Senate poised to unveil tax plan with impacts on innovators

Topline

• Senate plans to unveil tax plan in search of deal

• U.S.-China framework unlocks rare earth minerals but maintains tariff rates

• SEC withdraws Gensler-era rule proposals, but AML rules remain (for now)

• Carta & Mayer Brown: The Tipping Point: How the Growth of Private Equity and Private Credit Requires Rethinking Retail Investment Products and the Regulatory Framework | June 17 in NYC

• Crypto corner

• Quick hits

If you were a tax deal, where would you be…

The Senate is expected to release its tax bill today—or Monday. The politics remains challenging as there is increased pressure to lower the cost but also add additional tax breaks. And sign the bill into law by July 4. 

Innovation priorities: The engagement and hard work of Carta and its Innovator Alliance partners is paying off. But nothing is done until everything is done, so we will keep at it. 

• R&D: The tax bill is likely to restore immediate R&D expensing on a permanent basis, an improvement over the House text which did so on a temporary basis. This is a major win for the community, though we continue to push for retroactivity.

  • Prediction: Expect this permanent restoration to remain intact in the final bill.

• QSBS: The provision is likely to be preserved in its current form, which is a major win, as it came under fire and proposals were on the table to modify or eliminate it to offset other costs. We continue to push for its expansion—to more corporate entities and transaction types, along with a phased-in approach—but that will be a challenge. 

  • Prediction: Expect QSBS to remain in current form.

• Carried interest: Remains at risk. Few Republican Senators want to curb it, but it remains a priority for the president and a provision that can raise money (~$15B or $100B depending on who you ask) to pay for other cuts.

  • Prediction: Likely remains in current form, but the confidence meter is shaky.

Macro politics: The broader politics are focused on the degree of cuts to Medicaid and Medicare funding and the level of SALT relief, with the Senate likely either lowering the House’s proposed $40K cap or lowering the $500K income eligibility cap. Such adjustments are necessary to cobble together votes in the Senate, but they risk losing votes in the House. And with both chambers having thin margins, the president and congressional leaders will need to twist—and maybe break—arms. But if history is a guide, even vocal skeptics in both the House and Senate soften when the president asks. 

Next steps: Senate bill will come out today-ish. Expect that to open more public negotiations with industry and the House, but likely leading to few changes save for those needed to secure House votes. There are a few scenarios: 

• Conference: Senate passes the bill, then the two chambers conference—negotiate—a final bill that passes both chambers. 

• Ping-pong: Senate passes bill. The House then amends the Senate bill, passes it again, and sends it back to the Senate. 

• Pre-conference/power-move: Senate works informally with House and White House to pass a bill that the House can then pass. 

The first two options—conference and ping-pong—take time. And if President Trump wants a July 4 signing ceremony, expect Plan A to be pre-conference where the Senate passes a bill that is either suitable for House passage or close enough that the Senate and the president can force the House to pass it. The only real deadline, however, is X-date in August, at which time the nation will breach the debt ceiling, which this bill will raise. Stay tuned.

Tariff-ish talks

While trade dynamics remain fluid, the U.S. made progress on a framework with China, though details are scarce, questions remain, and nothing has been signed by the leaders of the respective nations. The framework would restore temporary U.S. access to rare earth minerals controlled by China, a key component to our technological infrastructure. In return, reports are that the U.S. will ease restrictions on certain exports of technology and other products to China, as well as ease back on revoking visas for Chinese students. 

This is “tariff-ish” because the agreement appears to be more narrow in scope than tariffs. The deal does not adjust the tariff rates, leaving in place the U.S. reciprocal tariff of 30% on Chinese goods and the Chinese reciprocal tariff of 10% on U.S. imports. These are on top of the existing duties when Trump came into office, so the majority of Chinese imports are subject to a 55% tariff. Resolving that dynamic with a more comprehensive deal will be a much longer process.

The rest of the world: The president paused the broader set of tariffs applied to most other nations for 90 days, but the July 9 deadline is fast approaching. The U.S. is reportedly actively negotiating with 18 other major partners, and perhaps more countries. The dynamics, however, remain murky. The treasury secretary signaled that tariff hikes will remain paused for negotiating in good faith; for those nations who are not, the deadline will not be extended.  The president, on the other hand, noted he does not believe extending the deadline will be necessary and the U.S. will send letters to other countries with “ take it or leave it” terms, as the U.S. cannot possibly negotiate with 150+ countries. 

Bottom line: Tariff policy will remain fluid for the foreseeable future. Even if pauses are extended, the clock serves as a forcing function for negotiation, but also a driver of market uncertainty. Navigating it requires investors and company leaders to diligence their market position, scenario plan, and be ready to act to successfully navigate this fluid environment. How? Well, start by watching our virtual event where leading legal partners and an investor talk through how best to understand trends and execute.

SEC withdraws Gensler-era rule proposals, but AML rules remain (for now)

This week, the SEC withdrew a number of Gensler-era rule proposals that would have substantially impacted private fund advisers, including the predictive data analytics, safeguarding, cybersecurity risk management, outsourcing, and ESG investing rule proposals. As expected, the withdrawal of these proposals provides clarity that this administration will push forward similar policy changes, though we could see the commission take a fresh approach to custody or other rules to improve and modernize the regulatory framework for private fund advisers—and we are pushing them to do so. 

What about KYC? The SEC did not act on its pending customer identification program (CIP) rules, which would require investment advisers to establish, document, and maintain programs to identify and verify their customers. The CIP proposal complements the new FinCEN rule, which will require private equity and venture capital fund managers to adopt formal anti-money laundering (AML) programs and is set to take effect January 1, 2026. There is a good chance the compliance date is delayed and/or the requirements are modified. We are tracking these developments closely and expect more to come. 

Carta & Mayer Brown: Discussion on Private Markets and Private Credit

On June 17, Carta Policy will join Mayer Brown and an all-star panel in New York to discuss the evolving private market landscape, recent trends in private credit, and efforts to increase retail access to private funds. Register here.

If you can’t make it to the event, but would still like to see your favorite policy team while we’re in the city, please reach out: policy@carta.com.  

Crypto corner

• GENIUS update. After the stablecoin framework cleared a number of procedural hurdles with significant bipartisan support, the Senate is expected to pass the landmark legislation next Tuesday.

• House market structure bill on its way to the floor. The House Financial Services Committee advanced the CLARITY Act, which would create a regulatory framework for digital assets. The effort lost support from key HFSC Democrats who supported previous efforts largely in response to the Trump family crypto ventures and perceived conflicts of interest. The House Agriculture Committee, which also shares jurisdiction on the bill, also advanced the measure, albeit in a more bipartisan nature, including the support of the committee’s lead Democrat. Negotiations will continue as the landmark crypto bill makes its way to the House floor for a vote, which is expected this summer. 

• On the regulatory front. SEC Chairman Atkins has directed staff to consider an exemptive relief framework, or “innovation exemption,” that would speed up the process of bringing on-chain products to market while the commission works to amend its rules and regulations. 

Quick hits

• SEC extends Form PF amendments compliance date . The SEC extended the compliance date for the Form PF amendments until October 1, 2025, to give private fund advisers and their third-party service providers additional time to test and develop their reporting systems. We expect the commission to undertake a broader review of Form PF to ensure the information collected meets its regulatory objectives.

• Oregon enacts restrictions on PE investments in healthcare. The new law imposes the nation’s toughest restrictions on private equity in healthcare by banning overlapping ownership, board roles, and decision-making authority between Management Services Organizations (MSOs) and the medical practices they serve, while also voiding non-compete and other restrictive covenants. At least a half-dozen other states have adopted or are actively considering legislation to curb private equity’s reach in healthcare.

• Chime Financial is the latest IPO to soar in debut. Are IPOs back?

• SEC announces leadership posts. Brian Daly, a private funds law partner, has been tapped to lead the Division of Investment Management as division director; Jamie Selway, a markets expert with a strong background in financial technology and crypto, to lead the Division of Trading and Markets; and Kurt Hohl, an industry veteran, to serve as chief accountant. 

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