Congressional Republicans continue to hold differing views on how to 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, with extension of expiring Tax Cuts & Jobs Act provisions in a second reconciliation bill later in the year. House Ways and Means Committee Chairman Jason Smith (R-MO) prefers for tax to go in a large reconciliation bill that would also include border security, energy, defense and other issues.

House Budget Committee Chair Jodey C. Arrington (R-TX) this week was quoted as saying he sees momentum building among House Republicans to go with two reconciliation bills, under which a smaller initial bill will address the border to be paid for by a later, second reconciliation tax bill.

Looming, however, is the pressing need for Congress to pass a continuing resolution (CR) to fund the federal government past 20 December. Congressional negotiators earlier this week released a government funding bill that would have extended funding into March 2025, but President-elect Trump and some Republicans strongly opposed provisions in the bill, resulting in its being pulled from consideration. A second, significantly slimmed-down CR also failed in the House. As we go to press, House Republicans have come out with third tentative plan to avoid a partial government shutdown.

Treasury and the IRS issued Notice 2025-4 this week, announcing their intent to issue proposed regulations to implement "in its entirety" the substance of the OECD's February 2024 report on BEPS 2.0 Pillar One Amount B, including supplemental statements released in June 2024. The simplified and streamlined approach (SSA) would apply for pricing certain controlled transactions involving baseline marketing and distribution activities. The proposed regulations will incorporate the SSA as a taxpayer safe harbor. Taxpayers subject to US tax on in-scope transactions may rely on the Notice and elect to apply the SSA for tax years beginning on or after 1 January 2025.

According to the Notice, the SSA is similar to the comparable profits method under Reg. Sections 1.482-3(a)(4), 1.482-5 and 1.482-9(a)(5) and (f). The IRS requests that comments on the Notice be submitted by 7 March 2025. An EY Tax Alert provides details.

Treasury, on 17 December, announced the partial suspension of the 1973 US-USSR tax treaty as it applies to Belarus. The partial suspension, by mutual agreement, is effective 17 December 2024 through 31 December 2026, or earlier if mutually agreed.

Several senior US officials have announced plans to leave the government with the coming change in Administrations in January. IRS Chief Counsel Marjorie Rollinson recently said she will retire early next year. Scott Levine, Treasury Assistant Secretary for International Affairs, who serves as the top US delegate in OECD BEPS discussions, also said he is leaving the government in early 2025.

In OECD BEPS news, a US Treasury official said the organization plans to publish guidance that addresses "how certain transactions and incentives will be treated under the global minimum tax."

The official also indicated countries are at the end of the first stage of the peer review process regarding the global minimum tax qualified domestic minimum top-up tax (QDMTT) and income inclusion rules (IIRs). In this stage of the peer review process, countries must self-certify to the Inclusive Framework that they are compliant with Pillar Two global minimum tax rules; a full legislative review will take place later in the process. The official said that before the end of the year, the relevant working group reportedly will release a list of countries that have qualifying QDMTTs and IIRs.

According to the official, BEPS negotiators are also developing guidance on parent company losses in the context of controlled foreign company regimes.

The OECD, on 19 December, released a pricing tool and fact sheets for implementation of BEPS Pillar One Amount B that are meant to help in understanding and applying the simplified and streamlined approach in transfer pricing. The Pricing Automation Tool automatically computes the Amount B return for an in-scope tested party. According to an OECD press release, the tool only requires minimal data inputs and is intended for both tax administrations and taxpayers.

The OECD on 12 December also issued the eighth annual Harmful Tax Practices — 2023 Peer Review Reports on the Exchange of Information on Tax Rulings under BEPS Action 5.