Congress is in session for the last week before the planned holiday break. A continuing resolution to extend government funding beyond the December 20 expiration and likely into sometime in March 2025, and possibly including disaster relief beyond the previously approved $5 billion disaster tax package, is expected to be released today after being delayed over farm bill provisions and other issues, including funding for the Key Bridge in Baltimore. The Senate may also vote on the Social Security Fairness Act (H.R. 82), to repeal reductions to Social Security benefits for those who receive other benefits like a state or local pension.

The House is back today with votes beginning at 6:30 p.m. on bills under the jurisdiction of the House Administration Committee and Energy and Commerce Committee addressing online privacy and broadband issues, plus a Senate-passed bill (S. 4610) to officially designate the bald eagle as the national bird. Later this week, a vote is scheduled on H.R. 115, to provide for consideration of resolutions of disapproval for "midnight rules" (regulations issued by an outgoing Administration) en bloc.

The Senate is also back in today with a procedural vote related to the National Defense Authorization Act (NDAA) at 5:30 p.m. The NDAA approved by the House December 11 includes some health care policies, including coverage updates for Tricare enrollees and provisions aimed at onshoring production of and increasing transparency into supply chains, including pharmaceutical supply chains that serve the Department of Defense. On Wednesday, December 18 (10 a.m.), is a Senate Finance hearing on US International Trade Commission (USITC) nominations.

Tax — There continue to be differing views on how Republicans approach the 2025 budget reconciliation process. Incoming Senate Majority Leader John Thune (R-SD) wants border and energy issues addressed in a first budget reconciliation bill and extension of expiring Tax Cuts & Jobs Act (TCJA) provisions in a second reconciliation bill later in the year. Ways and Means Committee Chairman Jason Smith (R-MO) made his case for tax to go in a first, big bill on Fox Sunday Morning Futures: "The American people have spoken. They want us to address the border. They want us to address the tax cuts that are expiring, and they want us to address energy. I believe that the one package is the quickest and best approach to deliver these victories for the American people."

He said one big bill is preferable given the tight party margins in Congress next year, noting, "In the House of Representatives, for the first time in the history of our nation, when a party controls the House and the Senate, we have a smaller margin in the House than we do in the Senate."

Politico Playbook this morning said the reconciliation conversation is the focus of Washington, as President-elect Trump, Senator Thune, and House Speaker Mike Johnson (R-LA) attended the weekend Army-Navy football game together. In addition to the arguments stated by principals to the discussion — Trump himself hasn't weighed in, but top advisor Stephen Miller made the case for two bills the prior weekend — "The incoming administration also wants to put its stamp on the tax bill, they argue, [and] it will take time to not only get a Treasury secretary confirmed but also stand up the administration's tax policy staff."

While it seemed like GOP Senators were coalescing around Thune's view and House members aligning with Chairman Smith, there have been some deviations. Senate Finance Committee member Thom Tillis (R-NC) said on Fox News Sunday that he thinks tax should go in a first bill. Asked whether he is concerned that TCJA extensions may not get done if they are not included in the first reconciliation package, Senator Tillis said, "I am … When President Trump came in, in 2017, we tried to move quickly on reversing the damage that Obamacare was creating. We came up a vote short. What we don't want to do is burn too much time because if we don't get the tax provisions in place and make it very clear to the markets and to the American people that will be in the August or September timeframe, the markets are going to price in that cost and then it's going to make it more difficult."

Tillis said the prospect of getting 7 or 8 Senate Democratic votes for Republican bills is underestimated. "Let's get in there and do the hard work. Let's have the border package through reconciliation as an option," he said. "But why don't we get together and start having discussions right now about border security and immigration reform that President Trump supports? He's already said he thinks there should be a path for Dreamers and DACA population. We could actually get some big stuff done, I believe, even with 60 votes to take pressure off that timeline that we need to get reconciliation done for tax reform."

Asked whether he thinks tax should go in the first bill, Tillis said, "I believe that we've got to pull it forward. It could be the mechanics of the tax package and some border. It could be dual track where we're working on 60-vote threshold for border while we're trying to get the package done."

Meanwhile, Punchbowl News reported House Budget Committee Chair Jodey Arrington (R-TX) as saying if it's two bills, the first needs to be "very targeted," and that energy and any deregulation efforts would be for bill two along with tax and spending cuts. (Arrington previously said that reconsideration of Inflation Reduction Act energy tax credits would be inevitable under complete Republican control in Washington.)

The House Freedom Caucus endorsed the two-track approach on Friday: "It is imperative that we first send — in January — a focused and quick border reconciliation package that is fully offset. President Trump's agenda will be enacted, and border security must move first - and then we should move forward to a second, larger reconciliation bill covering taxes, spending, energy, bureaucracy, and more."

In a CNBC interview at the New York Stock Exchange last week, President-elect Trump restated his proposal to further cut the corporate tax rate: "We're going to be cutting taxes still further. As you know, we got it down to 21%. We're going to bring it down even below that. You pay 21% if you don't build here, and meaning your product, or whatever it is you're building, and if you do, we're going to try getting it down to 15%, but you have to build your product, make your product in the USA."

Former National Economic Council Director Gary Cohn said on Face the Nation that it is not yet known whether the President-elect can deliver on additional corporate tax cuts, as "the whole tax discussion is going to happen over the course of 2025." He said financial constraints with the TCJA — Republicans had $1.5 trillion to spend under reconciliation rules decided upon amongst GOP senators — precluded a further reduction in the corporate rate and required the individual provisions' expiration in 2025.

Still, "when we open up tax code, even if we're just talking about the personal side, the corporate side will come into play," he said. Cohn said the business community was supportive of a 21% tax rate and probably would have been happy with anything at 23% or lower, in line with other OECD countries. "Obviously, companies will be happier if the tax rate goes lower, but realistically we just need, in this country, to be competitive with the rest of the world. We do not want corporate taxes to be a disadvantage," he said.

Morning Tax reported that Senate Finance Committee Chairman Ron Wyden (D-OR) will release a draft bill on private-placement life insurance today.

Energy tax — An EY Alert on IRS final regulations (TD 10005) relating to the types of energy property that qualify for the IRC Section 48 investment tax credit is available.

Congress — The House Republican Steering Committee December 13 recommended the following new members to the Ways and Means Committee for the 119th Congress, all of whom are currently serving their first full term in the House:

• Rep. Aaron Bean (R-FL), a former bank president and, like IRS Commissioner nominee former Rep. Billy Long (R-MO), an auctioneer.
• Rep. Max Miller (R-OH), a former senior advisor to President Trump.
• Rep. Nathaniel Moran (R-TX), a former judge.
• Rep. Rudy Yakym (R-IN), a supply chain executive and former aide to the late Rep. Jackie Walorski (R-IN) who won the special election to replace her.