Legislative Lowdown
FY26 Appropriations Outlook: House Republicans are weighing options to avoid a government shutdown as the Sept. 30 funding deadline approaches, with some movement toward a short-term stopgap plan. Freedom Caucus Chairman Rep. Andy Harris (R-MD), who pushed for a year-long continuing resolution, said he could accept a shorter measure if House Appropriations Committee Chairman Tom Cole (R-OK) secures the votes. Chairman Cole’s proposal would extend funding into November and include three full-year spending bills, giving them more time to debate the rest of the spending bills. Speaker Mike Johnson (R-LA) has not yet decided on a path forward, but Majority Leader John Thune (R-SD) signaled support for a clean, short-term extension while leaving room for a bipartisan deal on the expiring Affordable Care Act (ACA) tax credits.
House Ways and Means Committee Republicans Met with Tax Policy Head: Reportedly, the House Ways and Means Committee Republicans met with Treasury Assistant Secretary for Tax Policy Ken Kies to discuss the Trump administration’s implementation of tax provisions in the One, Big, Beautiful Bill Act (OBBBA, Public Law 119-21). Kies noted that he will help manage implementation provisions in the OBBBA, including the global minimum tax, expanded tax breaks for small-company stock, and incentives for investment in rural and low-income areas. He also addressed details on new deductions for seniors, no tax on tips and safeguards against abuse. Reps. Greg Murphy (R-NC) and Lloyd Smucker (R-PA) raised concerns about how those provisions would be applied.
Kies also told committee Republicans that the Treasury Department may revive proposed Section 899, commonly referred to as the “revenge tax,” if the Organisation for Economic Co-operation and Development (OECD) fails to respect the U.S. international tax framework and does not exempt American companies from the global minimum tax. Section 899 would have authorized the United States to impose additional taxes on individuals and entities associated with countries that levy taxes deemed “unfair” or discriminatory against U.S. firms.
House Lawmakers Introduce Bipartisan Bill to Extend ACA Credits Through 2026: A group of House lawmakers, led by Reps. Jen Kiggans (R-VA), Tom Suozzi (D-NY) and Brian Fitzpatrick (R-PA), introduced a bipartisan bill to extend the Affordable Care Act’s (ACA) enhanced premium tax credits for one year, preventing them from expiring at the end of this year. The credits, first expanded under the American Rescue Plan Act (ARPA, Public Law 117-2) to provide broader and more generous assistance during the COVID-19 pandemic, particularly for lower- and middle-income families, have helped millions reduce health insurance costs. Rep. Kiggans highlighted that 33,000 of her constituents rely on the program and stressed the need to give families more time to plan. The bill has also drawn support from a wide bipartisan group, including Reps. Jared Golden (D-ME), Jeff Hurd (R-CO), Rob Bresnahan (R-PA), Young Kim (R-CA), David Valadao (R-CA), Carlos Gimenez (R-FL), Tom Kean (R-NJ), Juan Ciscomani (R-AZ), Mike Lawler (R-NY), Don Davis (D-NC) and Marie Gluesenkamp Perez (D-WA).
House Appropriations Committee Sends FY26 FSGG Bill to the House Floor: Last week, the House Appropriations Committee voted 38-26 to send their fiscal year (FY) 2026 Financial Services and General Government (FSGG) appropriations bill to the House floor. The proposal includes a 20% cut to the Internal Revenue Service (IRS) budget, which is a $2.8 billion reduction from FY25. The bill also bars the IRS from using funds to create a free public electronic tax filing service without congressional approval. Additionally, it allocates up to $33.6 million for adminisrative expenses for the CDFI Fund and New Markets Tax Credit Program, including at least $1 million for investment performance tools and up to $300,000 for administrative costs related to the direct loan program. While the House bill likely will not become law, cuts of this magnitude would further restrain already limited IRS operations, delay audits, limit taxpayer services and enforcement efforts, and potentially increase delays for taxpayers seeking assistance or refunds.
During the full committee markup, Rep. Gluesenkamp Perez introduced an amendment to preserve the IRS Direct File program, which allows individual taxpayers to prepare and file their federal returns at IRS.gov. Republicans have criticized Direct File as unauthorized under law and said the take-up rate during the first two years of the platform was very low. Chairman David Joyce (R-OH) opposed the amendment.
Energy-Tax Mainlines
Grassley, Curtis and Tillis Continue Holds on Treasury Department Nominations: At the start of the August recess, Sens. Chuck Grassley (R-IA), Thom Tillis (R-NC) and John Curtis (R-UT) placed holds on several of President Trump’s Treasury Department nominees in response to the administration’s planned changes to guidance implementing the wind and solar tax credits following the passage of the One Big Beautiful Bill Act (OBBBA). The president issued an executive order, titled “Ending Market Distorting Subsidies for Unreliable, Foreign, Controlled Energy Sources,” directing the Treasury Department to enforce the phaseout of clean energy tax credits and update guidance on when projects are considered to have begun construction. Sens. Grassley, Lisa Murkowski (R-AK), Mike Rounds (R-SD) and others expressed concerns that the order could conflict with congressional intent, which included provisions allowing additional time for clean energy projects to qualify for credits. For more information on the guidance, please see here for last week’s Taxation and Representation newsletter.
Sens. Grassley, Curtis and Tillis indicated that they will maintain their holds until the administration provides clarification on OBBBA implementation and the potential effects on projects in their states.
1111 Constitution Avenue
Trump Administration Reissues Spring Regulatory Unified Agenda: The Trump administration reissued its Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions, including updates from the Treasury Department and the Internal Revenue Service (IRS), after a brief August posting was removed. The agenda largely mirrors prior postings that include the Treasury Department’s and the IRS’ annual Priority Guidance Plan. The current posting adds rules on digital assets, international tax measures from the Tax Cuts and Jobs Act (TCJA, Public Law 115-97), transfer pricing, a broad rule to reduce taxpayer regulatory burdens, updates to partnership reporting and trust filing requirements, and guidance on calculating investment interest limits. While the tax list includes some energy tax credits, including the Sections 45Z Clean Fuel Production and 45U Nuclear Production credits, it does not appear to be reflective of regulatory projects that include changes enacted in the One, Big, Beautiful Bill Act (OBBBA). The Unified Agenda also reflects the Treasury Department’s plans to withdraw prior guidance on basis-shifting transactions in related-party partnerships, and updates three regulations reflecting the Department of Justice (DOJ) Tax Division’s elimination. The Treasury Department and the IRS have not yet released the 2025-2026 Priority Guidance Plan, which is still anticipated this fall and expected to include new regulatory projects under the OBBBA.
Tax Preparer Industry Stuck in Regulatory Limbo: The tax preparation industry continues to be locked in an unending battle over regulation, with the Internal Revenue Service (IRS), Congress and preparers divided on how oversight should be enforced. While many support harsher standards to combat fraud, particularly targeting contingency fee arrangements that can inflate claims, court rulings have curtailed the IRS’ authority, which has left the issue unresolved. The Biden administration previously proposed updates to Circular 230 to ban those fees and fine violators, arguing the practice fuels fraud, though critics warn this could eliminate affordable options for small businesses. Earlier this year, Senate Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) introduced a bipartisan discussion draft to set minimum preparer standards, but no real action has been taken since then.
Best Departs IRS Large Business and International Division: Jennifer Best, acting commissioner of the Internal Revenue Service’s (IRS) Large Business and International Division, left the IRS on Friday. This highlights another leadership departure amid widespread vacancies and acting appointments in the division. Best, who previously served as deputy commissioner and held other senior roles, will be replaced by Mabeline Baldwin, who will continue her permanent position as director of the Eastern Compliance practice area. The division has seen over half of its roughly 30 top leadership roles vacant or temporarily filled, following departures incentivized by the Trump administration and recent administrative leaves of other executives. Best described her decision to leave as carefully considered.
IRS Plans to Close Nine Taxpayer Centers Across the U.S.: The Trump administration is expected to shut down nine Internal Revenue Service (IRS) taxpayer assistance centers on Nov. 30 as part of a wider initiative to cut federal office space and expenses. Rep. Mike Lawler (R-N.Y.) has asked Treasury Secretary Scott Bessent to keep the office in his district open and warned that the closure would place a burden on constituents who depend on in-person support for complex tax matters. The IRS stated the decision is aimed at reducing rent costs and will not lead to job losses. However, the National Treasury Employees Union said that the closures will disproportionately impact low-income taxpayers and identity theft victims, who may be forced to travel long distances to access in-person services.
Tax Worldview
AICPA Asks Treasury Department and OECD for Guidance on Pillar Two: The Association of International Certified Professional Accountants (AICPA) submitted comments urging the Organisation for Economic Co-operation and Development (OECD) and U.S. Department of the Treasury to issue clear guidance on implementing Pillar Two in connection with existing U.S. tax rules. The group highlighted ongoing uncertainty for taxpayers regarding effective dates, retroactive relief, reporting obligations and compliance procedures for fiscal years 2024 and 2025. The letter emphasizes the need for clarity on how the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) will be suspended for U.S.-based groups and calls for full parity for the U.S. research and development (R&D) tax credit with refundable R&D incentives abroad to prevent unfair penalties in effective tax rate calculations. The association also recommended transitional relief and development of a framework for substance-based nonrefundable credits to stabilize compliance, reduce administrative costs and ensure consistency across jurisdictions as Pillar Two moves into its first filing cycle.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Committee does not have any tax hearings scheduled for this week.
Senate Finance Committee
The Senate Finance Committee will hold a nomination hearing on Sept. 10 to consider Donald Korb to be the chief counsel of the IRS.
