“One Big Beautiful Bill” Falls into Senate Byrd Bath–The “One Big Beautiful Bill Act” (OBBBA) narrowly passed the House by a 215-214 vote on May 22. It is now before the Senate for consideration. The text of the bill is in constant flux as Senators put their mark on the various provisions in the 1,116-page document. Although the full extent of the reworked bill won’t be made clear until OBBBA comes to the Senate floor for a vote, which is expected as early as June 27, there are several provisions which have been struck from the bill and are unlikely to resurface when the bill returns to the House. Of those, two provisions affecting businesses stand out. Proposed Elimination of the PCAOB NixedThe OBBBA is a budget reconciliation bill. It allows for expedited consideration and can pass with a simple majority in the Senate, making it a powerful tool for enacting significant fiscal changes. The Senate Parliamentarian, Elizabeth MacDonough, has ruled that the provision that had sought to eliminate the Public Company Accounting Oversight Board (PCAOB) and transfer its functions to the Securities and Exchange Commission (SEC) violates the Senate’s Byrd Rule. The Byrd Rule (named after West Virginia Senator Robert Byrd) came into being as an amendment to the Congressional Budget Act of 1974 and allows Senators, during the Reconciliation Process, to block legislation if it increases the federal deficit beyond a ten-year period or is an extraneous matter as set forth in the Budget Act. Essentially, it restricts what can be included in a budget reconciliation bill ensuring that only provisions directly related to federal spending or revenue can be included. It aims to prevent extraneous policy changes from being added to these budget measures, requiring a 60-vote super majority to keep any provisions deemed non-budgetary. The PCAOB is funded through assessments made against public companies and broker-dealers. Of the nearly $400 million 2025 budget that the SEC approved for the PCAOB, the PCAOB will collect $346.1 million from public companies, and an additional $28.8 million from broker dealers, for a total of $374.9 million. The SEC fills in the budget gap. Since the PCAOB funding does not come directly from Congress, but rather fees paid by publicly traded companies and SEC-registered Broker-Dealers, the Parliamentarian’s view is that the provision was non-budgetary. PCAOB BackgroundThe PCAOB was established by the Sarbanes–Oxley Act of 2002. Its main function is to oversee independent audit firms registered with the PCAOB and to inspect the audits those firms conduct on US-listed public companies, and SEC-registered broker-dealers. Although the PCAOB operates as an independent entity, most of its actions are subject to SEC review and approval in several key areas:
CFPB Provision ExcisedParliamentarian MacDonough also has determined that efforts to defund the Consumer Financial Protection Bureau (CFPB) by including it in the OBBBA reconciliation bill violated the Byrd Rule. The CFPB provision would have slashed $6.4 billion from its budget, essentially eliminating the agency which was created under the Dodd-Frank Act after the 2008 financial crisis. The CFPB is funded through the Federal Reserve, not through congressional appropriations. The Parliamentarian concluded that the effort to defund the CFPB was a policy change disguised as a budget cut. Nuclear Option Off the TableAlthough rare, the actions of the Senate Parliamentarian can be overruled by the Senate, referred to as the “nuclear option,” a Senate procedure where the majority party changes the rules to allow a bill to pass with a simple majority. The Wall Street Journal is reporting, however, that it’s off the table for OBBBA. “Senate Majority Leader John Thune (R., S.D.) has already said that his party wouldn’t attempt such a maneuver, which could effectively end any special restrictions for reconciliation bills. Neither party has been eager to do so,” reported the Journal. To read how the PCAOB calculates issuer accounting support fees: https://pcaobus.org/about/accounting-support-fee To view the SEC budget: https://www.sec.gov/newsroom/press-releases/2024-204 To view the WSJ article: SEC Reports on Reg A, Crowdfunding, Private FundsThe SEC has released three reports offering insight into capital formation trends and the dynamics of private fund ownership. The first report, Analysis of the Regulation A Market, reviews data from 2015–2024 and highlights that over 1,400 Regulation A offerings sought to raise more than $28 billion, with approximately $9.4 billion raised by over 800 issuers. Those seeking funding were typically small, young companies without established profitability. The report sheds light on the Regulation A exemption’s role in providing access to capital markets for less mature businesses. The second report, Analysis of Crowdfunding Under the JOBS Act, covers offerings under Regulation Crowdfunding from 2016 through 2024. More than 8,400 offerings by 7,100+ issuers were initiated, with a total maximum capital sought reaching roughly $8.4 billion. Issuers reported over $1.3 billion in proceeds across 3,800 offerings, indicating growing reliance on this exemption by early-stage companies. The median issuer was notably modest in scale—holding $80,000 in assets and employing just three people—underscoring the platform’s utility for small businesses entering capital markets. The third report, Beneficial Ownership Concentration and Fund Outcomes for Qualifying Hedge Funds (QHFs), analyzes trends from 2013 to 2023. It finds that funds with concentrated beneficial ownership grew faster and held more liquid portfolios than their more diversified counterparts. However, while unconcentrated funds achieved 1.2% higher gross returns on average, net returns only slightly exceeded those of concentrated funds—suggesting that the performance edge is largely neutralized by higher expenses. To view the reports: Banner Collection Year for US TreasuryDespite the staff and budget cuts announced earlier this year at the Internal Revenue Service, Treasury Secretary Scott Bessent is reporting a banner year at the tax collecting agency. “I am pleased to report that Treasury has just completed its most successful tax filing season in years—and we did so while improving efficiencies and cutting costs at the IRS,” he said during an appearance before the House Ways and Means Committee on June 11. Bessent said “Critics of the President’s efforts to modernize the IRS warned that the effort would result in a 10% shortfall in receipts. Instead, the opposite happened. April receipts this year were up 9.5% over the previous year. And receipts in May were up 14.7% over the previous year.” “Most remarkably,” added Bessent, the increased revenue was achieved “while reducing $2 billion in waste and planned IT spending at the IRS.” According to end of April data compiled by the Penn Wharton Budget Model, the U.S. Treasury collected over $120 billion more in individual income and payroll tax receipts compared to the previous year. This surge came despite earlier concerns that IRS downsizing might reduce collections. Wharton’s data showed that as of late April, the Treasury collected approximately $2.6 trillion in individual income and payroll tax receipts. The IRS processed over 138 million returns, with the total amount refunded reaching $253.1 billion, up 3.2% from 2024. To read Bessent’s address to the House Ways & Means Committee: https://home.treasury.gov/news/press-releases/sb0164 To read the Wharton report: |
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