House Republican leaders had hoped to announce as soon as today a framework for a tax bill ahead of a potential committee-level markup of an FY2025 budget resolution next week, the first step toward unlocking the budget reconciliation process that Republicans want to use to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 with only Republican votes. A February 6 White House meeting with the President and about a dozen members representing disparate factions of the House GOP, including the Freedom Caucus group of conservatives, broke a logjam of differing perspectives, and House Budget Committee Chairman Jodey Arrington (R-TX) was cited last night as suggesting members were close to clinching a deal. Bloomberg reported this morning that talks may stretch into the weekend.

House Majority Leader Steve Scalise (R-LA) was cited by the Wall Street Journal as saying some tax provisions could be proposed to be permanent, and others temporary, and elsewhere said members were closing in on decisions about the budget baseline. Using a current policy baseline that won't require the $4 trillion cost of TCJA extensions to be paid for appeared to be a point of consensus, at least among tax committee chairmen in the House and Senate, but Chairman Arrington and others are dubious about that approach. Tax Notes reported Ways & Means member Dave Schweikert (R-AZ), who has deficit concerns about a tax bill, said of a current policy baseline, "It is an intellectual fraud to say, 'Let's ignore the actual law and let's just keep doing what we're doing … "

Punchbowl News reported of an emerging framework, "House Republican leaders say that they will try to include savings from Elon Musk's DOGE effort in the reconciliation package to juice the budget numbers." White House Press Secretary Karoline Leavitt said President Trump, in addition to increasing the state and local tax (SALT) deduction cap, wants to end the preferential tax treatment of carried interest and end "special tax breaks for billionaire sports team owners."

(Newsweek reported this morning, "Currently, when an owner buys a sports team, a portion of the purchase price is allocated to intangible assets, such as player contracts. Under current Internal Revenue Service rules, such intangible assets can be written off through amortization over 15 years, even if the team remains highly profitable. Other loopholes used by sports team owners include tax-exempt municipal bonds to finance professional sports stadiums. It is unclear how much revenue Trump's tax plan could generate for the U.S. government.")

Prior to the White House meeting, a Senate-first approach to the reconciliation process had been under development as a fallback option, but there is a recognition that it's easier for the Senate to take up whatever bill the House can pass rather than vice versa. Senate Budget Chairman Lindsey Graham (R-SC) said he may mark up an FY2025 budget resolution next week amid House inaction. Politico reported that the Senate budget, reflecting a two-bill strategy, would provide for a reconciliation bill split between border security and defense spending — about $150 billion for each — and as-yet-unidentified revenue offsets.

"Asked why he was attempting to bypass the work his Republican colleagues in the House have been working on, Graham said it was because he didn't believe they had a proposal that would be able to pass," ABC News reported. News of the Senate's action did not go over well with House Ways & Means Committee Chairman Jason Smith (R-MO), who said of Senator Graham, "It's kind of unfortunate that he's going to go through a practice that doesn't accomplish anything." Semafor reported that Senate Majority Leader John Thune (R-SD) said the Senate marking up a budget preserves "optionality" in the conflict with the House.

The primary dispute among House Republican members has been the amount of spending cuts that should accompany a tax bill, and the related matters of the baseline and duration of tax cut extensions, which will play a big role in the cost of the package. Speaker Mike Johnson (R-LA) and House Republican committee chairs proposed between $500 billion to $700 billion in spending cuts for an all-in-one reconciliation package, but conservative members want $2 trillion-$5 trillion in spending cuts. Majority Leader Scalise said this week that committees are being directed to propose deeper potential spending cuts under their jurisdictions, after a plan unveiled last week to cut $315 billion in spending over 10 years was apparently seen as inadequate.

Revenue concerns threatened to hobble the goal of some members to make the expiring TCJA provisions permanent. The Wall Street Journal February 5 reported "House Republicans, struggling with their narrow majority and lawmakers' demands for spending cuts, are considering an extension of President Trump's expiring tax cuts that would last for as little as five years." That approach would "limit the total revenue decline" but is less than the permanency some wanted, and less than the duration provided in the TCJA. "There is almost no way it's going to be permanent, so I guess the question is how long do you just make it last," said Rep. Andy Harris (R., Md.), chairman of the conservative House Freedom Caucus, said in the report. His group supports the two-bill approach backed by Senate Republicans and called for spending cuts.

"We have had conversations, including last night, about, do we do five-year tax policy? Do we do five-year policy for some, permanent/ten-year for others? I think we're working on that. Those are the levers to pull to try to figure out the math," Rep. Chip Roy (R-TX), Policy Chair of the Freedom Caucus, said.

Tax — On February 6, Reps. Randy Feenstra (R-IA) and Joe Morelle (D-NY) introduced the Growing and Preserving Innovation in America Act, which would make permanent the reduced Foreign-Derived Intangible Income (FDII) tax rate which, absent congressional action, will increase from 13.125% to 16.4% in 2026.

Tariffs — The 25% tariffs on Canadian imports (10% tariffs for energy resources) and 25% tariffs on Mexican imports that were to be effective February 4 under Executive Orders (EOs) signed by President Trump February 1, then were pushed off for 30 days amid continued negotiations, were of course a topic of discussion during the February 6 Senate Finance Committee hearing with President Trump's nominee to be United States Trade Representative (USTR), Jamieson Greer.

Senator Catherine Cortez Masto (D-NV) said she has heard from constituents about the practical impacts of the tariffs, including businesses with Canadian customers cancelling projects due to uncertainty. She said it is important that businesses and workers don't suffer collateral damages in this type of trade dispute. Senator Maggie Hassan (D-NH) said about 80% of New England's fuel supply comes from Canada, and home heating is now being subjected to a surcharge in some instances. The tariff actions are also driving up prices in New Hampshire given that Canada is the state's largest trading partner, and she asked Greer how to address increased prices. Greer said if confirmed, he would use his post to examine economic effects of any measures taken.

Senator Todd Young (R-IN) asked Greer how he would work to prevent discriminatory treatment of US companies globally and ensure they're competing on a level playing field when it comes to digital trade. Greer said, in the first Trump administration, "We took action under Section 301, to combat discriminatory Digital Services Taxes. I know there are many jurisdictions in the world right now that are doing this and other measures to try to control the business models of our digital champions … And I think that we need to explore using Section 301 and other measures to make sure that we're able to stay competitive globally."

Bill intros — Bill introductions of interest from February 5 include:

• S. 429, to enhance the economic and national security of the United States by securing a reliable supply of critical minerals and rare earth elements through trade agreements and strategic partnerships, Senator Young
• H.R. 1003, to modify the carbon oxide sequestration credit to ensure parity for different uses and utilizations of qualified carbon oxide, Rep. Kevin Hern (R-OK)

The Senate last night approved Russell Vought's nomination to be OMB Director by a party-line 53-47 vote.

Today, February 7 at 12 p.m. is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments."