Trade on May 28, 2025, struck down all of the Trump tariffs issued under the International Emergency Economic Powers Act (IEEPA), including the global and reciprocal tariffs and the 20% fentanyl-based tariffs, ruling they exceed the president’s legal authority. But the Trump administration already has appealed this decision and has received a stay from the Court of Appeals for the Federal Circuit, meaning the tariffs are still being collected. Our expectation is these tariffs will stay in place until the U.S. Supreme Court rules on the issue, and that as a backup plan the Trump administration will launch investigations to support alternative bases for tariffs, under either Section 232 and Section 301.
Fearless Guess #3: Notwithstanding the foregoing, Canada and Mexico will be the exception as they reduce or even eliminate the 10% global tariff, as part of the 2026 review of the U.S.-Mexico-Canada Agreement, but only for USMCA-compliant goods that meet strengthened country-of-origin requirements.
Fearless Guess #4: There will be Partial Rollbacks for Reciprocal Tariffs that Still Leave Fairly High Tariffs in Place. Despite the 90-day pause representing a potential off-ramp to permanently higher tariffs, the reciprocal tariff pause should not be viewed as a dialing down of the trade war until we see concrete evidence of negotiated and lowered long-term tariffs. There are several reasons to believe that while negotiated tariffs will decline, they will bottom out at a fairly high level:
The reciprocal tariffs are based on trade deficits, not actual tariff barriers. This is why countries like Switzerland and Korea, which impose very low tariffs on imports, were still hit hard with big reciprocal tariff numbers. The administration appears to view any trade deficit as needing major correction, which implies the need to maintain much more than just 10% global tariffs.
The originally announced vision for the reciprocal tariffs, which was to go subheading-by-subheading and identify areas where the United States was charging less than foreign countries, has gone by the wayside. Instead, there is a general sense that the reciprocal tariffs are intended to counteract any and all potential forms of favoring foreign industries (subsidized electricity, manipulated currency, and maintaining a Value-Added Tax, which generally exempts exports from paying any VAT, which President Trump views as an export subsidy), as well as any tariff or non-tariff barriers that make it harder for U.S. firms to export abroad.
The Trump trade officials seem to view any pain that U.S. importers are seeing as being short term, believing that there will be a renaissance of made-in-USA manufacturing that will “fix” all tariff issues in fairly short order.
The Trump administration views tariffs as helping with a different administration priority, which is to provide revenue to partially offset the cost of extending the 2017 tax cuts.
Fearless Guess #5: Plan for Very High Tariffs for the Reasonably Foreseeable Future. Tariff rates are still very high, even after the reciprocal tariff pause. As a rough approximation, U.S. imports totaled $3.3 trillion last year. A 10% tariff, even taking into account the certain coming decline in imports, implies a $300 billion tax increase paid by U.S. importers. Adding in steel, aluminum, automotive tariffs, and likely Section 232 tariffs raises the total to well over $400 billion, and this is before accounting for wherever the reciprocal tariffs end up. Add it up, and CBP is on track to be collecting over $1.5 billion dollars per day in duties.
Fearless Guess #6: Retaliation Will Not Be a Major Factor. The EU and others have announced that they will not retaliate (other than retaliating against steel and aluminum tariffs, as previously announced) — for now — given the decision to pause the reciprocal tariffs. This puts the focus squarely on negotiating reciprocal tariff reductions, not escalation, for the 90-day pause. Our prediction is that most countries will choose to negotiate the best deal they can rather than risk the type of retaliation that the Trump administration imposed against China when China originally retaliated against the U.S. tariffs.
Fearless Guess #7: Product-Specific Exclusions Will Be Rare and Based on National Security Reasons, Not Economic Ones. It is tellingthat one of the very first tariff actions taken by the Trump administration was to wipe out all accumulated product-specific exclusions that had built up over the years from the 2018 steel and aluminum exclusions. In the current tariff proclamations, the impetus has been in the opposite direction, which is to give U.S. producers opportunities to expand the number of products covered, with no provision for any exclusions. We anticipate that few (if any) exclusions will be granted, and any that come on board will be for reasons of national security for critical items in short supply rather than for economic reasons. Importers should be looking to build flexibility, resilience, and agility into their supply chains and should be risk-planning how they would negotiate a new normal of permanently higher tariff rates, rather than hoping for the administration to reinstate the type of product exclusions seen in the first Trump administration for steel and aluminum products.
What Are the Key Concerns for Importers and Manufacturers?
Fearless Guess #8: The Tariff Proclamations Represent a Permanent Attack on a Dominant U.S. Manufacturing Model. Many U.S. manufacturers rely on global parts and components for domestic assembly. The business strategies of multinationals often depend on purchasing parts and components through carefully thought-out international supply chains and then adding value and further manufacturing in the United States. These carefully engineered supply chains took decades to build, and tariffs threaten to upend this entire business strategy, not just margins.
Fearless Guess #9: Recognize that Tariff Uncertainty Is a Huge Business Risk for the Reasonably Foreseeable Future. A common theme we see when engaging in tariff risk-planning exercises with clients is the difficulty of reacting to rapidly changing tariff announcements and the uncertainty of not knowing which countries will end up with high or low tariffs. This leads to delayed investments, frozen M&A activity, and general investment and planning paralysis. Companies are spending resources on cost-passing strategies and supply chain triage, not growth. This means the tariffs will have an impact far beyond the direct bottom-line impact for companies that depend on imports.
What Is the Outlook for the China Tariffs?
Fearless Guess #10: Recognize that the Trade War Has a Sharper China Focus. Though also broad-based, the trade war has a clear China focus, which is the only country with triple-digit tariff rates. Although some of these tariffs are now temporarily suspended to support a negotiated settlement, even the remaining tariffs still add up to more than the highest reciprocal rate imposed on any other country. With China and the United States comprising 40% of global GDP, the escalation in tariffs between these two economies introduces significant systemic global trade risks. Supply chains can’t shift overnight, and companies report that for many items, including basic parts such as capacitors or resistors, no alternative sourcing exists outside of China. Even if relocation were possible, it could take years and raise permanent costs. With China preparing its producers for a long trade war, there may be a long and uncertain path toward resolution. We also would not be surprised to see the administration push other countries to take coordinated actions against China or to look for ways to impose a tariff on all Chinese-origin content, even if the good is substantially transformed in another country, as a means of pushing back on Chinese efforts to use non-U.S. markets as a way to indirectly sell to the United States.
What Is the Outlook for the USMCA review?
Fearless Guess #11: USMCA Survives — but with Strengthened Originating Content Requirements and New Anti-China Provisions. At this point, it is clear that Canada and Mexico are receiving preferential trade treatment, as most tariffs aimed at Canada and Mexico are paused — but only for USMCA-compliant goods. Because so many U.S. companies have integrated supply chains across North America — particularly within the politically powerful automotive industry — it is likely that the administration will ultimately seek to preserve the USMCA. We do anticipate, however, that there will be substantial revisions, including strengthened country of origin rules, new measures restricting the use of Chinese parts and components, and potential new unified tariff barriers against China.
What Is the Outlook for the Automotive Tariffs?
Fearless Guess #12: Recognize that the Automotive Sector Still Faces Major Disruption. Automotive tariffs remain a flashpoint, with ripple effects across the U.S.-Canada-Mexico supply chain. These tariffs will continue to disrupt the largest U.S. manufacturing sector, especially with the administration launching a new Section 232 investigation into medium- and heavy-duty trucks. Because of the integrated U.S.-Canada-Mexico automotive supply chains, it is impossible to divorce the upcoming 2026 USMCA review from the automotive sector, as it is the main determinant of the trade deficit with Mexico. Chinese investment in Mexico, and the use of Chinese-origin parts and components in Mexico, have been major trends over the last six years as Chinese companies have reacted to the Section 301 tariffs imposed in the first Trump administration. So one likely area of compromise will be limitations on Chinese investment in North America and the use of Chinese-origin parts and components to qualify for USMCA-compliant status.
What Is the Outlook for Additional Section 232 Tariffs?
Fearless Guess #13: Plan on More Section 232 Tariffs. We do not believe the incessant drumbeat of new Section 232 investigations is at an end. Expect the administration to continue to announce more investigations, particularly in light of the Court of International Trade striking down the expansive use of IEEPA to support general tariff increases.
Fearless Guess #14: Recognize that Lobbying Will Be Intense — and You May Need to Get Involved. All or nearly all countries are negotiating. Industries will jockey to receive favorable treatment for their own concerns. Thus, with global tariffs on the table, expect a surge of special-interest activity, as industries and companies race to secure carveouts, exemptions, or favorable tariff treatment. Negotiations will open a free-for-all of companies and industries pushing to get favored status. The same will be true as various Section 232 investigations play out.
What Coping Mechanisms Should Importers Be Taking?
Fearless Guess #15: Recognize that the Risks of Being an Importer Have Sharply Risen — and that Customs Compliance and Accuracy in Import Operations Is More Important than Ever. In a high-tariff environment, it is essential to have complete accuracy for all imports, as errors can quickly result in large underpayments, associated interest, and penalties. Further, the Trump tariff proclamations have directed Customs to focus on ensuring full collection and compliance with the new tariff requirements, often directing Customs to impose penalties at the maximum level allowed without considering any mitigating factors. As a result, it is essential that importers carefully review the accuracy of all import-related information, especially for the critical areas of country of origin, valuation of the product, and USMCA compliance. This is especially important when importing goods made in third countries using Chinese parts and components, as these goods could be considered to still be Chinese in origin and thus subject to the high Chinese tariffs unless they were substantially transformed in the third country. Because Customs is carefully scrutinizing all imports for potential underpayments of the new tariffs, importers should be doing the same.
Fearless Guess #16: The Importance of Filing Voluntary Self-Disclosures Has Never Been Greater. Importers are required to file all import-related information electronically in the Customs entry portal known as the Automated Commercial Environment (ACE). Customs uses sophisticated data mining to find anomalies and potential tariff underpayments. With Customs being directed to emphasize enforcing the new tariffs, and to apply the maximum penalties without considering mitigating factors, Customs will be using ACE data frequently to target tariff underpayments and to initiate investigations to seek the recovery of underpaid tariffs. The only way to avoid these high penalties is for importers to file voluntary self-disclosures, which lock in the ability to close out administrative disclosures with the payment of back duties and interest but with no penalty. We accordingly expect disclosures will sharply increase as importers take steps to avoid potential penalties.
GeTtin’ SALTy Episode 54 | One Big, Beautiful Bill: Federal Tax Changes and State Fiscal Shakeups – Midyear SALT Update with Morgan Scarboro [Podcast]
Gettin’ SALTy podcast host Nikki E. Dobay welcomes back Morgan Scarboro, Vice President at Multistate Associates, for a lively midyear check-in on the dynamic world of state and local tax (SALT) policy.
Kicking off with a discussion of the much-anticipated federal tax bill—the “One Big, Beautiful Bill Act”— Nikki and Morgan break down what its provisions mean for states, separating political rhetoric from fiscal reality.
They explore the impact of federal conformity on state revenues, highlight the bigger budgetary threats in federal spending shifts, and share insights from the Tax Foundation’s latest research.
The conversation then pivots to a state-by-state rundown: from Illinois’ budget process and GILTI tax surprise, to Washington’s digital advertising tax, Florida’s tax relief standoffs, and California’s conformity efforts.
The episode wraps on a lighter note, as Nikki and Morgan swap memories of 2000s one-hit wonders.
Whether you’re a SALT pro or just trying to keep up, this episode delivers a fast-paced overview of what’s happening—and what’s next—in state and local tax policy.
What Every Multinational Company Should Know About … The Current Trump Tariff Proposals (June 2025 Update)
Less than five months into the new administration, we have already seen more than 50 tariff proclamations. With new tariffs being proposed, imposed, revoked, suspended, and sometimes reimposed, it can be difficult for importers to keep up with all the proclamations. So, as an aid to the importing community, we have put together an “evergreen” tariff article, which contains three key items for importers:
A summary of the key tariffs and tariff proposals, including their current status[1] and the key issues for each.
A list of resources for importers looking for aids to cope with tariff and international trade uncertainty; and
A list of the most common questions we are receiving from clients regarding the new tariffs and their implementation.
We also note that on May 28, 2025, the U.S. Court of International Trade struck down many of the new Trump tariffs (i.e., those based on the International Emergency Economic Powers Act (IEEPA)), ruling that they exceed the president’s legal authority. Commerce Secretary Lutnick recently emphasized that “tariffs are not going away,” citing multiple statutory authorities available to maintain them. The Trump administration has already appealed the CIT’s decision to the U.S. Court of Appeals for the Federal Circuit and has obtained a stay. Our expectation is that these tariffs will stay in place until the U.S. Supreme Court rules on it, which will take time to occur. We also anticipate that the Trump administration will likely launch investigations to support alternative bases for the IEEPA tariffs, including under Section 232 and Section 301. We will be regularly updating these resources to reflect new tariff proposals and modifications, which are in some cases being updated or changed daily.
Where Are We on the Various Tariff Announcements?
The state of play for each tariff is as follows:
Bucket 1: Chapter 1-97 Pre-Existing Tariffs
What Are They? The first set of tariffs are the “normal” tariffs that have existed for decades.
Are they Permanent? Yes.
How Much Are They? Generally, in the range of 0%–7%.
Do They Stack? These tariffs are the starting point for stacking, as all tariffs are added to these initial normal tariffs.
Bucket 2: Global 10% Tariffs
What Are They? The “price of entry” for selling to the United States.
Are They Permanent? Unlikely to be negotiated away, with the possible exception of Canada and Mexico as part of USMCA review.
How Much Are They? 10%.
Do They Stack? Yes, the global tariffs stack on top of the Chapter 1-97 tariffs.
Bucket 3: Reciprocal Tariffs
What Are They? Tariffs against the entire world, based on the level of trade surpluses with the United States.
Are They Permanent? Currently suspended for country-by-country negotiations. They are likely to return but at lower, negotiated levels.
How Much Are They? Up to 50%.
Do They Stack? The reciprocal tariffs stack on top of the Chapter 1-97 tariffs. The announced reciprocal tariff rates include the 10% global tariff. The reciprocal tariffs, however, carve out any goods that are subject to any Section 232 sectoral tariffs, making the reciprocal and sectoral tariffs an either-or set of tariffs.
Bucket 4: China Tariffs
What Are They? The fourth set of tariffs comprises those imposed specifically against China, which include both the global and reciprocal tariffs and additional, China-only tariffs. Thus, calculating the total tariffs on China requires adding up the following tariffs:
Section 301 Tariffs: The first China-specific tariffs were imposed on Chinese-origin goods in the first Trump administration. About half of trade with China is exempt from these tariffs (the so-called “List 4B”); the other half of imports from China pay a tariff of between 7.5% and 25%. These tariffs stack on top of the Chapter 1-97 tariffs. These tariffs are carryovers from the first Trump administration and continued through the Biden administration, and thus are likely permanent unless negotiated away as part of the current negotiations with the Chinese government (unlikely).
IEEPA 20% China Tariffs: The second China-specific tariffs are the 20% tariffs relating to what the Trump administration characterizes as the Chinese government’s failure to halt the shipment of fentanyl precursors used to support the export of fentanyl into the United States. These tariffs are not currently paused and stack on top of the Chapter 1-97 and the Section 301 tariffs. There is some chance that these tariffs will be diminished or removed based on the progress in negotiations and perceptions of the administration regarding whether China has taken sufficient steps to address concerns relating to the export of fentanyl precursors. The fentanyl tariffs stack on top of the Chapter 1-97, Section 301, and global tariffs. These tariffs are not paused and are likely to be permanent.
Reciprocal Tariffs: The fourth set of China tariffs are the reciprocal tariffs. After China retaliated against the U.S. tariffs, the Trump administration raised the China IEEPA reciprocal tariff to 125% (which includes the 10% global tariff). The reciprocal tariffs stack on top of the Chapter 1-97, global, and Section 301 tariffs. The China reciprocal tariffs are currently paused and are subject to negotiations with China. It is likely that these tariffs will return at the end of the 90-day pause period, albeit at a lower negotiated rate.
Total China Tariffs/How They Stack: Thus, all China-origin goods have a tariff rate of 145%. These goods are still subject to the original Section 301 tariffs, which means the stacked tariffs on Chinese-origin goods range from 145% to 170%, plus the normal Chapter 1-97 tariff rates for the specific product. With the paused reciprocal tariffs, the current baseline is the Chapter 1-97 tariffs, plus the global 10% tariff and the 20% fentanyl-based tariff, with the addition of any applicable Section 301 tariff.
Bucket 5: Section 232 Sectoral Tariffs
The fifth set of tariffs are the sectoral tariffs imposed under Section 232 on specific products.
What Are They: These sectoral tariffs currently include steel and aluminum tariffs (50% as of June 4) and the automotive(25%) sectoral tariffs, with the latter currently suspended for USMCA-compliant goods. Because the sectoral tariffs are either-or with the reciprocal and global tariffs, where these tariffs apply, they replace those tariffs.
Future New Sectoral Tariffs: The administration has announced or clearly telegraphed new Section 232 investigations covering medium- and heavy-duty trucks and parts; copper and derivative products; critical minerals; lumber and timber; aircrafts, jet engines, and parts; pharmaceutical; and semiconductor goods.
Expansion of Sectoral Tariffs: For Section 232 tariffs currently in place, the administration has announced there will be opportunities for U.S. producers to request additional derivative tariffs.
How They Stack: Where the Section 232 tariffs apply, the global and reciprocal tariffs do not. Thus, they stack on top of the normal Chapter 1-97 tariffs. For China, they stack also on top of the 20% fentanyl-based tariffs and the Section 301 tariffs.
Bucket 6: IEEPA 25% Canada and Mexico Tariffs
The last set of tariffs are the 25% tariffs imposed on Canada and Mexico, relating to what President Trump characterizes as those countries’ insufficient efforts to halt the flow of fentanyl and unauthorized immigrants into the United States. These tariffs are suspended for any goods that are USMCA-compliant.
Frequently Asked Questions
After presenting at numerous seminars and webinars, and in discussions with clients, we have noticed certain recurring questions. To aid the importing community, we have compiled a list of these, which include the following:
General FAQs
Do the tariffs stack? Yes, all tariffs stack, with the exception of the Section 232 sectoral tariffs and the global/reciprocal tariffs, which are either-or. The full stacking details are above. In addition, if the product is covered by an antidumping or countervailing duty order, then those duties also stack.
Is the stacking compounded? No. The tariffs add up without compounding. If both a 20% and a 25% tariff apply, the result is a 45% increased tariff.
Are you seeing clients pursue a China +1 strategy to cope with the new tariffs? Yes. Many clients have been pursuing a strategy of adding additional capacity outside of China since the imposition of the original Section 301 duties. These efforts appear to be accelerating, as there is a growing realization that high tariffs for China are the new normal. In this regard, it is important to note the original Section 301 tariffs remained in place even under the Biden administration. Further, China is likely to see the greatest amount of increased tariffs under the reciprocal tariff proposal because it hits so many categories — it heavily subsidizes its industries, it has been tagged as a currency manipulator by the Department of Treasury for years, and there are numerous countervailing duty findings by the Department of Commerce that provide a clear roadmap to identify subsidy programs.
One caution is that when companies move production out of China, they often continue to use Chinese-origin parts and components. Companies pursuing this strategy need to do a careful analysis to ensure they are “substantially transforming” the product by doing enough work and adding enough value in the third country to create a new and different article of commerce with a new name, character, or use, thus giving it a new, non-Chinese country of origin.
Will there be exceptions for goods like medical devices in the proposed tariffs? Medical devices that fall under Chapter 98 continue to maintain duty-free status under the Nairobi Protocols. Whether further exceptions will be granted is unclear, as the tariffs have veered toward being universal due to concerns that exceptions (like those granted for steel and aluminum under the original sectoral tariffs) tend to undermine the efficacy of the new tariff measures. As a result, one purpose of the aluminum and steel tariff announcement was to wipe out the list of accumulated product-specific exceptions that had grown over the years. These factors work against an announcement of tariff-specific exceptions.
Will there be exemptions for goods being imported for use in the U.S. defense industry? How about shipments to the Department of Defense? At this time, there is no such exemption nor any indication that such an exemption is in the works.
Are there any discussions relating to potential tariff relief for other sectors? So far, the only somewhat industry-specific reprieve has been the lifting of tariffs on USMCA-compliant goods, first for the auto manufacturing sector and then in general. If discussions regarding tariff relief for other sectors are occurring, they have not been announced.
Will the executive orders on tariffs be challenged in litigation? Challenges on behalf of private companies and by states such as California already are filed. But in general, the Court of International Trade and the Court of Appeals for the Federal Circuit tend to defer to the executive branch in matters of international trade policy. Also, the imposition of special tariffs in the first Trump administration were generally upheld by the trade courts. It is almost certain that the core issue of whether the president can broadly expand the definition of a ”national emergency” to support universal tariffs without action of Congress will be decided by the U.S. Supreme Court.
Have you heard of any plans to change Foreign Trade Zones (FTZ) laws? In general, no. Specific tariff announcements, however, have contained provisions relating to the FTZs, including that any goods that go into FTZs need to enter in “privileged foreign status.” This means the duty rate is fixed at the time the goods enter the zone, meaning even if the goods are further manufactured within the FTZ, the duty will be based on the original classification when they entered the FTZ.
Reciprocal Tariff FAQs
What are reciprocal tariffs? As originally announced, “reciprocal tariffs” were intended to equalize tariff rates, such as when a foreign country imposes a higher tariff on the United States than the United States does for the same product category. As actually announced, however, the reciprocal tariffs are almost completely based upon the relative trade deficit with individual countries.
Nonetheless, the original concept of the reciprocal tariffs is being applied in tariff negotiations and could work out in several ways. First, because the United States generally has low tariffs, this could mean that there are many opportunities either for U.S. HTS subheadings to increase or for comparable foreign HS subheadings to be reduced, with the impact varying by country. Second, because the announcement of the coming reciprocal tariffs states that it will take into account any form of discrimination against U.S. companies or programs that favor foreign companies, final reciprocal tariffs could remain quite high even if negotiated down. For example, most countries have Value Added Taxes that rebate any VAT payments when goods are exported. The Trump administration has indicated that this would be considered a form of subsidy that should be counteracted with reciprocal tariffs. Similar reasoning applies to subsidized electricity, currency manipulation, and so forth. Adding these concepts on top of equalizing tariffs across HTS categories could lead to major increases in tariffs — or major reductions in foreign tariffs or trade barriers. The final result awaits the announcement of the results of tariff renegotiations.
When will the negotiated rates be announced? The 90-day reciprocal tariff pause was announced on April 9, 2025 putting the 90-day mark at July 9, 2025. The Trump administration has indicated that it will start with major trading partners with large trade deficits, making it likely that many smaller trading partners will be given an additional 90-day extension to allow negotiation down the line.
Do the tariffs apply based on where the product comes from or the country of export? Tariffs are determined by the country where the product was originally made or where it was last substantially transformed, not the country of export. So, if an item is manufactured in China but sent to Vietnam, the importer still pays the Chinese tariffs. The same is true if it undergoes only a moderate amount of processing and is not substantially transformed in the third country. Importers relying on a China +1 strategy need to be certain they are correctly analyzing the substantial transformation requirements to properly claim tariffs based on the country of final manufacture.
If my product includes U.S.-made components, do I get a tariff discount? Potentially yes. If at least 20% of the product’s value comes from U.S.-origin parts and components (either fully produced or substantially transformed domestically), then only the portion of the product that is not U.S.-origin is subject to the reciprocal tariffs.
Are there any items excluded from these tariffs? Several categories of goods are excluded:
Any goods subject to Section 232 tariffs — even if the goods are currently only under investigation — are excluded, because the carveout includes future Section 232 sectoral tariffs. This includes specific goods like certain types of copper, lumber, pharmaceuticals, and semiconductors, and products detailed in Annex II to the reciprocal tariffs.
Items covered under 50 U.S.C. § 1702(b), such as personal communications, donations, and personal baggage, are excluded.
Products from countries with which the U.S. lacks normal trade relations (Belarus, Cuba, North Korea, and Russia), which are already covered under high Column 2 rates, are excluded.
Energy products and critical minerals that are not sourced domestically are excluded.
Can importers claim duty drawback for the reciprocal tariffs? Yes. Duty drawback allows importers to reclaim up to 99% of duties paid if items do not remain in the U.S. Customs territory because they either were later exported or destroyed. Unlike certain other tariff proclamations, such as the Section 232 aluminum and steel tariffs, the reciprocal tariff proclamation does not specify whether the reciprocal tariffs qualify for duty drawback. However, CBP on April 8, 2025, instructed that drawback is available for reciprocal tariffs.
Are Chapter 98 imports affected by the new tariffs? In most cases, no — favorable Chapter 98 treatment still remains. But there is an exception for Chapter 98 as applied to goods exported for repair/processing and brought back. Here, the tariffs apply only to the foreign work’s value. At the same time, if the work performed abroad includes U.S.-origin parts and components, the tariffs apply only to the non-U.S. portion of the final value.
What about Foreign Trade Zones (FTZs)? Goods with U.S. origin or already-imported goods given “domestic status” under 19 C.F.R. § 146.43 remain unaffected. But beginning on April 9, 2025, any imported goods entering an FTZ are treated as having “privileged foreign status” under section 146.41, which means that the tariff rate that applied at the time of entry is locked in, even if the good is further manufactured or altered after it enters the FTZ.
Steel and Aluminum Tariff FAQs
How have the Section 232 aluminum and steel tariffs changed from the original 2018 version?
The aluminum tariffs increased from 10% to 25%.
All negotiated tariff-rate quotas for the EU, Japan, and the United Kingdom, as well as the quotas negotiated with Argentina, Brazil, and South Korea, are no longer applicable. The previous exemptions for Australia, Canada, Mexico, and Ukraine no longer apply.
All product-specific exemptions that had been granted under the original aluminum and steel program are revoked.
The “derivative articles list” is considerably expanded.
On June 4, the Section 232 tariffs on steel and aluminum increased to 50%.
Are Chapter 72 articles still subject to Section 232 tariffs? Yes. Certain headings in Chapter 72 that were previously subject to the original Section 232 tariffs are still covered. All exclusions that previously applied to certain Chapter 72 products are now revoked.
Are iron products covered? Based on the description of the covered products in the Executive Orders, carbon alloy steel products — not iron — are covered by the exclusions.
How should we treat imports that fall under the “derivative articles” HTS codes but do not actually contain any aluminum or steel? In some cases, certain HTS classifications on the derivative aluminum and steel HTS classifications cover types of products that may not contain any aluminum or steel. For example, certain types of metal furniture are covered, but if these are made out of a metal other than steel, then they would not be covered even though they fall within an HTS that is listed in Annex 1 of the steel proclamation. In these cases, the foreign producer should include a statement on the commercial invoice, providing that the product does not contain aluminum or steel, to support why the tariffs are not due on the entry.
After the elimination of the product-specific exemptions, are there any remaining exemptions? The only exemption remaining is for derivative articles that are manufactured from steel melted/poured in the United States or aluminum smelted/cast in the United States. For such products, the importer should request a statement on the commercial invoice stating that the product contains aluminum smelted/cast in the United States or steel that was melted/poured in the United States. In case of a Customs inquiry, it would be appropriate to include copies of steel mill certificates or aluminum certificates of analysis in the 7501 Entry Summary packet.
For derivative articles, is the Section 232 tariff paid on the full value of the article? The Executive Orders state that the Section 232 tariff is paid on the “value” of the aluminum or steel “content” of the “derivative article.” There are, however, no instructions as to how this value should be calculated. In accordance with normal Customs requirements, the value should be calculated using a reasonable method that is supportable. This could potentially be based on a calculation from the foreign supplier. Frequent importers of derivative products should monitor CSMS announcements to see if CBP issues instructions on this issue.
Is duty drawback available for the aluminum and steel tariffs? No, the executive orders state that duty drawback cannot be used.
Does Chapter 98 provide relief from the Section 232 aluminum and steel tariffs? The executive orders do not list any Chapter 98 exceptions for the new tariffs. This is consistent with the original Section 232 tariffs, which also did not contain any Chapter 98 exceptions.
Will there be an exclusion process? None has been announced or established. It is unlikely that the Trump administration would wipe out all product-specific exemptions, only to build them back up again.
Could the list of “derivative articles” expand? The executive orders directed the Department of Commerce to establish a process by May 11, 2025, to consider requests to add additional “derivative articles.” The established process opens up two-week comment windows several times a year to allow for such comments. We anticipate that U.S. aluminum and steel manufacturers will aggressively use this process to push for additional excluded derivative products.
Do Chinese-origin steel and aluminum products still face the previous tariffs? Yes. Products subject to Section 232 tariffs — like steel and aluminum — will continue to be charged the original 20% IEEPA tariff. However, they’re exempt from the new Reciprocal Tariffs. So for Chinese steel and aluminum, the total tariff remains 20%, plus the additional Section 232 duties as well.
Automotive & Medium- and Heavy-Duty Truck Tariffs
Why were these tariffs imposed so quickly? The automotive tariffs (which cover passenger vehicles, light-duty trucks like SUVs and pickup trucks, and automotive parts) references a 2019 Commerce Department investigation that concluded foreign auto imports, including their parts and components, pose such a threat to U.S. national security. The Trump administration was able to leverage this determination to issue tariffs without further investigation, picking up on the previous findings detailed in Proclamation 9888 (issued May 17, 2019). Other Section 232 investigations are starting from a clean slate and thus require the completion of new investigations.
Can companies get a refund of duties if they re-export the imported goods? No. These tariffs are not eligible for duty drawback.
Is using an FTZ a viable strategy for these tariffs? Yes. Once the tariffs are in force, all applicable vehicles and parts entering an FTZ must be placed under privileged foreign status, pursuant to 19 C.F.R. § 146.41, unless the items qualify for domestic status under section 146.43.
Do these new tariffs stack on top of others already in place? Yes, except for the reciprocal tariffs. The Section 232 auto tariffs stack on existing duties, including those under Section 301, Section 201 (safeguards), and any Chapter 1-97 tariffs. The global and reciprocal tariffs, however, are either-or tariffs that are carved out by the reciprocal tariff announcement.
Will parts and components be added or subtracted? Yes, to the former; unlikely for the latter. The proclamation instructs the Department of Commerce to establish a process, within 90 days, whereby U.S. producers or industry groups can request additions to the original list of covered HTS subheadings. At this time, there has been no announcement of a means for importers to seek product exclusions.
When will the medium- and heavy-duty sectoral tariffs be announced? This Section 232 investigation commenced on April 23, 2025. Section 232 investigations take 270 days under the statute, which would put the announcement day on January 18, 2026. There are indications, however, that the Section 232 announcements may be made earlier than the full 270-day period.
USMCA/Canada and Mexico Tariff FAQs
How will tariffs effect the IMMEX/Maquiladora imports from Mexico? Because the Maquiladora, Manufacturing, and Export Services Industry (IMMEX) program is a figure of Mexican law, we anticipate Mexico will do all it can to protect companies that operate using the program.
Will the Canada and Mexico tariffs be lifted when the USMCA review occurs? Unclear. We do note, however, that the United States lifted the prior aluminum and steel tariffs as part of the negotiation of the USMCA under the first Trump administration. We anticipate that even though the second Trump administration is taking a much harder line on tariff and international trade issues, that there will be a push for a “Fortress North America” to fend off Chinese goods (including Chinese parts and components), resulting in a form of free trade within the USMCA region while erecting mutually reinforcing walls against Chinese goods. The true result will have to wait for the conclusion of the 2026 USMCA review.
Force Majeure and Surcharges FAQs
The Foley Supply Chain team also has published a set of FAQs regarding contractual issues, which we are repeating here for convenience.
What are the key doctrines to excuse performance under a contract? There are three primary defenses to performance under a contract. Importantly, these defenses do not provide a direct mechanism for obtaining price increases. Rather, these defenses (if successful) excuse the invoking party from the obligation to perform under a contract. Nevertheless, these defenses can be used as leverage during negotiations.
Force Majeure
Force majeure is a defense to performance that is created by contract. As a result, each scenario must be analyzed on a case-by-case basis, depending on the language of the applicable force majeure provision. Nevertheless, the basic structure generally remains the same: (a) a listed event occurs; (b) the event was not within the reasonable control of the party invoking force majeure; and (c) the event prevented performance.
Commercial Impracticability (Goods)
For goods, commercial impracticability is codified under UCC § 2-615 (which governs the sale of goods and has been adopted in some form by almost every state). UCC § 2-615 excuses performance when: (a) delay in delivery or non-delivery was the result of the occurrence of a contingency, of which non-occurrence was a basic assumption of the contract; and (b) the party invoking commercial impracticability provided seasonable notice. Common law (applied to non-goods, e.g., services) has a similar concept, known as the doctrine of impossibility or impracticability, that has a higher bar to clear. Under the UCC and common law, the burden is quite high. Unprofitability or even serious economic loss is typically insufficient to prove impracticability, absent other factors.
Frustration of Purpose
Under common law, performance under a contract may be excused when there is a material change in circumstances that is so fundamental and essential to the contract that the parties would never have entered into the transaction if they had known such change would occur. To establish frustration of purpose, a party must prove: (a) the event or combination of events was unforeseeable at the time the contract was entered into; (b) the circumstances have created a fundamental and essential change; and (c) the parties would not have entered into the agreement under the current terms had they known the circumstance(s) would occur.
Can we rely on force majeure (including if the provision includes change in laws), commercial impracticability, or frustration of purpose to get out of performing under a contract? In court, most likely not. These doctrines are meant to apply to circumstances that preventperformance. Also, courts typically view cost increases as foreseeable risks. Official comment of Section 2-615 on commercial impracticability under UCC Article 2, which governs the sale of goods in most states, says:
“Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. Neither is a rise or a collapse in the market in itself a justification, for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance, is within the contemplation of this section. (See Ford & Sons, Ltd., v. Henry Leetham & Sons, Ltd., 21 Com. Cas. 55 (1915, K.B.D.).)” (emphasis added).
That said, during COVID and Trump Tariffs 1.0, we did see companies use force majeure/commercial impracticability doctrines as a way to bring the other party to the negotiating table to share costs.
May we increase price as a result of force majeure? No, force majeure typically does not allow for price increases. Force majeure only applies in circumstances where performance is prevented by specified events. Force majeure is an excuse for performance, not a justification to pass along the burden of cost increases. Nevertheless, the assertion of force majeure can be used as leverage in negotiations.
Is a tariff a tax? Yes, a tariff is a tax.
Is a surcharge a price increase? Yes, a surcharge is a price increase. If you have a fixed-price contract, applying a surcharge is a breach of the agreement.
That said, during COVID and Trump Tariffs 1.0, we saw many companies do it anyway. Customers typically paid the surcharges under protest. We expected a big wave of litigation by those customers afterward, but we never saw it, suggesting either the disputes were resolved commercially or the customers just ate the surcharges and moved on.
Can I pass along the cost of the tariffs to the customer? To determine if you can pass on the cost, the analysis needs to be conducted on a contract-by-contract basis.
If you increase the price without a contractual justification, what are customers’ options?
The customer has five primary options:
Accept the price increase: An unequivocal acceptance of the price increase is rare but the best outcome from the seller’s perspective.
Accept the price increase under protest (reservation of rights): The customer will agree to make payments under protest and with a reservation of rights. This allows the customer to seek to recover the excess amount paid at a later date. Ideally, the parties continue to conduct business and the customer never seeks recovery prior to the expiration of the statute of limitations (typically six years, depending on the governing law).
Reject the price increase: The customer will reject the price increase. Note that customers may initially reject the price increase but agree to pay after further discussion. In the event a customer stands firm on rejecting the price increase, the supplier can then decide whether it wants to take more aggressive action (e.g., threatening to stop shipping) after carefully weighing the potential damages against the benefits.
Seek a declaratory judgment and/or injunction: The customer can seek a declaratory judgment and/or injunction requiring the seller to ship/perform at the current price.
Terminate the contract: The customer may terminate part or all of the contract, depending on contractual terms.
[1] Please note that the implementation of the various tariff programs remains in flux, and thus the status of these program should be monitored closely. The included table is current as of the date of publication of this article.
The One Big Beautiful Bill Act (Tax Reform): Employee Benefits and Executive Compensation Breakdown
On May 22, 2025, the House of Representatives passed legislation titled “The One Big Beautiful Bill Act” (the “House Bill”) (available here), which includes several tax reform provisions. The House Bill is now being considered by the Senate.
If passed by the Senate and signed by the President, the House Bill would extend and/or modify a number of provisions from the 2017 Tax Cuts and Jobs Act (“TCJA”), and it would enact a number of new provisions. The following are key provisions from the House Bill related to employee benefits and executive compensation:
Employee Benefits Provisions
Deductions for Tips. Taxpayers earning $160,000 or less in 2025 (adjusted for inflation through 2028) would be allowed to deduct cash tips earned from an occupation that “traditionally and customarily received tips before January 1, 2025,” subject to certain limits. This deduction would be allowed only for tax years 2025 through 2028. To support the deduction, employers would have to report tip income on employees’ Forms W-2 using a special code in Box 12 (in addition to continuing to include this income in Boxes 1, 3, and 5).
Deductions for Overtime Compensation. Taxpayers earning overtime compensation would be allowed to deduct their overtime compensation for tax years 2025 through 2028. To support the deduction, employers would have to report overtime compensation on employees’ Forms W-2 using a special code in Box 12 (in addition to continuing to include this income in Boxes 1, 3, and 5).
Health Savings Accounts (“HSAs”). The House Bill includes several provisions that would expand eligibility to contribute to HSAs and make HSAs more flexible, effective for taxable years beginning after December 31, 2025:
Would allow individuals who are eligible for Medicare Part A to make or receive contributions to HSAs if they are also enrolled in a high-deductible health plan (“HDHP”).
An individual’s spouse being covered by a flexible spending account (“FSA”) would no longer disqualify the individual from eligibility to make or receive HSA contributions (subject to limitations).
Eligibility to receive the following items and services at an employer’s clinic (for both the employee and their spouse) would be disregarded for purposes of eligibility to contribute to an HSA: physical exams, immunizations, certain drugs (but not prescribed drugs), treatment for injuries incurred during the course of employment, and preventive care. This means employers would be allowed to offer these items and services with no deductible, but other items and services at an on-site clinic would continue to be subject HSA minimum deductible requirements.
Would treat certain sports and fitness expenses, such as membership fees and costs associated with physical exercise or activity, as qualified medical expenses that may be reimbursed through an HSA, up to $500 per year for single taxpayers and $1,000 per year for joint or head of household taxpayers (pro-rated on a monthly basis and subject to cost-of-living adjustments beginning in 2027).
An employee who enrolls in an HDHP and becomes eligible to contribute to an HSA would be allowed to transfer unused FSA and health reimbursement arrangement balances to their HSA (subject to a cap based on the FSA contribution limit).
An employee who enrolls in an HDHP that is HSA-eligible could use their HSA for expenses incurred any time after joining the HDHP, if they establish their HSA within 60 days after joining the HDHP.
An individual age 55 or older who is eligible to make their HSA catch-up contributions (up to $1,000) could make their catch-up contributions to their spouse’s HSA.
Would increase (in many cases double) the HSA contribution cap for individuals and families with taxable income less than a certain threshold ($75,000 for single taxpayers and $150,000 for joint filer taxpayers, with phase-outs ending at $100,000 and $200,000, respectively). The threshold would be indexed for inflation.
Health Reimbursement Arrangements (“HRAs”). The House Bill includes the following changes to HRA rules to make HRAs more flexible, effective for taxable years beginning after December 31, 2025:
Would codify the IRS’s final rules permitting employers to offer individual coverage HRAs (which would be renamed Custom Health Option and Individual Care Expense, or “CHOICE” arrangements). This would permit employees enrolled in a CHOICE arrangement through a cafeteria plan to purchase health insurance coverage on the individual healthcare exchange marketplaces with pre-tax dollars.
A credit would generally be available to employers with less than 50 full‑time employees and that have employees enrolled in a CHOICE arrangement. For the first year of the credit period, the credit would be $100 (adjusted for inflation beginning in 2027) per month per employee that is enrolled in a CHOICE arrangement, and, for the second year of the credit period, the credit would be one‑half of the amount determined for the first year.
Tuition and Student Loan Reimbursements. The House Bill would make permanent the ability to reimburse student loan payments under a Section 127 education assistance program (rather than letting that feature of Section 127 programs expire on December 31, 2025). In addition, the House Bill would provide inflation adjustments beginning in 2027 to the $5,250 limit on pre-tax reimbursements for qualifying education expenses (including student loans).
UBTI for Qualified Transportation Fringe Benefits. Tax-exempt organizations would have to recognize UBTI for amounts incurred for qualified transportation fringe benefits or any parking facility that is not directly connected to the organization’s unrelated trade or business. The change is economically comparable to a for-profit entity not being allowed to deduct these expenses (which is the rule under Section 274(a)(4)) and would apply for taxable years beginning after December 31, 2025.
Employer-Provided Child Care Credit. The maximum tax credit employers would be allowed for providing qualified child care would be increased from $150,000 to $500,000 ($600,000 for eligible small businesses), adjusted for inflation beginning in 2027. The change would apply for taxable years beginning after December 31, 2025.
Paid Family and Medical Leave Credit. The House Bill would make permanent the employer tax credit for a percentage of wages paid to qualifying employees while they are on paid family and medical leave (rather than letting it expire on December 31, 2025). In addition, the value of the credit would be expanded to include a percentage of premiums paid for certain insurance policies. The change would apply for taxable years beginning after December 31, 2025.
Reimbursements for Moving Expenses Would Continue to be Taxable. Before the enactment of the TCJA, qualified moving expense reimbursements were excluded from employees’ income and the paying employer could deduct the expenses. The TCJA eliminated that treatment (resulting in employees having to pay tax on moving expense reimbursements), except in the case of active duty members of the armed forces. The House Bill would make the TCJA’s changes permanent (rather than letting them expire at the end of 2025).
Bicycle Commuting Reimbursements Would Continue to be Taxable. Reimbursements of bicycle commuting expenses would continue to be taxable. Before the enactment of the TCJA, certain reimbursements were not taxable.
Executive Compensation Provisions
Deduction for Excessive Employee Compensation. The aggregation rule under Section 162(m), which currently applies for (a) identifying a corporation’s covered employees and (b) determining compensation that is subject to Section 162(m), would be expanded to pick up all members of a covered corporation’s controlled group and affiliated service group under Section 414(b), (c), (m) and (o) (a broader group than under the existing aggregation rule). The amount of deductible compensation would be allocated to each member of the controlled group or affiliated service group based on the pro-rata portion of the total compensation paid by that member. The change would apply for taxable years beginning after December 31, 2025.
Tax-Exempt Organization Excessive Employee Compensation Excise Tax. The excise tax that tax-exempt organizations must pay on compensation in excess of $1 million paid to employees would be expanded to apply with respect to all current and former employees of the tax-exempt organization, even if they were never among the top 5 highest paid. The change would apply for taxable years beginning after December 31, 2025.
Alternative Minimum Tax Exemption. The House Bill would extend indefinitely the increased alternative minimum tax (“AMT”) exemptions that were added by the TCJA and set to expire after December 31, 2025. This is relevant for employees who exercise incentive stock options, which are not recognized for income and FICA tax purposes but are recognized for AMT purposes.
As noted above, the House Bill is currently being considered by the Senate, which is expected to make changes. If the Senate passes a modified version of the House Bill, the legislation would then have to go back to the House for another vote because both chambers must pass the exact same legislation. We are continuing to monitor developments in the legislative process.
House Proposes Cutbacks to Clean Energy Tax Credits
On May 14, 2025, the House Ways and Means Committee approved its markup of H.Con.Res.14, 119th Cong., 2025 (House Bill), which includes proposed changes that would modify substantially the clean energy tax incentives expanded by the IRA. The House Rules Committee released a manager’s amendment to the House Bill on May 21, 2025 (Manager’s Amendment). On May 22, 2025, the House passed the combined legislation.
The House Bill, as amended, is the first major step in the budget reconciliation process and is expected to undergo significant changes in the Senate.
The House Bill includes:
Early sunsets for the credits for clean electricity production tax credit (Section 45Y), clean electricity investment tax credit (Section 48E), clean nuclear facilities (Section 45U) and clean hydrogen production (Section 45V);
Transferability is preserved for the Section 48E ITC and the Section 45Y PTC, although these credits now terminate for projects that begin construction more than 60 days after the date of enactment or are placed in service after Dec. 31, 2028; and
Substantial new restrictions based on foreign ownership or influence that could disqualify taxpayers from credit eligibility, and which may introduce uncertainty and compliance difficulties.
Taxpayers should evaluate how the proposed changes could affect planned projects, financing strategies, supply chain arrangements, and the potential for mitigating the proposals’ effects.
This GT Alert summarizes the key energy-related provisions in the final House Bill.
Proposed Terminations
The House Bill proposes to sunset the following credits on Dec. 31, 2025:
Section 25C – Energy Efficient Home Improvement Credit
Section 25D – Residential Clean Energy Credit
Section 25E – Previously-Owned Clean Vehicle Credit
Section 30C – Alternative Fuel Vehicle Refueling Property Credit
Section 30D – Clean Vehicle Credit
Section 45L – Energy Efficient Home Credit
Section 45W – Qualified Commercial Clean Vehicles Credit
The Manager’s Amendment does not modify these proposed termination dates.
Modified Phaseouts and Other Proposals
In addition to the 2025 sunsets, the House Bill proposes accelerated phaseouts and other changes to many of the IRA’s cornerstone credits.
Phaseouts / Other Proposals
Credit
House Bill
Manager’s Amendment
45U Zero-Emission Nuclear Power Production
Phasedown beginning after Dec. 31, 2028; fully terminated after Dec. 31, 2031
Eliminates phaseout; credit ends after Dec. 31, 2031
45V Clean Hydrogen Production
Terminated for facilities that begin construction after Dec. 31, 2025
No change
45X Advanced Manufacturing Production
Wind components ineligible for credits after Dec. 31. 2027
Other eligible components phased down beginning after Dec. 31, 2028; fully terminated after Dec. 31, 2031
No change
45Y Clean Electricity Production
Phasedown beginning for projects placed in service after Dec. 31, 2028; fully terminated for projects placed in service after Dec. 31, 2031
Eliminates phaseout; credit ends for projects beginning construction more than 60 days post-enactment or placed in service after Dec. 31, 2028; exceptions for (i) advanced nuclear facilities beginning construction on or before Dec. 31, 2028, and (ii) expansion of approved nuclear facilities provided the expansion begins on or before Dec. 31, 2028
No credit available for leased wind or solar systems that otherwise qualify for Section 25D credits
45Z Clean Fuel Production
Extended through Dec. 31, 2031; requires that feedstock be grown or produced in the U.S., Canada, or Mexico for fuel sold after Dec. 31, 2025; excludes land use changes from lifecycle greenhouse gas emissions
No change
48 Energy Investment Credit
New phaseout for geothermal heat pump property; fully terminated for geothermal heat pump property that begins construction after Dec. 31, 2031
No change
48E Clean Electricity Investment Credit
Phasedown beginning for projects placed in service after Dec. 31. 2028; fully terminated for projects placed in service after Dec. 31, 2031
Low-income bonus credit sunsets after Dec. 31, 2031
Eliminates phaseout; credit ends for qualified facility or energy storage technology beginning construction more than 60 days post-enactment or placed in service after Dec. 31, 2028; exceptions for advanced nuclear facilities beginning construction on or before Dec. 31, 2028
No credit available for leased wind or solar systems that otherwise qualify for Section 25D credits
The House Bill extends 100% bonus depreciation under Section 168(k) for property acquired and placed in service after Jan. 19, 2025, and before Jan. 1, 2030 (or 2031 for certain long-lead property). The Manager’s Amendment does not make any changes to this extension.
Neither the House Bill nor the Manager’s Amendment would accelerate the phaseout or termination of Section 45Q carbon capture credits.
Repeal of Credit Transferability
The House Bill would significantly curtail the ability to transfer credits under Section 6418.
Transferability Cutoff
Credit
House Bill
Manager’s Amendment
45Q Carbon Oxide Sequestration
Equipment beginning construction more than 2 years after enactment
No change
45U Zero-Emission Nuclear Power Production
Electricity produced and sold after Dec. 31, 2027
Preserves transferability through the full credit period, which extends to Dec. 31, 2031
45X Advanced Manufacturing Production
Components sold after Dec. 31, 2027
No change
45Y Clean Electricity Production
Facilities beginning construction more than 2 years after enactment
Preserves transferability, subject to the sunset of the credits for projects that begin construction more than 60 days after enactment, or that are placed in service after Dec. 31, 2028
45Z Clean Fuel Production
Fuels produced after Dec. 31, 2027
No change
48 Energy Investment Credit:
Geothermal Heat Pump Property
Property beginning construction more than 2 years after enactment
No change
48E Clean Electricity Investment Credit
Facilities beginning construction more than 2 years after enactment
Preserves transferability, subject to the sunset of the credits for projects that begin construction more than 60 days after enactment, or that are placed in service after Dec. 31, 2028
Restrictions on Prohibited Foreign Entities
The House Bill would disqualify taxpayers from claiming certain energy credits where there is foreign ownership, control, or involvement from “prohibited foreign entities.”
Key definitions:
Specified Foreign Entity: Includes foreign terrorist organizations, Chinese military companies, entities identified under U.S. national security laws, and foreign-controlled entities.
Foreign-Influenced Entity: Includes entities with specified foreign entity ownership ≥10% (or ≥25% in the aggregate), significant debt holdings, board appointment rights, or substantial payments made to foreign entities.
Material Assistance: Includes any component, subcomponent, or critical mineral in an energy property that is extracted, processed, recycled, manufactured, or assembled by a prohibited foreign entity, or any design based on such entity’s intellectual property. Limited exceptions apply for non-unique parts or materials not predominantly produced by prohibited foreign entities.
The House Bill uses the above terms to impose restrictions on eligibility for various credits. The Manager’s Amendment does not alter the House Bill’s definition of prohibited foreign entities, specified foreign entities, foreign-influenced entities, or material assistance.
Taxpayers that are controlled by, or make certain payments to, a specified foreign entity may be disqualified from claiming credits in the first taxable year after enactment. Foreign-influenced entities would become ineligible two years after the date of enactment. In some cases, making a payment to a prohibited foreign entity could trigger full recapture of previously claimed credits.
The Manager’s Amendment does, however, modify the effective date of restrictions under Sections 48E and 45Y related to material assistance from prohibited foreign entities. Under the House Bill, qualified facilities and energy storage property that received material assistance from a prohibited foreign entity were disqualified if construction began more than one year after the date of enactment. The Manager’s Amendment replaces this floating one-year deadline with a fixed date: Dec. 31, 2025.
One Big Beautiful Bill Act Has Many Impacts for Nonprofit Health Systems
The US House of Representatives passed its One Big Beautiful Bill Act on May 22, 2025 (the Act), but nonprofit health systems may not find much about the Act that’s attractive. If passed by the US Senate and signed into law, the Act would threaten already thin operating margins at nonprofit hospitals and health systems by expanding the executive compensation excise tax, taxing parking and similar employee benefits, potentially altering funds flow arrangements for academic medical centers, and increasing demand for financial assistance through sweeping Medicaid and Health Insurance Marketplace changes.
In Depth
Nonprofit Hospitals Face Challenging Financial Environment
Nonprofit hospitals have made slow but steady progress in recovering from the financial hangover that COVID-19 induced, exacerbated by increased contract labor expenses and lingering inflation. Fitch Ratings determined that even with this improvement, the median operating margin for nonprofit hospitals was only 1.2% in 2024. Any increase in operating expenses or decrease in reimbursement that results from the Act may push many nonprofit hospitals across the thin line that separates profitability from financial distress.
The Act May Increase Nonprofit Hospital Operating Expenses
The Act would increase nonprofit hospital operating expenses in two primary ways:
Expanding the executive compensation excise tax.
Taxing parking and similar employee benefits.
As part of the Tax Cuts and Jobs Act of 2017 (TCJA), Congress imposed a 21% excise tax on compensation paid by charitable organizations exceeding $1 million and on certain excess parachute payments. The excise tax applies to the organization’s top five highest compensated employees during both the current tax year and any prior tax year beginning after December 31, 2016. The excise tax does not apply to compensation provided in exchange for medical services.
The One Big Beautiful Bill Act would significantly expand the scope of the excise tax by applying it to all employees of a charitable organization who receive compensation exceeding $1 million or an excess parachute payment. The Act would not eliminate the medical services compensation exception, but the reach and financial consequences of the expanded excise tax could be significant for nonprofit hospitals and health systems that compete with privately held or publicly traded organizations for executive or administrative talent.
The Act also threatens to increase nonprofit hospitals’ operating expenses by resurrecting a tax on parking and other qualified transportation fringe benefits made available to employees. Congress first included this so-called “parking tax” as part of the TCJA. The tax requires charitable organizations to treat the amount of qualified parking and transportation fringe benefits as unrelated business income for federal tax purposes. The complexities of taxing a business expense as income led to widespread criticism of the parking tax, and Congress retroactively repealed the tax in 2019.
The Act May Disrupt Funds Flow Arrangements, Charitable Conditions
The Act contains other provisions that may have a direct or indirect impact on nonprofit health system operations or funds flow, such as:
Increasing the tax on net investment of colleges and universities from 1.4% up to 21% (based on endowment value per student). The magnitude of this tax may result in university sponsors of academic medical systems seeking to renegotiate funds flow arrangements to recapture a portion of revenue lost to the tax.
Increasing the excise tax on private foundations up to 10% (based on assets of $5 billion). This tax may decrease the amount of funding that private foundations are willing to contribute to nonprofit health systems.
Medicaid, Health Insurance Marketplace Changes May Increase Demand for Financial Assistance
The Act contains sweeping changes to Medicaid and Health Insurance Marketplaces.. The Congressional Budget Office has not conducted a full analysis of the passed bill but estimated an increase in the number of uninsured by each committee proposal, with 7.6 million uninsured as a result of the Medicaid provisions and, at a minimum, an additional 2.1 million individuals under the Marketplace reforms by 2034. As a result, nonprofit hospitals and health systems can expect to bear the financial burden of caring for those displaced by these cuts.
What’s Not in the Act and What May Come Next
Earlier versions of the Act contained provisions that likely would have resulted in decreased revenue or increased operating expenses for nonprofit hospitals and health systems. For example, the version of the Act that passed the House Ways and Means Committee would have automatically taxed name and logo revenue as unrelated business income.
The Act now moves to the Senate, where notable Republicans, including Senator Rand Paul (R-KY) and Senator Ron Johnson (R-WI) have already called for significant changes to the Act. The goal remains to finish and pass the reconciliation package by July 4, 2025.
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U.S. Budget Bill Targets Foreign Companies with New Tax Hikes: What French Businesses Need to Know
The One Big Beautiful Bill Act (OBBBA) was passed by the U.S. House of Representatives on May 22, 2025, by a narrow vote of 215-214. OBBBA includes a new U.S. tax provision that could significantly increase taxes on foreign companies and investors—especially those from countries like France that have implemented digital services taxes or other similar measures. The new bill introduces a new section to the U.S. Internal Revenue Code Section 899.
What Is Section 899?
Section 899 is a proposed tax provision that would raise U.S. tax rates on foreign individuals and companies from countries the U.S. deems to have “unfair” tax policies. These include:
Digital Services Taxes (DST)
Diverted Profits Taxes (DPT)
Undertaxed Profits Rules (UTPR) under the global minimum tax framework
How Would the Tax Work?
The U.S. tax rate would increase by 5 percentage points in the first year.
It would rise by an additional 5 points each year, up to a maximum of 20 percentage points above the standard rate.
These increases would apply on top of existing U.S. tax rates, including:
21% corporate tax
30% withholding tax on certain income
Other applicable individual and corporate taxes
Who Is Affected?
Countries likely to be labeled as “discriminatory” include France, Germany, the UK, Japan, South Korea, and others that have adopted DSTs or UTPRs. In total, more than 30 countries could be impacted.
DST in France
France currently has a Digital Services Tax (DST) in place that applies to major U.S. technology companies and other large digital firms. Introduced in 2019, the French DST targets revenues generated from digital services such as:
Online advertising
Digital platforms
Intermediation services involving user data
Despite international negotiations aimed at replacing such taxes with a global framework (like the OECD’s Pillar One), France has maintained its DST. As of 2025, French Finance Minister Éric Lombard confirmed that the tax remains in force and is not being used as a bargaining chip in trade discussions with the U.S.
This continued application of the DST is one of the key reasons France could be classified as a “discriminatory foreign country” under the proposed U.S. Section 899, potentially subjecting French companies to higher U.S. tax rates.
Why Is the U.S. Doing This?
The U.S. government argues that certain foreign tax policies unfairly target American companies—especially tech giants. Section 899 is designed to:
Counteract foreign digital taxes
Protect U.S. economic interests
Strengthen the U.S. position in global tax negotiations
Economic Impact
According to estimates, this provision could generate $116 billion in revenue over 10 years. Legal experts describe it as a major shift in U.S. international tax policy, introducing new risks for foreign investors.
When Would It Take Effect?
Although passed by the U.S. Congress, OBBBA is now being reviewed and must be passed by the U.S. Senate and then signed by President Trump to become law. Unless the Senate passes OBBBA as drafted, any amendments of the bill would have to be returned to the House for approval of the changes, or a conference committee of both chambers formed to reconcile differences.
The additional taxes would apply 180 days after a country enacts a DST, DPT, or UTPR.
What Should French Companies Do?
If your business operates in the U.S. or has American subsidiaries, now is the time to:
Monitor the legislative process of OBBBA and Section 899
Assess your U.S. tax exposure
Review your international tax strategy
Consult with cross-border tax advisors
Oregon Expands Tax Court Access: HB 2119 Grants Associational Standing to Membership Organizations
On May 28, 2025, Oregon Gov. Tina Kotek signed HB 2119 into law. Having received strong support in the Oregon legislature, the law allows for associational standing in state tax cases—that is, membership organizations now have statutory standing to seek declaratory relief on their members’ behalf in the Oregon Tax Court. Associational standing may be granted for matters involving any number of state and local tax issues, including personal income, property, corporate excise, etc.
HB 2119 codifies Oregon’s requirements for associational standing, which mirror the long-standing federal three-prong test established in the U.S. Supreme Court case Hunt v. Wash. State Apple Advert. Comm’n.1 To have associational standing there must be an adverse impact on at least one of the association’s members, the issue must be germane to the association’s purpose, and the matter must not require the direct participation of the impacted member or members.
HB 2119 is relatively simple, but it brings a significant change to Oregon. Under the prior rule, only affected taxpayers could challenge a tax law for their individual harm and the resolution of a single issue could take more than a decade. Once a challenge reached the General Division of the Oregon Tax Court, the petitioner would also be required to pay the tax they were disputing. This process created an impediment for businesses and individuals to bring otherwise worthy tax challenges. Associational standing may help members share the burdens of litigation and speed up the resolution of tax questions and reduce burdens on the court system.
The passage and implementation of HB 2119 follow several years of advocacy by organizations such as Oregon Business and Industry and the Smart Growth Coalition. The new law may help taxpayers address and seek clarity on Oregon tax issues.
1 432 U.S. 333 (1977).