Legislative Lowdown
Trump Signs OBBBA Into Law: On July 4, 2025, President Trump signed H.R. 1, the One, Big, Beautiful Bill Act (OBBBA), into law, codified as Public Law 119-21. The tax title of the legislation makes several provisions from the Tax Cuts and Jobs Act of 2017 (TCJA, Public Law 115-97) permanent. See below for the key takeaways:
- Business Deductions: Makes permanent the Tax Cuts and Jobs Act (TCJA) expiring business provisions, namely, the section 199A passthrough deduction, bonus depreciation, R&D expensing and the broader section 163(j) interest limitation.
- International Tax: Permanently increases the Base Erosion and Anti-Abuse Tax (BEAT), reduces the global intangible low-taxed income (GILTI) deduction, expands the foreign-derived intangible income (FDII) deduction and makes permanent the extension of the look-thru rule for controlled foreign corporations.
- Clean Energy: Substantially cuts back the Inflation Reduction Act energy tax credits, including terminating the electric vehicle credits, limiting the hydrogen production credit, extending the clean fuel production credit and establishing new restrictions on foreign entities of concern.
- Child Tax Credit: Enhances the employer-provided child care credit, adoption tax credit, child and dependent credit, and the dependent care assistance program.
- Education: Modifies the excise tax on colleges and universities, restores the TCJA exclusion from gross income for forgiven student loans and expands qualified higher education expenses.
- Health Care: Extends the paid family and medical leave employer tax credit, requires verification of applicant eligibility to receive the premium tax credit, enhances treatment of the Bronze and Catastrophic plans for use with health savings accounts, and allows high-deductible health plans to provide telehealth and other remote care without a deductible. Finally, it limits Medicare coverage and premium tax credit eligibility to foreign persons who are “lawfully present” in the United States. Rep. Dina Titus Introduces Bill to Restore Gaming Loss Deduction: Rep. Dina Titus (D-NV) has introduced the FAIR BET Act, which would restore the full 100% deduction for gambling losses that was reduced to 90% in the recently enacted OBBBA. Rep. Titus argues the provision unfairly taxes gamblers on money they did not win and could discourage proper reporting and drive players to unregulated platforms.
Gambling Tax Repeal Bill Blocked in Senate: Last week, Senate Republicans blocked a request from Sen. Catherine Cortez Masto (D-NV) to pass her bipartisan bill, the Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act, which would restore full deductibility of gambling losses, after the recently passed OBBBA capped deductions at 90% of winnings. Sen. Cortez Masto, joined by Sen. Ted Cruz (R-TX), warned the cap could harm Nevada’s tourism and gaming industry by taxing gamblers even if they break even. Sen. Todd Young (R-IN), while supporting the fix, objected to the request unless Democrats also agreed to reinstate a religious exemption from an unrelated endowment tax affecting institutions like Notre Dame in Indiana. With no agreement reached, both proposals stalled. Sen. Cortez Masto vowed to continue pushing the bill, though Rep. Dina Titus (D-NV) noted it would face procedural hurdles in the House, where tax bills must originate.
Senators Announce Passage of Bill to Put Off Filing Deadlines: The Senate passed H.R. 517, the Filing Relief for Natural Disasters Act, a bipartisan bill led by Sens. Catherine Cortez Masto (D-NV), John Kennedy (R-LA), Chris Van Hollen (D-MD) and Marsha Blackburn (R-TN), and it now heads to President Trump for his signature. The bill allows the Internal Revenue Service (IRS) to extend federal tax filing deadlines for individuals impacted by disasters declared at the state level, addressing a gap in current law that limits such relief to federally declared disasters. It also increases the standard extension window from 60 to 120 days, ensuring broader access to tax relief for affected communities.
Rep. Sykes Introduces Bill to Preserve and Expand IRS Direct File Tax Program: Rep. Emilia Sykes (D-OH) introduced H.R.4352, the Get Your Money Back Act, to permanently authorize the IRS’ Direct File tax-filing program and mandate its availability in all states. Developed under the Biden administration and expanded to 25 states in 2025, Direct File facilitated the filing of about 296,000 tax returns this year, out of 32 million eligible taxpayers. The Trump administration is expected to terminate the project due to the fact it was not authorized by Congress, as well as its low take-up rate and high costs.
Energy-Tax Mainlines
Trump Executive Order Seeks to End Wind and Solar Tax Credits: On July 7, President Trump issued Executive Order (EO) 14135, titled “Ending Market-Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources.” The EO directs the accelerated elimination of federal subsidies and tax credits for wind, solar and other “green” energy sources. It mandates strict implementation of the OBBBA’s repeal of Sections 45Y and 48E Clean Electricity tax credits and enhanced restrictions on foreign entities of concern. Within 45 days, the departments of the Treasury and Interior must review and revise policies to remove preferences for wind and solar, ensure enforcement of tax credit terminations and report their actions to the president.
1111 Constitution Avenue
IRS Eliminates 83 Pieces of Obsolete Guidance: The Internal Revenue Service (IRS) has revoked 83 guidance documents considered outdated to help simplify tax administration and improve clarity for taxpayers and advisors. According to Notice 2025-36, removing these documents aims to reduce the volume of guidance that must be reviewed for compliance and make tax laws easier to navigate. The IRS earlier withdrew nine pieces of obsolete guidance in April and plans to retire additional documents in the coming months. The revoked guidance includes previous Notices, Revenue Rulings, Revenue Procedures, and Announcements covering topics like tax credits, estate tax portability, digital asset reporting and valuation rules dating back several decades.
IRS Workers in Limbo Amid Supreme Court Ruling on Firings: The Internal Revenue Service (IRS) is undergoing significant workforce reductions following a recent Supreme Court ruling that lifted the injunction blocking federal agency layoffs. The agency is expected to lose over 26,000 employees—approximately a quarter of its staff—by the end of the year due to retirements, resignations and layoffs, while a hiring freeze remains in effect until Oct. 15. Initial reductions have affected probationary workers and key divisions such as audits and compliance, and the agency has experienced considerable leadership turnover, with several acting officials serving until the recent confirmation of IRS Commissioner Billy Long.
IRS Encourages Free File Use for Extension Filers: The Internal Revenue Service (IRS) is encouraging taxpayers who requested an extension to file their returns now instead of waiting until the Oct. 15 deadline. They are suggesting taxpayers use IRS Free File, which offers free tax preparation for individuals with an adjusted gross income of $84,000 or less. Filing early helps avoid the fall rush and allows more time to address any issues or arrange payments.
IRS Eyes Changes to Proposed Cloud-Computing Rules, Official Says: The Internal Revenue Service (IRS) is considering revisions to its proposed regulations on sourcing income from cloud-computing transactions. At a recent event, Peter Blessing, the IRS associate chief counsel (International), acknowledged that the agency may change several aspects of the proposal, which was issued in January to help determine whether income from cloud-based services should be treated as U.S.- or foreign-sourced for tax purposes. While some business groups and tax professionals have called for the rules to be withdrawn due to their complexity and rigidity, the IRS maintains that having clear guidance is important for audit and compliance purposes.
IRS Increased High-Income Taxpayer Audits in 2024, TIGTA Says: A report by the Treasury Inspector General for Tax Administration (TIGTA) found that the Internal Revenue Service (IRS) planned about 70,000 audits of high earners—nearly 2.5 times the average from previous years—while aiming to lower audits for others to around 350,000, down from an average of 450,000. This progress was supported by increased enforcement funding under the Biden administration, though much of that funding has since been reduced, with the enforcement allocation now at roughly $4 billion. Staffing reductions raise questions about the agency’s capacity to maintain this audit strategy, especially as TIGTA urges the IRS to better define what qualifies as a high-income return.
Tax Worldview
Path for G7 Pillar Two Deal Enactment Must Be Clear by November: Negotiations are underway to finalize how to implement the G7’s recent agreement exempting U.S.-based multinational groups from certain OECD Pillar Two global minimum tax rules. The European Union (EU) faces challenges with the transitional undertaxed profits safe harbor expiring on Jan. 1, 2026, and member states will need to amend national legislation within a tight time frame, even if changes to the EU directive itself are not required. The Pillar Two rules, part of the OECD’s global tax reform, require large multinational enterprises to maintain a minimum 15% effective tax rate across jurisdictions. Differences between the U.S. global intangible low-taxed income (GILTI) framework and OECD’s income inclusion rule prompted the G7 agreement to avoid dual taxation of U.S.-parented groups, with the United States agreeing to drop plans for retaliatory taxes on countries enforcing certain Pillar Two measures. Some EU countries have expressed concerns about the exclusivity of the G7 talks and the complexity of implementation, while the European Commission supports using safe harbors to apply the agreement without amending the directive.
U.S. Companies Still on Hook for Global Tax, Advisers Warn: U.S. multinational companies have reacted with cautious optimism to the G7’s recent announcement of a tentative understanding to exempt U.S. firms from certain OECD Pillar Two rules, but tax advisers emphasize that no formal agreement has yet been reached. Despite hopes for an exemption, companies face upcoming Pillar Two filing deadlines in multiple countries and are advised to continue compliance efforts to avoid legal and reputational risks. The exemption depends on a broader agreement among over 140 OECD member countries, followed by the development and implementation of administrative guidance and local legislation, a process that could take considerable time. While the United States aims for a “side-by-side” system allowing its tax framework to coexist with the global minimum tax, companies will still be subject to qualified domestic minimum top-up taxes in many jurisdictions.
EU Proposes Corporate Tax, Ditches Bloc-wide DST in New Budget: The European Commission’s latest budget proposal does not include a bloc-wide digital services tax (DST) on major tech companies like Amazon, Google and Meta. Instead, the proposal focuses on a new corporate tax, an excise tax on tobacco and a tax on electronic waste to help fund the European Union (EU) budget. The DST, previously imposed by some EU countries, has faced criticism from the United States as discriminatory, leading countries like Canada to revoke their DSTs to ease trade tensions. Under the new plan, companies with a permanent establishment in the EU and annual turnover over €50 million would pay a lump-sum annual contribution. The proposal also emphasizes revenue from the EU carbon market as a key budget source, though most proceeds will stay with national governments. The commission aims to raise its “own resources” to address growing demands in areas like green and digital transitions, defense, migration and resilience.
At a Glance
Treasury Department Officially Removes Crypto Broker Reporting Rules: The Department of the Treasury has officially withdrawn TD 10021, a set of crypto reporting rules that would have required decentralized finance (DeFi) exchanges to report customer transaction data to the Internal Revenue Service (IRS). This action follows the passage of H.J. Res. 25, a Congressional Review Act resolution introduced by Rep. Mike Carey (R-OH), which repealed the IRS’s proposed rule titled “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” The now-revoked rules, issued under Section 6045, aimed to improve tax compliance in the crypto space but faced strong pushback from industry advocates who argued that DeFi platforms lack the personnel or structure to meet such reporting requirements.
Litigation Funders’ Tax Bill Escape Spurs Industry Reckoning: Litigation funders recently avoided a major policy challenge when a proposed 40% tax on their profits was removed from the OBBBA. Introduced by Sen. Thom Tillis (R-NC), the measure sought to increase tax burdens on third-party entities that finance civil lawsuits and limit their ability to offset losses. While the provision was ultimately struck under the Byrd Rule, it sparked a coordinated response from funders through the International Legal Finance Association (ILFA) and other advocacy channels. The provision underscored both the fragmented nature of the industry’s lobbying efforts and ongoing calls from groups like the U.S. Chamber of Commerce for greater transparency and oversight. In response, some litigation finance firms are now pushing for more unified engagement and public education as policy discussions continue at both federal and state levels.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Oversight Subcommittee is scheduled to hold a hearing titled “Making America the Crypto Capital of the World: Ensuring Digital Asset Policy Built for the 21st Century” on July 16 at 9 a.m.
Senate Finance Committee
The Senate Finance Committee has no hearings scheduled for this week.
