The House and Senate return to Washington, DC today to begin the 119th Session of Congress. The House is set to convene at noon today for the Speakership election and swearing in of members. President-elect Trump endorsed current Speaker Mike Johnson (R-LA) to remain in the position, citing his likability and near consensus support, which boosts his chances of winning the vote even as some Republicans took issue with the year-end 2024 continuing resolution (CR). The President-elect has been phoning potential holdouts. The Senate is also scheduled to convene at noon.

Late January 2, President-elect Trump made additional Treasury personnel announcements in a social media post, including: "Ken Kies will be Assistant Secretary for Tax Policy. Ken has been a tax lawyer for 47 years, and has served as the Chief of Staff of the Joint Committee on Taxation, and the Chief Republican Tax Counsel of the House Ways and Means Committee." Other names included in the announcement:

• Alexandra Preate as senior counselor to the Treasury secretary
• Hunter McMaster as director of policy planning
• Daniel Katz as chief of staff
• Samantha Schwab as deputy chief of staff
• Cora Alvi as deputy chief of staff

Also on January 2, Senate Democrats announced new members of the Finance Committee for the new Congress given retirements and election losses. Joining the Committee are Senators Bernie Sanders (I-VT), Tina Smith (D-MN), Ben Ray Luján (D-NM), Raphael Warnock (D-GA), and Peter Welch (D-VT). Senator Roger Marshall (R-KS) was previously announced as the member to join the Committee on the Republican side. Incoming Senate Majority Leader John Thune (R-SD) is staying on the Committee, unlike outgoing Majority Leader Chuck Schumer (D-NY), who stepped off when he won the chamber's top position.

Energy tax — New this morning: Final regulations (TD 10023) implementing the credit for production of clean hydrogen and certain provisions of the energy credit as enacted by the Inflation Reduction Act of 2022.

Tax — With full control in Washington, Republicans are looking to use the budget reconciliation process to act on border issues and extensions of TCJA tax provisions that expire at the end of 2025, though there isn't unanimity on whether to combine GOP priority issues into one bill or two separate packages, headlined by border first and tax cut extensions later (two reconciliation packages are possible under the FY2025 and FY2026 budgets).

While some argue that the difficult CR process in late 2024 argues for an all-in-one reconciliation bill in early 2025, it may be full steam ahead on the two-bill strategy, with border issues going first. A Semafor story from December 24 had some reporting on a super-accelerated schedule for the first reconciliation bill: "the Senate Budget Committee may move a budget resolution in early- to mid-January; a very aspirational goal could put the budget resolution on the Senate floor before Donald Trump is sworn in. That would keep Congress on track for a Trump signature on border funding by sometime in February … " The bill would be paid for with energy leases and with a TBD national security component, the report said.

There appears to be greater agreement among tax committee leaders about using a current policy baseline and not paying for tax cut extensions, but with narrow margins in the House and Senate, such an approach will require the support of nearly all Republicans. And the CR discussions at yearend 2024, which ultimately omitted a further debt limit increase or suspension despite President-elect Trump's late-game push to have the issue addressed, exposed the intention of some members to seek deep spending cuts. Punchbowl News reported that during a December 20 House Republican meeting, there was a slide shown indicating agreement to increase the debt limit by $1.5 trillion alongside a promise to cut $2.5 trillion in "net mandatory spending in the reconciliation process." A December 22 report said that's "an intensely difficult political project" and observed, "The spending-cut pressure is woven solidly into the tax debate right now."

Additionally, a group of conservatives led by Senator Rick Scott (R-FL) and House Freedom Caucus Chair Andy Harris (R-MD) wrote to GOP leaders December 18 calling for a two-step reconciliation process with a second budget reconciliation bill to be primarily focused on preventing tax increases. "To ensure passage, after factoring in the dynamic score of extending the Trump Tax Cuts, that reconciliation bill should reduce the deficit by including necessary spending reforms and cuts," the letter said. "This includes, but is not limited to, repealing the green tax credits in Democrats' so-called 'Inflation Reduction Act' and the estimated $2.5 trillion worth of cuts that the Department of Government Efficiency will identify as necessary to restore the fiscal health of the nation."

Subsequent reports also suggested the conservatives want a tax bill linked to spending cuts. A December 31 Tax Notes story, "What to Expect from Scoring the 2025 Tax Bill," cited Rep. Chip Roy (R-TX), as saying of the current-policy approach that doesn't require offsets, "I oppose that approach as what I believe it is for many members of Congress and the Senate — as a cover … for basically not wanting to have to do cuts." He added that he could be persuaded to go along with the current-policy approach if trillions of dollars of deficit reduction are prioritized up front. "I cannot support going down that road unless and until, perhaps, we've seen in full how we're going to reduce deficits with spending cuts married to the tax policy," Roy said.

An analysis in the December 27 Wall Street Journal said, "Republicans on Capitol Hill are considering a 10-year budget plan that ties mandatory spending cuts of $2.5 trillion to extending Trump's 2017 tax cut." The analysis also said presidents can cut mandatory spending unilaterally:

• President Biden "reversed an Obama era interpretation of the Affordable Care Act to expand subsidies to families, at a projected 10-year cost of $34 billion;"
• Treasury's "liberal interpretation of who qualifies for clean-energy tax credits in the Inflation Reduction Act (effectively, though not technically, a form of mandatory spending) added roughly $300 billion to the law's 10-year cost," according to the Penn Wharton Budget Model; and
• Trump could save billions by blocking the Biden rule that Medicare and Medicaid cover anti-obesity drugs.

A list in the January 2 Washington Post of "10 policies Republicans could use to pay for new tax cuts" was topped by new tariffs, which The Committee for a Responsible Federal Budget projected "during the campaign, before Trump pitched additional tariffs on North American trading partners … . could bring in $2.7 trillion over 10 years," and repeal of the IRA clean energy programs, raising $700 billion.

A House rules package proposed for the new Congress would provide for expedited consideration of a dozen bills, including "A bill to amend the Internal Revenue Code of 1986 to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States." The US-Taiwan Expedited Double-Tax Relief Act, to provide targeted and expedited relief from double taxation on US-Taiwan cross border investment was included in the broader Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) that was approved by the House but not the Senate in 2024.