This week (April 14-18)

Congress: The House and Senate are out of session for two weeks.

This Week in Tax Policy won't be published while Congress is away.

Last week (April 7-11)

Budget reconciliation: The House and Senate have now passed the same FY2025 budget resolution, clearing the path for using the reconciliation process for Republicans to construct and pass a bill to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025, provide funding for border security, and make cuts in mandatory spending programs, with only GOP votes and without negotiating with Democrats. As Congress heads into a two-week recess, agreement between the chambers on the budget resolution marks a major step toward a tax bill, which could be drafted in May. Several House Republicans were opposed to the Senate-passed FY2025 budget resolution until Thursday morning, when Senate Majority Leader John Thune (R-SD) offered public assurances that GOP Senators are on board with the spending cut targets House Republicans set when they passed their version of a budget reconciliation bill February 25. "We are aligned with the House in terms of what their budget resolution outlined in terms of savings. The Speaker's talked about $1.5 trillion. We have a lot of United States senators who believe that is a minimum," Thune said during a joint news conference with House Speaker Mike Johnson (R-LA). "And we're certainly going to do everything we can to be as aggressive as possible to see that we are serious about the matter not only of, you know, making our federal government more fiscally sustainable but also deficit reduction, which is critical to a lot of our members in the Senate." The House passed the resolution 216-214 shortly thereafter, with GOP Reps. Thomas Massie (R-KY) and Victoria Spartz (R-IN) opposed.

Most of the dozen or so previously opposed members had objected to the Senate-passed resolution because it doesn't require significant spending cuts. It leaves the House reconciliation instructions unchanged — for $2 trillion in deficit reduction as a condition for a full $4.5 trillion deficit increase for tax cuts, including to Energy & Commerce for at least $880 billion in spending cuts — but mandates only nominal savings (of at least $4 billion) from Senate committees. Prior to Leader Thune's comments, some House Republicans doubted that significant deficit reduction would be pursued by the Senate. President Trump also pledged support for spending cuts.

As numerous press stories have stated, what lies ahead are decisions about how to achieve the desired level of spending cuts and any number of issues regarding the tax provisions, including what additional tax cut proposals beyond extending or making permanent the 2017 tax cuts to include, how to pay for them, and craft some relief from the $10,000 state and local tax (SALT) deduction cap.

After the recess, Republicans will "begin the even-heavier lift of writing — and then whipping support for — the behemoth package of tax cuts, military spending, energy policy, border security investments and more," Politico reported. "That process will pit fiscal hawks against moderate Republicans as GOP leaders try to square their conflicting demands to protect safety-net programs like Medicaid while cutting trillions of dollars from that slice of the federal budget."

Semafor reported, "there are huge disagreements to sort through on taxes, spending cuts, and Medicaid in order to finalize President Donald Trump's agenda — and there's still a lot of heartburn about Trump's remaining tariffs," and some are still "second-guessing" the reconciliation strategy. "Now you've got to actually write these bills," Sen. Lindsey Graham (R-SC) said. "If this gets to be a long, drawn out and never-ending process, then everything we worried about with the 'big beautiful bill' comes true."

Punchbowl News: "Thune didn't commit to $1.5 trillion in spending cuts, no matter what Johnson or the [House Freedom Caucus] assert … So don't be shocked if Senate Republicans don't reach that target. What's next? After months of preliminary jockeying, now comes the really hard part — drafting a bill. Johnson's challenges in juggling concerns from the center and right of his conference over spending cuts this morning underscored just how difficult it's going to be. Then throw in the tax portion of the package and you have an enormously complex Rubik's Cube to solve."

The spending cuts and tax cuts puzzle will be difficult to solve, and some members are warning that the goal of some in Congress to include President Trump's tax proposals — which include no tax on tips, overtime, and Social Security benefits, plus cutting taxes on "domestic production and all manufacturing" — may be an overreach. During a Senate Finance Committee hearing on nominations, Senator Thom Tillis (R-NC) questioned the wisdom of trying to find a half-trillion dollars to fund the additional tax cut proposals, making extending the TCJA much more complicated. "What is the case other than fulfilling a political promise for including all that non-pro-growth tax policy in this first tranche?" he asked.

Also this week, Rep. Andy Harris (R-MD), the Freedom Caucus Chair, made news for telling constituents on Maryland's Eastern Shore and northeast region during a telephone town hall meeting that he would support a millionaires' tax bracket of 40% to pay for President Trump's proposal to exempt tip income from tax. This follows reporting last week that such a top rate was under discussion. Additionally, Bloomberg reported Deputy Treasury Secretary Michael Faulkender as warning against a corporate tax rate increase at an event hosted by the Managed Funds Association (MFA).

Energy tax: Some Republicans want to roll back Inflation Reduction Act (IRA) energy tax credits to pay for other priorities, which has gotten some pushback in the House and, now, the Senate. Senators Tillis, Lisa Murkowski (R-AK), John Curtis (R-UT), and Jerry Moran (R-KS) wrote to leader Thune April 9 calling for maintaining a stable and predictable tax framework in the interest of promoting domestic energy development. "The United States produces some of the cleanest and most efficient energy in the world, and an all-of-the-above approach — including support for traditional and renewable energy sources — has long been a hallmark of our energy strategy," the Senators wrote. "To that end, many American companies have made substantial investments in domestic energy production and infrastructure based on the current energy tax framework. A wholesale repeal, or the termination of certain individual credits, would create uncertainty, jeopardizing capital allocation, long-term project planning, and job creation in the energy sector and across our broader economy."

Treasury: The April 10 hearing to consider the nomination of Ken Kies to be Assistant Treasury Secretary for Tax Policy didn't wade too far in to the Trump administration's views on tax policy, which Kies said he couldn't necessarily speak to as a nominee. Chairman Mike Crapo (R-ID) asked about permanent extensions of TCJA provisions, and Kies spoke about the importance of the standard deduction and Child Tax Credit, and later about the 20% passthrough deduction. Chairman Crapo further asked about a current policy baseline. Kies said the current policy baseline is a path to achieving permanency, which is an important outcome, and consistent with how CBO has scored spending decisions. He said the current policy baseline highlights the effect that if a tax policy expires, it has the effect of being a tax increase.

Ranking Member Ron Wyden (D-OR) asked about the tax issue of roundtripping (or US MNCs booking US profits through subsidiaries in low-tax jurisdictions) and asked generally about pursuing tax policies that would make it more attractive to do business in the United States. Kies said the reduction in the corporate rate made the US an attractive place to do business and there haven't been any significant inversions since the 2017 enactment. Other members raised international tax issues. As she has previously, Senator Marsha Blackburn (R-TN) spoke out against Pillar Two of the OECD-led global tax agreement and said US companies pay an outsize portion of the global minimum tax. "This is something the prior Administration got us into, it is something we need this Administration to get us out of," she said. Kies noted the international tax executive order signed by the President. Senator Tillis asked about the foreign-derived intangible income (FDII) deduction and whether it is worth maintaining. Kies said that provision and the lowering of the corporate rate were designed to encourage companies to stay in the US and bring their intellectual property (IP) to the US, and to stop inversions.

Additionally, Secretary Scott Bessent officially announced appointments for senior Treasury positions:

• Rebecca Oakes Burch, formerly at WCEY, is Deputy Assistant Secretary for International Tax Affairs
• Kevin Salinger will serve as Deputy Assistant Secretary for Tax Policy
• Derek Theurer, who currently serves as Counselor to the Secretary of the Treasury, is President Trump's nominee to serve as Deputy Under Secretary of the Treasury for Legislative Affairs and upon confirmation will be designated as Assistant Secretary for Legislative Affairs

OECD: Representatives from the more than 135 jurisdictions and countries that make up the Inclusive Framework, which generally support the OECD's base erosion and profit shifting initiatives, met in Cape Town, South Africa. At the end of meetings, which included US Treasury representatives, the Inclusive Framework issued a statement saying the meetings were constructive and that the discussions covered BEPS implementation, Pillars 1 and 2, and the future OECD tax agenda. "Members recognised the critical importance of securing certainty and stability in the international tax system, in particular with respect to the implementation of Pillar Two and the ongoing Pillar One negotiations, agreeing to continue discussions in furtherance of this objective,' the statement said. In addition, the Inclusive Framework will explore new areas of common interest including global mobility and the interaction between "tax, inequality, and growth." The statement anticipates a report on the OECD's progress on tax issues to be shared with the G20 later this year.

Among other things, US Treasury representatives shared their views on how the President's January 20 Executive Order and memorandum on OECD Pillar 2 should be implemented, with a focus on excluding US MNEs from Pillar 2 while allowing Pillar 2 to co-exist with US international tax rules, including GILTI, Subpart F and the full inclusion regime for tax foreign branches of US MNEs.