This Week (April 7 - 11)

Congress: The House and Senate are in session.

OECD: The Inclusive Framework, consisting of more than 140 jurisdictions participating in the OECD's base erosion and profit shifting project, meets in Cape Town, South Africa for plenary sessions to discuss the latest developments relating, among other things, to the future of Pillars 1 and 2. At those meetings, US delegates are expected to unveil at least at a high level the Trump administration's plan reflecting the Executive Order and memorandum relating to Pillar 2 that were signed on January 20. President Trump signed an Executive Order and memorandum that describes the OECD "Global Tax Deal" as allowing extraterritorial jurisdiction over US income and limiting the ability of the US to enact tax policies that serve the interests of US businesses and workers. The Order directed the US Treasury Secretary and the US Ambassador to the OECD to notify the OECD that any commitments made by the prior administration regarding the Global Tax Deal have no force and effect in the US absent an act by the US Congress adopting the relevant provisions.

It is expected that the US delegates will present the delegates with proposals that limit the reach of Pillar 2 for US MNEs, and that these discussions will kick off OECD negotiations making modifications to the Pillar 2 rules.

Treasury: The Senate Finance Committee has set a hearing to consider the nominations of William Kimmitt to be Under Secretary of Commerce for International Trade and Ken Kies to be an Assistant Secretary of the Treasury (Tax Policy) for Thursday, April 10 at 10 a.m.

Trade: The Senate Finance Committee has set a hearing on The President's 2025 Trade Policy Agenda for Tuesday, April 8 at 10 a.m., with testimony from United States Trade Representative Jamieson Greer. Politico said, "The annual hearing carries additional significance this year because of Trump's determination to reverse decades of U.S. trade liberalization in favor of a new tariff-heavy tax regime aimed at boosting manufacturing and raising government revenue."

The House Ways & Means Committee holds its Trade Policy Agenda hearing with USTR Greer on Wednesday, April 9 at 10 a.m.

Last Week (March 31 - April 4)

Budget reconciliation: The Senate early April 5 adopted a retooled version of the FY2025 budget resolution that would unlock the reconciliation process for a tax bill, set a current policy baseline that wouldn't count the $4 trillion cost of Tax Cuts & Jobs Act (TCJA) extensions, and provide the Finance Committee an instruction for up to a $1.5 trillion deficit increase for additional tax cuts. The vote was 51-48 and followed the vote-a-rama process of multiple amendment votes that caps consideration of the budget resolution in the Senate. Democrats offered amendments challenging the tax cut extensions, the $2 trillion in mandatory spending cuts that the House plan provides for, President Trump's tariffs, and other issues.

Democratic tax amendments were rejected, including:

• Senator Mark Kelly (D-AZ) #1737, to establish a deficit-neutral reserve fund relating to legislation that does not increase tax breaks for the wealthy, not agreed to by voice vote
• Senator Chris Murphy (D-CT) #1977, to establish a deficit-neutral reserve fund relating to legislation that does not increase tax breaks for the wealthy, not agreed to by voice vote
• Senator Angus King (I-ME) #1773, no tax cuts for anyone earning more than $1 billion per year, not agreed to by voice vote
• Senator Elizabeth Warren (D-MA) #1647, to establish a deficit-neutral reserve fund relating to legislation that does not increase tax breaks for wealthy corporations, not agreed to by voice vote

The resolution retains the House budget's reconciliation instructions to House committees — including to Ways & Means for a $4.5 trillion net deficit increase to cover TCJA extensions and other tax policy priorities that is reduced if total spending cuts other committees are instructed to make falls short of $2 trillion, and to Energy & Commerce for at least $880 billion in spending cuts — but only mandates nominal savings from Senate committees. The Senate-passed resolution providing different instructions to the Senate committees than it does to the House committees postpones difficult intraparty decisions. Some House Republicans only want to vote in favor of tax cut extensions if they are accompanied by significant spending cuts, while other members, including some senators, don't want to pursue deep spending cuts, especially if the Energy & Commerce instruction requires significant Medicaid changes.

Republican senators acknowledged that postponing a confrontation over House-Senate differences doesn't resolve them. "It's not gonna go away just because we will it to go away," Senate Lisa Murkowski (R-AK) said in Punchbowl News, regarding House-Senate tensions over Medicaid cuts. "We're just gonna be dealing with it later on." Senate Republicans also sidestepped plans to get guidance from the parliamentarian over whether a current policy baseline will pass muster under reconciliation rules. Politico said there were efforts by leadership Thursday "to quell anxieties among the lawmakers that letting Senate Budget Chair Lindsey Graham decide the baseline could come back to haunt them if it later ends up running aground of budget rules in the final bill."

The Senate plan drew criticism from House Budget Committee Chairman Budget Jodey Arrington (R-TX) as fiscally irresponsible — he said not making spending cuts enforceable at the budget resolution level means they probably won't happen — and unlikely to be supported by some House Republicans. "I can't imagine any world where deficit hawks in the House would ever walk away from the reconciliation process with the deficit going up at the rate it would with that framework," he said in a Politico report. "I would have tremendous concern." There are questions about whether the Senate resolution can be approved by the House, at least prior to the next congressional recess scheduled to begin April 11. Both chambers must pass the same budget to unlock the reconciliation process.

The report also included concerns from Ways & Means members Reps. Greg Steube (R-FL) and Lloyd Smucker (R-PA) about the increased tax cut allowance from $4.5 trillion under the House resolution to an expected $5.3 trillion under the Senate version. Senate Finance Committee Chairman Mike Crapo (R-ID) has suggested TCJA extensions would cost $3.8 trillion, the cost of which would be disregarded under the current policy baseline, and extension of already expired TCJA provisions — 100% expensing (which is in the midst of a phasedown in 20% increments), 5-year R&D amortization, and the calculation for interest expense deductions (EBITDA to EBIT) — would be $500 billion more. The Chairman has suggested a tax bill could include changes to the Child Tax Credit and the President's tax proposals. Tax increases are also possible.

"That $1.5 trillion is a net number, so the Finance Committee could add more tax cuts if it reduces spending on Medicaid or raises taxes elsewhere," a story in the April 3 Wall Street Journal said. "For example, Republicans have been planning to curtail or repeal clean-energy tax breaks that Democrats created in 2022, but they haven't decided yet how far they're willing to go or how much money that would generate."

Potential tax increases to cover other tax cuts are among the issues still to be resolved in the development of the reconciliation bill, in addition to relief from the TCJA $10,000 state and local tax (SALT) deduction cap that GOP members from high-tax states are seeking. The Daily Tax Report (DTR) said April 1, "Republicans are in the process of drafting a tax bill behind closed doors that includes an increase of the state and local tax deduction to as high as $25,000 for an individual … "

An April 1 WSJ editorial said of rumblings in the press that a tax bill could raise corporate and individual income tax rates: "That rate hikes are now possible shows how confused today's GOP is about economics. It's bizarre enough that the Trump Administration is selling tariffs as tax cuts. It also makes no sense that the party is putting tariffs first while delaying the tax bill for months. But if rate hikes are in the bill, it will also mean the party has lost the plot about the pro-growth rationale for tax reform." Bloomberg reported April 3, "Republicans are weighing the creation of a new bracket for those earning $1 million or more to offset some of the costs of their tax bill, a stark departure from decades of GOP opposition to tax increases … Deliberations have included a new top rate that would be around 39% to 40%."

International tax: During a March 31 Fox Business interview, Rep. Ron Estes (R-KS) was asked about the Unfair Tax Prevention Act (H.R. 2423), his bill cosponsored by every Ways and Means Republican to ensure that if a country moves forward with an Undertaxed Profits Rule (UTPR) under Pillar 2 of the OECD-led tax agreement, the United States will impose a reciprocal tax increase measure on companies headquartered in countries that have discriminatory taxes like the UTPR. The bill strengthens anti-avoidance rules in the base erosion and anti-abuse tax (BEAT), revokes the ability of newly identified foreign-owned extraterritorial tax regime (FETR) entities to disregard certain service payments and payments subject to withholding taxes, and treats 50% of cost of goods sold as a base erosion tax benefit. Estes said the Biden Treasury allowed other nations "to raise taxes on American businesses so that they can get more taxes in their country. And, basically, what they were doing was looking at and saying that each big business — they call it big business, but really it was targeted towards American businesses — they were going to raise taxes on them and not take into account the U.S. tax code, and we have the responsibility for U.S. tax code in the United States." He said "the UTPR tax that was part of their pillar two version, is completely unworkable. The administrative burdens are so huge on U.S. businesses, and it will raise taxes on them and actually reduce the taxes going into the U.S. Treasury. So, we want to make sure that if any country tries to unfairly tax U.S. businesses, that we'd also tax them."

PGP: IRS Notice 2025-19 invites the public to submit recommendations for items to be included on the 2025 — 2026 Priority Guidance Plan.