Congress will probably need into next week to clear an extension of government funding beyond the current December 20 expiration before breaking for the holidays, most likely through a continuing resolution (CR) to carry funding through sometime in March. Talks continue over what may be added. Democrats are pushing for further disaster relief, beyond the $5 billion disaster tax bill cleared last week, and their support for the government funding bill is likely required given that some conservative House Republicans oppose the CR format generally and are also making statements against more disaster relief. Politico reported that CR text may not be released until the weekend, setting up a scramble to clear the bill through both chambers before the December 20 deadline.

Top appropriators in the House and Senate said discussions over disaster relief continue. "I remain hopeful and determined that we can reach a deal with our Republican counterparts, but the only way we're going to get a disaster package done is with a serious show of bipartisan cooperation. That's how the CRs work," Senate Majority Leader Chuck Schumer (D-NY) said December 10. "Disaster aid is not a Democrat or Republican issue … " The package would likely be less than the $100 billion requested by President Biden but, according to Senator Thom Tillis (R-NC), whose state was affected by Hurricane Helene, not by much.

It is unclear what else may be added. A one-year farm bill extension remains under discussion. A US-Taiwan tax relief bill, which was embedded in the 2024 House-passed tax bill (H.R. 7024) that won't move through the Senate, could potentially be peeled off to move separately yet this year as disaster tax relief was, and Senate leaders are reportedly querying members over whether there are any possible objections.

Tax — Senate Republicans are coalescing around the two-bill approach to the reconciliation process outlined by incoming Senate Majority Leader John Thune (R-SD) that would put expiring Tax Cuts & Jobs Act (TCJA) provisions on the back burner for a second reconciliation bill later in the year, with border and energy issues addressed first. "In my view, it makes sense for us to move quickly on things we know we can do quickly — border, defense, energy," Thune said Tuesday. "And then come back with another package that would address some of the savings that can be achieved through reductions in costs in various agencies, and bureaucracies, and government and programs. And then also deal with the expiring Trump tax cuts in a package later this year." House Ways & Means Committee Chairman Jason Smith (R-MO) has expressed opposition to that approach, arguing the priorities should go as one and tax should be part of the process early on.

Incoming Trump Deputy Chief of Policy Stephen Miller said on Fox Business December 8, " … [A comprehensive tax reform package is] where you have to figure out SALT [state and local deductions]. That's where you're going to figure out different policy baselines that you're going to use for the tax cuts, about corporate tax reform, about trade reform, manufacturing reform, and all those tax policies." He continued, "With the two or three seat majority in the House, obviously that's going to take some time, but nobody, I repeat, nobody is even talking or considering delaying tax [reform]." Fox said he reiterated, "Tax reform will happen, and it will be the greatest tax bill that we've ever seen. Now, these are not final. These are ongoing discussions and negotiations, but I just want to be very clear that no one is talking about delaying tax reform."

Reconciliation will allow two packages — one using the FY2025 budget resolution, and another for FY2026 — to pass the Senate with a simple majority, meaning Republicans controlling the chamber 53-47 next year can sidestep negotiations with Democrats on these bills. Lending credence to the burgeoning Senate two-bill plan, incoming Budget Committee Chair and long-time Trump ally Lindsey Graham (R-SC) posted on social media December 9: "Stephen Miller was spot on when he said that the Senate and House should first pass a border security bill through the budget reconciliation process. While I support spending restrictions and tax cuts, my top priority — and the first order of business in the Senate Budget Committee — is to secure a broken border. The bill will be transformational, it will be paid for, and it will go first."

Axios reported December 9 that the border and energy initial reconciliation bill could cost upwards of $120 billion and that overturning the Biden student loan forgiveness program is eyed as a revenue offset. Previous reports said energy permitting could provide some revenue for the plan.

The two-step approach isn't assured despite the Senate insistence. "According to a person close to leadership … House Speaker Mike Johnson and Majority Leader Steve Scalise privately agree with [Chair Smith] that the best strategic move would be to tie border funding to an extension of expiring tax cuts in one big, sweeping package … " Politico reported December 9. "The House leaders, though, haven't officially backed the strategy and will ultimately defer to what President-elect Trump decides."

Speaker Johnson has not taken a firm position publicly. "There probably will be at least two reconciliation packages. So, the determination right now is where does the tax piece fit in? Do we do that first out of the gates, or do you wait a couple months to get all that done because it can be very complicated?" he said on Fox News December 10. Asked whether immigration would maybe go first, Johnson said, "Yes. I mean, it's no surprise the border is the top of everyone's priority list because it's the top of the list for the American people. We do that, we do energy policy. We ensure that we don't have the largest tax increase in U.S. history which is what would happen at the end of next year if we don't extend those tax cuts … "

The two-step approach espoused by Senate GOP leaders was endorsed by an editorial in the December 10 Wall Street Journal. "Passing anything in the GOP House will be difficult next year. But the question to ask Mr. Smith is why House Republicans think they can rally that sliver of a majority around a giant and complex tax reform in such short order. That's a recipe for division and delay, even as it risks the GOP getting nothing done at all if it collapses of its own great political weight … " the editorial said. "Mr. Trump is eager to show early progress, and a targeted bill would allow Congress to fund early executive orders on his border and energy promises. A focused bill is also an easier lift in the first months of Congress, when Speaker Mike Johnson's tiny majority will shrink even further as several Republicans resign once they are confirmed for Trump Administration posts."

In the Senate, Chairman Graham will in some ways hold the keys to the process, which first requires a budget resolution with reconciliation instructions to relevant committees. Both chambers must agree to the same resolution (but it is not signed by the President).

The Congressional Research Service says of the number of measures under a resolution: "If a committee is given more than one directive — for instance, both to increase revenues and to decrease spending — then the committee may respond with separate recommendations. Under current Senate practice, the language in Section 310(a) is interpreted to mean that no more than one measure of each type would be eligible to be considered under expedited procedures as a reconciliation bill. Under current practice, therefore, as many as three measures could qualify for consideration under expedited reconciliation procedures in the Senate — but no more than one each for spending, revenue, and the debt limit."

Friday, December 13 at noon, is the EY Webcast, "Tax in a time of transition."