unlawful or criminal behavior, such as creating algorithms that make discriminatory employment decisions and powering“ deep fake” technology that creates fake or obscene images of others. In response to this rising threat, states and localities are considering legislation that would regulate the use of AI.
An early version of the BBB threatened the ability of states and localities to do so. That version included a provision imposing a 10- year moratorium on state and local enforcement of“ any law or regulation... limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.” The bill would have made AI regulation the sole province of the federal government for the next decade. However, the final version of the BBB dropped the moratorium.
SALT Deduction Gets A Bump, And PTET Remains Intact
One of the TCJA’ s most controversial provisions was limiting the individual taxpayer deduction for state and local tax(“ SALT”) payments to $ 10,000. Many saw the provision as an effort by Republican lawmakers to punish individuals who live in“ blue” high-tax, large-population states like California, New Jersey, and New York.
The BBB increased the SALT deduction cap to $ 40,000 for 2025 for taxpayers making less than $ 500,000, which will increase by 1 % each year from 2026 through 2029 before reverting to $ 10,000 in 2030. Taxpayers with a modified adjusted gross income of over $ 500,000 have a $ 40,000 cap that is phased downward to a $ 10,000 floor in 2025 through 2029.
Equally relevant for plaintiff attorneys who own firms organized as pass-through entities like partnerships, limited liability companies, S corporations, or sole proprietorships is that the final BBB does not contain a restriction on state-level pass-through entity tax(“ PTET”) that an earlier version had. PTET is a workaround developed by states after the TCJA. Because the SALT deduction cap generally does not apply to entities, with PTET, a pass-through entity can deduct the amount of the state tax it paid, reducing the taxable income allocated to its owners and avoiding the $ 10,000 SALT limit. The owners of the passthrough entity receive a state tax credit equal to the amount the entity paid.
Opportunity Missed For Sexual Abuse Victims
Though legislation was introduced earlier this year to exempt from tax recovery proceeds received by sexual abuse victims, that change didn’ t make it into the BBB. There are legislative opportunities later in the year, including in a technical corrections bill.
Previously published by Forbes
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