02 March 2025 This Week in Tax Policy for March 3 On Thursday, March 6, the Senate Finance Committee is holding a hearing to consider the nomination of Michael Faulkender to be Deputy Secretary of the Treasury. President Trump is scheduled to address Congress on Tuesday, March 4 (an address to Congress in the first year of a presidency is not designated a State of the Union address). House budget: The House this week took a big step to advance Republican plans to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 in a budget reconciliation bill that can pass Congress with GOP-only votes, adopting a FY2025 budget resolution 217-215 late February 25. Passage by the House of the budget resolution moves the budget resolution process to the next steps, a negotiation with Senate Republicans and the President to produce a final budget resolution that both chambers must agree to. Considerable differences exist between House and Senate Republicans so this process could take some time. The resolution requires at least $2 trillion in deficit reduction from other committees to avail the Ways & Means Committee a full $4.5 trillion net deficit increase for tax cuts. A minimum of $1.5 trillion in mandatory spending cuts is required from the other committees, including $880 billion from the Energy & Commerce Committee that has jurisdiction over Medicaid. Notably, the total tax cut amount is reduced under the Resolution by the amount savings fall short of $2 trillion. The Senate previously passed its own FY2025 budget that only contemplates increased spending for the border in a first budget reconciliation bill, meaning tax would be taken up in a separate bill later in the year. This approach has been overtaken by the House all-in-one plan but could still serve as a fallback. The nature of the Medicaid cuts called for under the budget has been the focus of concerns among some House Republicans and at least one GOP Senator, Josh Hawley (R-MO). Following President Trump's comments that programs like Medicaid won't be touched aside from combating fraud, House Republicans said they are united on the issues of preventing illegal immigrants from receiving benefits, instituting work requirements, and addressing waste, fraud, and abuse. There are also tax issues that need to be decided between the chambers, and both the House and Senate will need to pass the same budget to unlock the reconciliation process. Top Republican Senators, including Majority Leader John Thune (R-SD) and Finance Committee Chairman Mike Crapo (R-ID), want to make the expiring TCJA provisions permanent by using a current policy baseline, rather than the current law baseline under the House resolution, and have expressed concerns that the House resolution doesn't provide sufficient space to achieve that. Politico February 24 reported Ways & Means Committee Chairman Jason Smith (R-MO) as saying the committee's instruction for a $4.5 trillion net deficit increase for tax cuts will likely allow for only an eight to nine-year extension of TCJA provisions if the Committee also includes some of President Trump's campaign tax proposals, which the President earlier enumerated in a list during a White House meeting. "No tax on tips was number one listed. And then no tax on overtime, tax relief for seniors. Those were three of the eight that was listed," Smith said. Chairman Smith said of the current policy baseline advocated in the Senate, which wouldn't count the cost of tax cut extensions, "I've advocated for the policy baseline on this side of the building, but it just didn't make the cut. So, if the Senate wants to make the cut, I'd be very supportive of it." He subsequently expressed concern about whether it would be accepted by the Senate parliamentarian. House Speaker Mike Johnson (R-LA) said February 26 that he also hopes a final budget resolution will include use of a current policy baseline that doesn't count the cost of tax cut extensions. "The Senate wants it. I think the House wants it as well," he said. To Smith's point that us of a current policy baseline might not be blessed by the Senate parliamentarian, Leader Thune said that conversations with the parliamentarian were already underway. "We believe that the chairman of the Budget Committee makes that call, but obviously it's something that we will be discussing and having conversations with the parliamentarian," he said. There has long been the expectation that, under a current policy baseline, each of the provisions would need to be modified in some respect to meet the budget reconciliation requirement that proposals have some revenue impact. A current policy baseline hasn't been used in reconciliation in recent memory, and Senator Crapo and others mostly point to the practical example of using the approach for the extension of the Bush tax cuts at the end of 2012, which occurred in a bipartisan bill that was not subject to the budget reconciliation process. Beyond the Senate rules, deficit-conscious members will likely insist that tax cut extensions be offset. According to the Congressional Budget Office (CBO), a 10-year extension of expiring TCJA tax provisions would cost $4 trillion/10 years, not including interest costs. Bonus depreciation is included in that figure but addressing TCJA pre-cliffs on five-year R&D amortization and the calculation for interest expense deductions (EBITDA to EBIT) under IRC Section 163(j) could be $200 billion more, leaving little room for other tax cuts. While the estimates have been expected to be updated, a February 25 Politico story said: "Republicans are sticking with nearly year-old numbers, in part because they're the ones they've been using all along. Lawmakers for months have been considering scads of different tax policy options behind closed doors, and a whole new slate of estimates could scramble their internal deliberations. But it's possible that if the price tag was updated, it would go significantly higher … " President Trump has expressed a preference for one big bill as the House favors but has overall remained ambivalent about the mechanics of the process. He said yesterday, "So, the House has a bill, and the Senate has a bill, and I'm looking at them both and I'll make decisions … I know the Senate's doing very well and the House is doing very well, but each one of them has things that I like. So, we'll see if we can come together." Bloomberg reported that Treasury Secretary Scott Bessent and congressional leaders — House Speaker Johnson, Senate Majority Leader Thune, and tax committee chairmen Smith and Crapo- are to meet weekly to lay the groundwork for a tax package headlined by TCJA extensions. Global tax: Benjamin Angel, head of direct taxation at the European Commission, spoke at the Global IFA Travelling Lectureship Programme 2025 in Brussels on February 27th. Tax Notes reported today that Angel said "there is no reason to panic" regarding Trump administration efforts to change some aspects of the OECD Pillar 2 global minimum tax rules, including threats to increase taxes on certain inbound companies if negotiations to change those rules are not successful. Angel suggested that concerns raised by the US on how to consider GILTI in the context of the Pillar 2 rules and application of the UTPR to the earnings of US companies are "fairly technical" and "there are ways to fix it." At the same event, Angie Clocheret of Belgium's FPS Finance suggested that the U.S. may likely ask for GILTI to be given qualified status which would allow GILTI to be treated as equivalent to Pillar 2's Income Inclusion Rule. She also suggested that the US may likely request that the UTPR transitional safe harbor be made permanent. Angel also commented on several topics still under discussion at the OECD including linking anti-circumvention measures to tax credits, a permanent safe Harbor, and a dispute resolution mechanism.
The disapproval, under the Congressional Review Act process, addresses December 2024 final regulations (TD 10021) for digital asset brokers under IRC Section 6045 that require certain decentralized finance (DeFi) industry participants to file and provide information returns as brokers. The 2021 Infrastructure Investment and Jobs Act clarified the definition of broker for transfers of digital assets, expanded the categories of assets for which basis reporting is required to include all digital assets, and provided a definition for the term digital assets. The December 2024 Regulations generally apply to sales of digital assets occurring on or after January 1, 2027, and under the resolution the regulations would immediately cease to have effect and be treated as though they had never taken effect and could never be reissued in any substantially similar form.
Document ID: 2025-0585 | |||
