The House and Senate are back in session together this week for the first time since July and with only 12 days in session together before the expiration of government funding on September 30, which is also the deadline for a farm bill, renewal of FAA reauthorization and taxes, flood insurance, the Pandemic and All-Hazards Preparedness Act (PAHPA), and several healthcare programs.

The Senate will convene at 3 p.m. today (Monday) and will conduct a vote related to a Veterans Affairs nomination at 5:30 p.m. Expected this week is consideration of an Appropriations "mini-bus" measure packaging the spending bills on Military Construction/VA, Agriculture, and Transportation-HUD. The House is back on Tuesday, September 12, with votes postponed until 6:30 p.m. Multiple Foreign Affairs bills are to be considered on the suspension calendar, along with the Emergency Wildfire Fighting Technology Act and other Natural Resources bills. On Wednesday, the House will begin consideration of the Department of Defense appropriations bill. The House is set to vote on Thursday on Preserving Choice in Vehicle Purchases Act, to amend the Clean Air Act to prevent the elimination of the sale of internal combustion engines.

Most of the attention is on how the government funding debate will play out. House Speaker Kevin McCarthy (R-CA) is reportedly eyeing a continuing resolution (CR) into November and faces pressure from conservative Freedom Caucus members to win policy concessions from Democrats and spending cuts deeper than limits set forth in the Fiscal Responsibility Act (FRA) debt limit bill. To that end, House appropriators have marked up FY2024 spending bills to FY2022 levels ($1.471t), rather than the FY2023 levels ($1.602t) agreed to in the FRA. Senate appropriators have approved bills at FY2023 levels on a bipartisan basis, which Senate Majority Leader Chuck Schumer (D-NY) has pointed to as the path forward for funding rather than a standoff over conservatives' demands that could risk a shutdown.

A significant part of the debate is the President's supplemental funding request ($40b) for Ukraine ($24b), disaster relief ($12b), and border security ($4b). Reflecting opposition from some conservatives to Ukraine funding, Speaker McCarthy is widely reported to be considering acting only on disaster funding in the near term, in a potential CR, and leaving Ukraine money for later. Punchbowl News said September 7 that "House Republicans want to include disaster relief on a continuing resolution" and "McCarthy wants changes to border policies as well as an increase in overall border security money in return for additional Ukraine aid." Senate Republican leaders advocate addressing Ukraine funding now, in the CR, and the White House has warned against breaking up issues in the supplemental.

The Sunday Washington Post suggested senators want to add a supplemental to the CR, "daring the divided House Republicans to oppose it and take the blame for shutting down the government if the Sept. 30 deadline has not been met," then use their "largely unified position as leverage to get their way in the more detailed agency funding outlines expected in the late fall … The exact details are not final, but senators have made clear that they are not going to repeat their decision to sit out the debt debate that took place during the spring."

A story in the September 11 Wall Street Journal, referring to the House members who stifled floor activity in June in protest of the FRA, said, "hardline Republicans returning to work this week are signaling they are ready to use tougher tactics to extract concessions [and] the expected face-off could lead to a government shutdown this fall … The hard-liners worry that the continuing resolution is a precursor to passage of a large, omnibus spending bill that they will dislike, and many say they will only allow passage of the short-term bill if it contains concessions to conservatives." The report cited some conservatives as saying they want to attach a House GOP border security bill to the CR and others as suggesting that, while a shutdown is not the goal, they are willing to keep the chamber in overnight at times and aren't prepared to "surrender before the fight begins."

IRA implementation — Assistant Treasury Secretary for Tax Policy Lily Batchelder September 8 announced Phase Two of implementation of the IRA's clean energy credits, including:

• guidance before the end of the year related to the Section 45X Advanced Manufacturing Production Tax Credit
• guidance to be issued soon on the new Energy Efficient Home Credit
• further guidance on the suite of credits for clean vehicles, including transfer of the new clean vehicle credit (up to $7,500) and previously owned clean vehicle credit (up to $4,000) to a car dealer
• guidance on the Foreign Entity of Concern requirements in the 30D Clean Vehicle Credit
• guidance on the underlying Section 48 Investment Tax Credit
• guidance before the end of this year on the clean hydrogen and sustainable aviation fuel credits

A September 7 New York Times story on the corporate alternative minimum tax (CAMT) said "making the tax operational has become a mammoth challenge for the Biden administration, which has faced intense lobbying from industries that could be on the hook for billions of dollars in new taxes. Those groups have been flooding the Treasury Department with letters asking for lenient interpretations of the law and trying to create new loopholes before their tax bills come due next year. Republican lawmakers have been trying to repeal the law while Democrats such as Senator Elizabeth Warren of Massachusetts have been urging Treasury Secretary Janet L. Yellen to enforce it strictly."

Tax — A Senate Finance Committee markup of tax legislation intended to strengthen the US economic relationship with Taiwan could happen as soon as this week. The proposal is bipartisan, and the Committee released a discussion draft on the issue with Ways & Means leaders July 12. The Senate Foreign Relations Committee approved July 13 the Taiwan Tax Agreement Act (S. 1457) that would authorize the President to negotiate and enter into a tax agreement. The two proposals aren't necessarily mutually exclusive.

House tax-writers are returning to Washington for the first time after Ways and Means Chairman Jason Smith (R-MO) and Committee members traveled to Europe to discuss concerns with the OECD-led global tax agreement. Last Monday, the Ways and Means delegation met with German officials and, according to a release, "Members made clear that the OECD's proposed global tax deal would give foreign competitors … an economic advantage because they would never fully comply with the agreement. Meanwhile, the United States would surrender over $120 billion of tax revenue over the next decade. Given the Biden Administration's lack of constitutional authority to write U.S. tax laws, Members explained that Congress would not pass into law any OECD tax deal that permits foreign countries to impose unfair taxes on American workers and make the United States less competitive in the global economy."

Further, "Chairman Smith also reiterated Republican opposition to the UTPR surtax in Pillar 2 that would uniquely hurt innovative American businesses. Foreign countries should never be allowed to unfairly tax the domestic operations of American businesses."

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