Congress was busy last week with Republicans cementing their House majority (with open races being called) and holding leadership elections in both chambers. This week could offer some clarity on how end-of-year legislation is shaping up and how committee chairmanships and membership may be configured in 2025.

Government funding — Two main legislative packages are expected before year's end: a government funding bill paired with hurricane and disaster supplemental funding, and the National Defense Authorization Act (NDAA). It is still unlikely that any comprehensive tax package will be considered, after the House-passed Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) TCJA pre-cliffs-plus-CTC bill was passed over earlier this year by Senate Republicans who were interested in perhaps getting a better deal if in power in Washington in 2025 (which they will be) or considering elements of the bill as part of wider TCJA cliff negotiations. But talk of moving disaster aid and US-Taiwan tax relief separately is being revived.

Politico reported on Friday, "It still looks like there won't be a year-end tax bill in 2024, and the bipartisan bill to expand the Child Tax Credit and restore key incentives for businesses that Wyden and House Ways and Means Chair Jason Smith (R-Mo.) rolled out at the start of this year is all but officially dead. That's led policymakers to discuss attaching the disaster relief measure to a year-end spending bill, and the Taiwan legislation to the annual defense policy bill."

The House has passed five of the 12 annual appropriations bills and the Senate none, as the process to set long-term government funding through the end of the fiscal year (September 30, 2025) got caught up in the election and philosophical differences between House Republicans, who support spending cuts and policy riders, and Senate Democrats, who have sought a more bipartisan approach with Senate Republicans. On Fox News Sunday, House Speaker Mike Johnson (R-LA) noted the difference in progress on appropriations between the two chambers and said he may prefer a temporary rather than full-year measure. "So, we're running out of clock. December 20 is the deadline. We're still hopeful that we might be able to get that done, but if not, we'll have a temporary measure, I think, that would go into the first part of next year and allow us the necessary time to get this done. And I think that would be ultimately a good move, because the country would benefit from it, because then you'd have Republican control, and we'd have a little more say in what those spending bills are."

Regarding disaster funding, lawmakers are facing pressure to replenish the Small Business Administration's (SBA) disaster loan program, which ran out of funding October 15, as well as aide to communities recovering from Hurricane Helene and regarding the Francis Scott Key Bridge collapse in Baltimore. White House Office of Management and Budget Director Shalanda Young said in a memo this morning, "In the coming days, the Biden-Harris Administration will send to Congress a comprehensive disaster package. We look forward to working with Congress to quickly pass emergency funding so the Federal Government can meet its obligations to the American people."

Tax — H.R. 7024's extension of TCJA pre-cliffs — i.e., returning to 163(j) interest deductibility being calculated based on EBITDA (vs. EBIT) and R&D expensing rather than five-year amortization — were proposed to be retroactive to 2022 and extended through 2025. As a cost-saving measure, foreign R&D was not addressed, and remains subject to 15-year amortization. The proposal also includes an extension of 100% expensing.

Punchbowl News Sunday night published a check-in with GOP backers of the R&D provision now that Republicans have a trifecta of power in 2025. "Indiana Sen. Todd Young, GOP leader of the bipartisan Senate R&D bill, told us that while he hoped in the past to revive the upfront deduction going back to the start of 2022, he's now open to other perspectives. 'We'll see what appetite people have for that … " the story said. "Kansas Rep. Ron Estes, the House bill's Republican lead, told us he expects more conversations on whether full retroactivity is possible because so much time has passed. It's unusual for Congress to retroactively revive tax breaks with this much of a delay." Further, the exclusion of foreign R&D "aligns neatly with the protectionist message the GOP has been moving toward in the Trump era," the report said.

The House Republican Steering Committee could meet to recommend committee chairmanships and, potentially, begin the process of filling open Committee seats for the next Congress as soon as this week. According to press reports, members that could be tapped to join the House Ways & Means Committee include Republicans Rudy Yakym (R-IN), Max Miller (R-OH), Aaron Bean (R-FL), and Nathaniel Moran (R-TX); and Democrats including Budget Committee ranking member Brendan Boyle (D-PA) and Reps. Stacey Plaskett (D-VI) and Tom Suozzi (D-NY). For the Senate Finance Committee, possible additions could include Senators Roger Marshall (R-KS), Kevin Cramer (R-ND), and Pete Ricketts (R-NE), and, on the minority side, Senator Bernie Sanders (I-VT).

Hearings — The Senate Banking Economic Policy Subcommittee has scheduled a hearing, "Tax Policy in 2025: Implications for the American Economy," for Wednesday, November 20 (2:00 PM). Elizabeth Warren (D-MA) chairs this subcommittee and is set to be full Committee ranking member in the next Congress. She also serves on the Finance Committee. During a September 18 Subcommittee hearing on "The Macroeconomic Impacts of Potential Tax Reform in 2025," Senator Warren said Republicans led by Former President Trump want $7 trillion in additional tax cuts including reducing the corporate rate, while Democrats have proposals for "higher taxes on the rich."

The Joint Economic Committee has scheduled a hearing for Tuesday, November 19 (2:30 PM), on "Building on the Success of TCJA: The 2025 Tax Policy Debate." Witnesses include former Ways & Means Chairman Kevin Brady (R-TX).

Next administration — There were multiple stories over the weekend suggesting moves by President-elect Trump and his incoming administration are challenging Washington conventions. A story in the November 16 Wall Street Journal said, "Trump has threatened to take steps that would undermine the Senate's confirmation powers and Congress's role in budgeting — the most essential powers of the two chambers. He has insisted that senators allow him to place some nominees directly in their jobs, bypassing the Senate's public hearings and confirmation process. He has said he would move to impound — or decline to spend — money appropriated by Congress for programs he dislikes … "

"In less than two weeks since being elected again, Donald J. Trump has embarked on a new campaign to shatter the institutions of Washington as no incoming president has in his lifetime … " a November 17 New York Times analysis said. "If Republicans bow to his demand to recess the Senate so that he can install appointees without confirmation, it would rewrite the balance of power established by the founders more than two centuries ago. And if he gets his way on selections for some of the most important posts in government, he would put in place loyalists intent on blowing up the very departments they would lead."

"Trump appears intent on making good on what he pledged as a candidate. He is going after what he calls "the deep state," the vast federal bureaucracy that he saw as resisting his wishes during his first term. He is determined to have his way with the Pentagon brass, after several generals who served in his first administration turned on him … " said a November 17 Washington Post analysis. "Trump has put the Senate, which will now be in Republican hands under the new leadership of Sen. John Thune (South Dakota), on notice. He would like to steamroll his nominees past the normal Senate confirmation process by using recess appointments."

While President-Elect Trump has been active making cabinet selections since his election, his economic team has yet to take shape as we await his selections for Treasury Secretary, Commerce Secretary, National Economic Council Director, and USTR as well as the Chair of the Council of Economic Advisors. The top Treasury candidates were reported to be investor and hedge fund manager Scott Bessent and Cantor Fitzgerald CEO Howard Lutnick. Bessent is viewed as the more conventional choice, and Lutnick more as a voice for change. The NYT reported last night that President-elect Trump is also considering former Federal Reserve governor Kevin Warsh and investor Marc Rowan.