With the same FY2025 budget resolution passed by the Senate and House prior to the two-week recess, House committees this week are drafting parts of a reconciliation bill to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025, provide border security funding, and cut mandatory spending:

• The House Education & the Workforce, which oversees programs for student loans, child nutrition, and pensions, has scheduled an April 29 markup on legislation to meet its reconciliation instructions, which require $330 billion in deficit reduction.
• Also on April 29, the Armed Services Committee will mark up legislation to invest $150 billion in defense priorities, and the Homeland Security Committee may mark up as well.
• The Financial Services Committee, with a floor of $1 billion in deficit reduction, has set a markup for April 30 and has proposed rollbacks to the Public Company Accounting Oversight Board (PCAOB).
• The Oversight Committee, charged with achieving deficit reduction of at least $50 billion dollars and a focus on the Federal Employees' Retirement System (FERS), is also set to mark up on April 30.
• The Transportation & Infrastructure Committee, required to produce $10 billion in deficit reduction, has planned an April 30 markup and targets may include electric vehicle fees.
• The Judiciary Committee, one of the committees charged with providing border funding, may also announce a markup for this week.

A Ways & Means Committee markup hasn't been announced. Punchbowl News reported April 17 that Ways & Means consideration of a bill is probably weeks away, the Energy & Commerce Committee is eyeing May 7, and that House Republicans plan to have their reconciliation package on the floor the week of May 19. (Energy & Commerce has an $880 billion deficit reduction requirement and is expected to target Medicaid fraud and abuse, as well as issues like spectrum sales.) Politico reported April 24 that Ways & Means was eyeing May 12-13 for a markup, but later cited Rep. Darin LaHood (R-IL) as saying the Committee now aims to approve their portion of the plan "by early June," pushing out the goal of a House vote before Memorial Day. The reconciliation language written by 11 House committees — four with instructions to increase the deficit, seven to reduce the deficit — will be assembled by the House Budget Committee prior to a floor vote.

Regardless of the overall timeline, leaders are announcing that the post-budget bill-writing phase has begun. "What you will see over the next four weeks is the pieces, the various components of that big bill, rolling out of these committees. You will have committee markups scheduled in all those 11 committees successively over the next four weeks. And you're going to see this thing come together," House Speaker Mike Johnson (R-LA) said on Fox News April 23. "We are pushing it very aggressively on a schedule … to get it done by Memorial Day."

A reconciliation bill will require only GOP votes and no negotiations with Democrats, but Republicans will have to negotiate with each other. The budget resolution was able to clear both chambers by taking the historically uncommon approach of setting different reconciliation requirements for House and Senate committees that reflect the differing priorities in each chamber, rather than settling on a unified approach. This had the effect of postponing decisions on the level of spending cuts that will be included, which must be decided in this bill-writing phase along with any number of details about the tax provisions.

The House portion of the resolution requires $2 trillion in deficit reduction as a condition for a full $4.5 trillion deficit increase for tax cuts under the Ways & Means instruction, which could be reduced to as low as $4 trillion if only the $1.5 trillion floor for deficit reduction isn't exceeded. The Senate portion sets a current policy baseline that won't count the $4 trillion cost of TCJA extensions and provides the Finance Committee an instruction for up to a $1.5 trillion deficit increase for additional tax cuts. Chairman Mike Crapo (R-ID) has said a tax bill may include Child Tax Credit changes and Trump tax proposals, which include no tax on tips, overtime, and Social Security benefits, cutting taxes on "domestic production and all manufacturing" and an extension of 100% expensing retroactive to January 20, 2025. (It's been reported that a four-year duration of Trump tax proposals is being considered.) Treasury Secretary Scott Bessent has also proposed accelerated depreciation breaks for the construction of factories.

On Fox Business News yesterday, National Economic Council Director Kevin Hassett said, "We've got the next Big Six meeting — the White House negotiates with the Hill — next week where Secretary Bessent and I are going to be presenting a list of the President's top priorities to make sure that they make it in the bill." The Big Six refers to Republican leaders in each chamber, Speaker Johnson and Senate Majority Leader John Thune (R-SD); tax committee chairmen Senator Crapo and Ways & Means Chairman Jason Smith (R-MO); and Secretary Bessent and Director Hassett.

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 relief from the $10,000 state and local tax (SALT) deduction cap. The current House ratio is 220-213, meaning Republican leaders can only lose the votes of three of their members to pass any bill. GOP Reps. Thomas Massie (R-KY) and Victoria Spartz (R-IN) opposed the budget resolution, putting their support for any reconciliation bill in doubt.

The Senate has adopted a current policy baseline — which hasn't typically been employed in reconciliation — without guidance from the parliamentarian that it will pass muster under the reconciliation rules. The approach offers the best opportunity to make TCJA extensions permanent because of reconciliation rules including a prohibition on increasing deficits in years beyond the budget window. The Senate's action seemed to set the issue aside for now, but some House Republicans are expected to continue raising objections to the approach, alleging that it glosses over the deficit impact of tax cut extensions.

Morning Tax reported April 14 that the budget baseline is "probably the biggest outstanding issue facing Republicans on tax policy." The report said that, prior to the recess, House Budget Chair Jodey Arrington (R-TX) said a large fiscal package that used a current policy baseline would be a "non-starter" for "a good number" of House Republicans and couldn't pass the House. "It's well beyond our vote margin," he said. "And it's probably, you know, in the double digits for sure," referring to the number of members opposed.

"The one-bill strategy bets that Republicans lock arms with Trump and plunge ahead, unwilling to defy the president on an up-or-down vote on his agenda. Packaging everything together could give each party faction victories to highlight, even if they must accept pieces they detest," said a story in the April 14 Wall Street Journal. "The next few months will bring a blur of policies, numbers and congressional procedures that will make Republicans confront internal fractures over tax rates, incentives, Medicaid and budget deficits. The unity they have displayed so far will be tested, particularly in the House … "

Individual taxes — There has been increasing reporting on discussions among Republicans about increasing the top tax rate for those with high incomes. During an April 15 Town Hall, Senate Finance Committee member Chuck Grassley (R-IA) said, "it may surprise you that this list of possibilities we have on our working sheet that the members of the Finance Committee — and I am a member of that committee — are going to discuss is raising from 37% to 39.6% on the group of people you are talking about. That does not mean it is going to happen."

While tax increases have traditionally been the bane of Republicans, some have advocated for an increase on those with high incomes as a shield against political attacks from Democrats. President Trump made his reservations known April 23, saying of a millionaire's tax: "I think it would be very disruptive, because a lot of the millionaires would leave the country. You know, the old days, they left states, they go from one state to the other. Now, with transportation so quick and so easy, they leave countries. You'll lose a lot of money if you do that. That would — and other countries that have done it have lost a lot of people. They lose their wealthy people that would be bad, because the wealthy people pay the tax, OK?"

In an April 25 Time Magazine interview, the President said: "I certainly don't mind having a tax increase, and the only reason I wouldn't support it is because I saw [President George H.W. Bush] … where he said 'Read my lips' and he lost an election … I would be honored to pay more, but I don't want to be in a position where we lose an election … "

"I don't think we're raising taxes on anybody," Speaker Johnson said in the Fox interview.

Debt limit — Punchbowl News April 11 reported House Budget Chair Arrington as saying he believes House Republicans could agree to a $5 trillion debt limit increase in their final reconciliation bill. The report said President Trump has been pressing GOP lawmakers to take the debt limit off his plate. The so-called X date when Treasury extraordinary measures are exhausted has been estimated by the Congressional Budget Office (CBO) to fall in August or September, and Treasury is expected to announce its deadline this week.

Treasury - The Senate Finance Committee is planning to vote on the nomination of Ken Kies to be Assistant Treasury Secretary for Tax Policy on Tuesday, April 29 at 10 a.m.

Global tax — The Trump Treasury Department is telegraphing that the Administration intends to remain engaged in Pillar Two negotiations and to argue that, instead of requiring changes to bring GILTI into compliance with the Model Rules, the US tax system, including the US Global Intangible Low-Taxed Income (GILTI) regime, Subpart F and current taxation of foreign branches of US MNEs, should operate as a parallel system alongside Pillar Two and should not be integrated into Pillar Two. Counselor to the Secretary of the Treasury Derek Theurer told attendees of the Pacific Rim Tax Conference April 18 that the OECD's minimum tax under BEPS Pillar Two must coexist with the US GILTI regime. "GILTI's been in place for eight years. It was in place before Pillar Two, it's in place today, and will continue to be in place," Theurer said, adding that it would be challenging for companies to be subject to multiple regimes.

President Trump issued an Executive Order upon taking office on January 20 that stated that the OECD Global Tax Deal has no force and effect in the United States and required the Treasury Secretary to develop options for responding to foreign countries' extraterritorial tax rules. Multiple observers have said the Treasury "parallel system" argument would likely require ensuring the UTPR doesn't apply to US income and the foreign earnings of US companies and permitting pushdown of US taxes like GILTI and Subpart F when a US MNE calculates any top-up tax under a country's qualified domestic minimum top-up tax, among other changes.

According to the tax press, at its April 29 meeting the EU may consider options for Pillar Two changes to address the view that has been presented to them by the US, and that could include the application of the UTPR and the GLOBE rules' treatment of tax credits, including the nonrefundable US R&D credit that isn't exempted from determining a company's effective tax rate. A note circulated by Poland, which now holds the rotating presidency of the EU, contemplated an extension of the Transitional UTPR Safe Harbor — under which the UTPR Top-up Tax Amount is deemed to be zero if the UPE Jurisdiction has a corporate income tax that applies at a rate of at least 20%, through 2026 — or a new alternative.

Trade — President Trump April 17 unveiled trade investigations into pharmaceutical and semiconductor imports, relying on executive authority under Sec. 232 which allows the President to impose import restrictions on the basis of national security following an investigation by the Department of Commerce.

April 30 is the deadline for the Office of Management and Budget assessment of any distorting impact by foreign governments under the January 20 America First Trade Policy executive order's "economic and security review of the United States' industrial and manufacturing base to assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the United States."

On This Week yesterday, Treasury Secretary Bessent announced that the Administration has a plan to address reciprocal tariffs, saying the focus is on "17 important trading partners, and we have a process in place, over the next 90 days, to negotiate with them." He compared President Trump's trade negotiation tactics to "strategic uncertainty" in game theory and said high tariffs are "the stick" — and the carrot of more favorable trade policy is available if other nations remove their tariffs, non-tariff trade barriers, and currency manipulation, and stop subsidizing labor and capital.

The Saturday WSJ reported: "Officials plan to use a framework prepared by the U.S. Trade Representative's office that lays out broad categories for negotiation: tariffs and quotas; non-tariff barriers to trade, such as regulations on U.S. goods; digital trade; rules of origin for products; and economic security and other commercial issues … The initial plan is for six nations to come in for talks in one week, six nations in a second week, and six nations for a third week of talks — an 18-nation cycle that would then repeat until the administration's self-imposed July 8 deadline. At that point, reciprocal tariffs would hit nations that can't reach a deal, unless Trump further extends his 90 day pause."

President Trump said on social media April 27 that tariffs could lead to middle-income tax cuts: "When Tariffs cut in, many people's Income Taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year. Also, massive numbers of jobs are already being created, with new plants and factories currently being built or planned."

Wednesday April 30 (at 12 p.m.) is the EY Webcast, "Beyond the Trump Administration's First 100 Days: What's Next for Businesses?"