President-elect Trump's January 5 social media post calling for a single reconciliation bill with tax and other priorities, rather than leading with border issues and addressing Tax Cuts & Jobs Act (TCJA) expiring provisions in a second bill, wasn't the final word on the matter after all, as he went on to say he is open to a two-bill approach. Congressional leaders suggested one bill is the plan for now and some said the process to act on GOP priorities really comes down to the art of the possible.

"I favor one bill. I also want to get everything passed. And you know, there are some people that don't necessarily agree with it. So I'm open to that, also. My preference is one big — as I say, one big, beautiful bill," President-elect Trump said on the Hugh Hewitt Show January 6. "Now to do that takes longer. You know, to submit it takes longer, actually. But, so it's a longer process. I would say I'd live with that. I believe we'd get — I don't know, to me, it just is a cleaner, it's cleaner. It's nicer."

During a January 7 news conference, Trump praised Senate Majority Leader John Thune (R-SD) but said a tax bill "goes through the House first, and the question is whether or not we do the two bills or one bill. And you know, we'll have a look. I can live either way. I like the idea of the one big bill, but I can live either way."

Punchbowl News reported House Speaker Mike Johnson (R-LA) as saying January 6, "The plan in the House has been one bill … We met for two days over the weekend, two full days of discussion and strategizing with that in mind. And so that's our assumption right now." The Speaker had told members during a weekend retreat that Trump was for one bill, after weeks of suspense and Johnson himself largely staying neutral.

That announcement followed Johnson winning the speakership vote on Friday over opposition rooted in his negotiations with Democrats on the 2024 continuing resolution (CR). Another contentious government funding deadline looms on March 14. Politico said: "Johnson allies said his embrace of the one-bill approach was solidified in recent weeks as it became clear — in the December spending drama and in last week's nail-biter of a speaker election — just how difficult it will be to get one major bill passed, let alone two."

Senator Markwayne Mullin (R-OK), a close Trump ally and a former House member, suggested what can be passed in the more narrowly divided House may be operative. "Whatever they can send to us, we can pass," he said in another report. "I think it's going to be very difficult for the House to deliver two things, though. But if they can, wonderful," he said. "The House is a very thoughtful, dysfunctional body right now."

Punchbowl reported Speaker Johnson as acknowledging that Republican Senators remain in favor of the two-bill approach, which would "allow us to put points on the board … early in the year" by passing border security policy. An editorial in this morning's Wall Street Journal loosely backed the Senate approach, saying, "get a quick-strike victory on border security … and the GOP will have racked up a win before diving back into the maelstrom of tax policy."

Semafor January 7 reported Senate Finance Committee Chairman Mike Crapo (R-ID) as saying, "We still need a plan," The report said, "He's neutral and preparing for all contingencies, but everyone agrees it would be helpful to know what the sequencing is. It's not an esoteric debate: The chambers need to lay out their budget blueprints to get the process rolling, and until they do so, they are stuck."

The issues surrounding tax legislation will be discussed between lawmakers in the coming days. President-elect Trump is set to meet with Republican Senators tonight on Capitol Hill. Additionally, the President-elect is set to convene groups of Republican members at his Mar-a-Lago resort, including House committee chairs, the Freedom Caucus conservative group, and representatives of high-tax states concerned about continuing the $10,000 SALT deduction cap. Rep. Nick LaLota (R-NY), among the most vocal members on the latter issue, has said a SALT cap increase to $20,000 isn't sufficient but hasn't specified what is. A Bloomberg story on the Saturday meeting said, "The group including New York Reps. Andrew Garbarino and Mike Lawler, [and] Reps. Tom Kean (N.J.) and Young Kim (Calif.) will push to expand the deduction … "

And discussions will continue in Congress. The House Ways & Means Committee has scheduled a hearing, "Hearing on The Need to Make Permanent the Trump Tax Cuts for Working Families," for Tuesday, January 14 at 10 a.m.

Finance Chairman Crapo released a statement of priorities saying, on tax, that "Congressional Republicans are focused on preventing an over-$4 trillion tax hike on American workers and businesses … The TCJA's competitive corporate rate, paired with other pro-growth tax policies and international tax reforms resulted in record repatriations of foreign earnings by American businesses and increased domestic investment, particularly in research and development … We will also consider important new tax policies to provide further relief to the American families, workers and small businesses who continue to grapple with the unaffordable cost of living." The statement said, "It is also time to act on bipartisan legislation to relieve double taxation on cross-border investment between the U.S. and Taiwan."

Committee Democrats welcomed Budget Committee ranking member Brendan Boyle (D-PA) and Reps. Stacey Plaskett (D-VI) and Tom Suozzi (D-NY) back to Ways & Means for the 119th Congress. They all previously served on the Committee but not in the last Congress, as the Democratic side was winnowed when they lost control of the House. Rep. Suozzi left Congress after a bid for NY governor, then won a special election to replace George Santos. "Our team is now whole, and our committee will stand up for working families, fight billionaire giveaways, and protect the promise of Social Security and Medicare for the American people," Ranking Member Richard Neal (D-MA) said in a release.

Tariffs — President-elect Trump's post calling for one bill said, "IT WILL ALL BE MADE UP WITH TARIFFS, AND MUCH MORE, FROM COUNTRIES THAT HAVE TAKEN ADVANTAGE OF THE U.S. FOR YEARS." House Ways & Means Committee Chairman Jason Smith (R-MO) was cited in a Politico report as saying tariffs will be used to offset some of the cost of GOP tax policies but won't necessarily be included in budget reconciliation legislation. "Tariffs will pay for it. [Trump] didn't say it was going to be in the bill," Smith said. "Revenues coming into the country are revenues coming into the country."

Lawmakers seem to be putting some distance between themselves and tariffs. "The tariff matter will largely be in the executive branch," Speaker Mike Johnson said in Semafor this morning, adding, "I don't know how much of it would be codified or expected to be codified."

In a December 18 letter to Senate Democratic leaders, the Congressional Budget Office (CBO) said a uniform increase in tariffs of 10% of the value of goods would decrease deficits by over $2 trillion.

During his January 7 news conference, President-elect Trump restated his intention "to put very serious tariffs on Mexico and Canada." In a January 6 social media post, he pushed back on a Washington Post report that new tariffs may only cover imports critical for national or economic security, related to the defense industrial supply chain, critical medical supplies, and energy production. The story "incorrectly states that my tariff policy will be pared back. That is wrong," Trump said.

Energy tax - IRS January 7 issued 428-page final regulations (TD 10042) regarding the technology-neutral IRC Section 45Y clean electricity production credit and the IRC Section 48E clean electricity investment credit established by the Inflation Reduction Act (IRA). The existing IRC Section 45 Production Tax Credit and IRC Section 48 Investment Tax Credit are available to projects that began construction before 2025, while projects placed in service after December 31, 2024, will be eligible for the new Clean Electricity Credits.

A Treasury news release said the final regulations largely maintain the rules as proposed. "The final rules also confirm that future changes to the list of zero-emissions technologies or the designation of a lifecycle analysis model that may be used to determine emissions rates will need to be accompanied by an analysis prepared by the U.S. Department of Energy's National Labs, in consultation with interagency and other experts," the release said.

New this morning: Revenue Procedure 2025-11 provides the process under IRC Section 48E(h) to apply for an allocation of capacity limitation (Capacity Limitation) as part of the Clean Electricity Low-income Communities Bonus Credit Amount Program (Program) for 2025 and subsequent years.

Bill intros — With the start of the new Congress is a flood of new bill introductions, including:

January 3

• Chairman Smith and Ranking Member Neal, H.R. 33, to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States (this bill may receive expedited consideration under the House rules package)
• Rep. Andy Biggs (R-AZ), H.R. 74, to allow for tax-advantaged distributions from health savings accounts during family or medical leave
• Rep. Biggs, H.R. 111, to allow an above-the-line deduction for health insurance premiums
• Ways & Means Member Vern Buchanan (R-FL), H.R. 137, to make permanent certain provisions of the Tax Cuts and Jobs Act affecting individuals, families, and small businesses
• Rep. Buchanan, H.R. 138, to allow expenses for parents to be taken into account as medical expenses
• Rep. Buchanan, H.R. 140, to provide tax relief for damages relating to Hurricanes Helene and Milton
• Ways & Means Member Dave Schweikert (R-AZ), H.R. 193, to direct the Secretary of Health and Human Services to issue guidance on payment under the Medicare program for certain items involving artificial intelligence

In an article first published in Tax Notes Today Federal, Brandon Pizzola and Hilary Gelfond-Gross of EY's Quantitative Economics and Statistics (QUEST) practice analyze the economic effects of the foreign-derived intangible income deduction, the economic activity supported by the deduction, and the macroeconomic impacts of repealing it.

A WCEY Alert, WCEY guide to Washington in 2025, is available here.