The House Ways and Means Committee and Energy and Commerce Committee are now expected to hold their markups of reconciliation legislation the week beginning May 12, rather than May 5, as Republican leaders had suggested. Ways & Means is responsible for the centerpiece extensions of Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 plus additional items likely to include some of President Trump's tax proposals and some revenue offsets. Energy & Commerce is charged with coming up with $880 billion of the $2 trillion in total deficit reduction required as a condition for a full $4.5 trillion deficit increase for tax cuts under the Ways & Means instruction.

The work of the two committees involves some of the most controversial decisions in the reconciliation process, which House Republicans must negotiate among themselves and with Senate Republicans. There has long been the dynamic that some Republicans want deep spending cuts in exchange for tax cut extensions, while some members are wary of cuts, especially as they relate to Medicaid benefits. The parameters of the Ways and Means product depend on the work of other committees, and Committee Republicans must know the level of savings from other committees, including E&C, to determine the level of tax cuts and the need for additional offsets.

Unresolved issues related to the reconciliation bill include relief from the $10,000 state and local tax (SALT) deduction cap and how to meet the Energy & Commerce deficit reduction requirement that presents the potential for Medicaid cuts. Those issues were up for discussion during a May 1 White House meeting with President Trump, House Speaker Mike Johnson (R-LA), and other leaders.

Tax — Additionally, Speaker Johnson met April 30 with high-tax state Republicans concerned with SALT cap relief and a $25,000 per individual cap. Ending the current marriage penalty was discussed but no apparent breakthroughs occurred on an issue seen as essential to delivering the requisite votes for a GOP-only reconciliation bill with the slim 220-213 House majority. Rep. Nick LaLota (R-NY) said following the meeting, "We are still far away from each other," according to the Daily Tax Report. LaLota and Reps. Mike Lawler (R-NY), Andrew Garbarino (R-NY), Tom Kean (R-NJ), and Young Kim (R-CA) have threatened to reject any tax package that does not raise the SALT cap sufficiently, the report said.

A separate report said Ways and Means members have considered limiting relief from the cap to those earning $400,000 or less. Rep. Nicole Malliotakis (R-NY) said members on Thursday discussed the overall cap level, how many years to extend it and if there should be income limits, she said. "It needs to be adjusted in a reasonable manner where it is targeted to the middle class," she said.

Potential revenue offsets that Ways & Means may include aren't clear, but there is increased attention on some proposals, including rolling back Inflation Reduction Act (IRA) energy tax credits and expanding the IRC Section 162(m) deduction limitation for employee compensation over $1 million for publicly held corporations. Politico reported May 2, "Congressional Republicans are struggling to strike an agreement over cuts to the Biden administration's clean energy tax credits," and that the "intraparty squabble over the Inflation Reduction Act has emerged as a critical sticking point for Republicans in both chambers" as they piece a reconciliation bill together. "Nothing is decided on the IRA," said Rep. Vern Buchanan (R-FL). "The chips are on the table and a lot of that is going to happen next week."

On executive compensation, the TCJA eliminated the performance-based compensation and commissions exceptions to IRC Section 162(m) and expanded the definition of covered employee to include the CFO. The American Rescue Plan Act (ARPA) included a provision to deny the deduction for compensation over $1 million for the eight highest paid employees, plus the CEO and CFO, at publicly traded companies, effective beginning in 2027. Last year's Biden budget proposed expanding the deduction disallowance to have IRC Section 162(m) apply to all C corporations — publicly held and privately held — and to all compensation paid by the corporation over $1 million to any employee, which was estimated to raise nearly $272 billion.

"House Republicans are seriously considering proposals to further limit tax deductions that companies can take for their highest-paid workers' compensation, expanding restrictions that now apply only to a handful of current or former executives making more than $1 million … " said a story in the May 1 Wall Street Journal. "Discussions on this idea and other tax provisions are still fluid, and lawmakers haven't settled on details that would determine which employees and employers would be affected."

Health care — Next week, the House Energy and Commerce Committee is expected to begin marking up health care policies that could be included in the reconciliation package. The Committee is tasked with finding $880 billion in savings, and Chairman Brett Guthrie (R-KY) has suggested about $400 billion could come from Medicaid. Republican members this week have been working out differences on the level of Medicaid cuts and the type of Medicaid policies that could be included as some members have raised concerns about the potential cuts.

"The fate of Republicans' sweeping domestic policy bill is snagged on a crucial question: Are deep cuts to Medicaid, the federal health care program covering nearly 80 million Americans, something to be avoided? Or are they the whole point of pursuing the legislation? … ," Politico reported May 1. "Trump officials are 'actively' pushing congressional Republicans to explore a proposal to slash drug prices within the Medicaid program … Lowering the cost of drugs for the federal government could generate significant savings, lessening the need to pursue the $600 billion of cuts House GOP leaders are eyeing for Medicaid."

Beyond Energy and Commerce, the next largest deficit reduction instruction was $330 billion from the Education & the Workforce Committee, which the panel addressed with the Student Success and Taxpayer Savings Plan on student loans and other issues. The Agriculture Committee is required to find $230 billion in deficit reduction. Punchbowl News reported that Committee Republicans and the White House are discussing what to do about the Supplemental Nutrition Assistance Program (SNAP), specifically how to avoid cutting benefits. Some members want the $230 billion figure reduced.

On April 30, the House Financial Services Committee voted 30-22 along party lines to adopt its reconciliation instructions, fulfilling its obligation to contribute $1 billion in budget savings. The changes included eliminating the authority of the nonprofit Public Company Accounting Oversight Board (PCAOB) to independently collect and spend accounting support fees; instead, those fees would to be remitted to the Treasury and the CFPB's authority to draw funds from the Federal Reserve would be modified.

Administration — President Trump's initial FY2026 budget proposal, referred to as the "skinny budget," is being released today. The budget will begin the FY2026 appropriations process. Politico reported, "A more detailed budget request is expected to be sent later this month."

IRS — On April 29, President Trump nominated Donald Korb to be Chief Counsel for the Internal Revenue Service. He was previously Chief Counsel during the George W. Bush administration.

Hearings — The Senate Finance Committee has set a hearing to consider the nominations of James O'Neill to be Deputy Secretary of Health and Human Services and Gary Andres to be an Assistant Secretary of Health and Human Services for Tuesday, May 6 (at 10 a.m.).

Bill intros — On April 29, Senate Finance Committee members Todd Young (R-IN) and Maria Cantwell (D-WA) introduced a bill (S. 1515) to reform the low-income housing credit. The bill would increase the number of credits available to states by 50% for the next two years and make the temporary 12.5% increase secured in 2018 permanent.

Senate Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) introduced a bill (S. 1532) to modify the railroad track maintenance credit.

On May 1, Ways and Means member Mike Carey (R-OH) introduced a bill (H.R. 3137) to extend the biodiesel fuels credit and the biodiesel mixture credit.