US House Republicans this week focused on negotiations to reach agreement on a budget reconciliation to extend the Tax Cuts and Jobs Act (TCJA) provisions expiring at the end of 2025. Discussions have centered around a host of outstanding issues, including relief from the $10,000 state and local tax deduction cap, potential tax revenue offsets, the issue of temporary or permanent provisions, as well as Medicaid changes. Whatever eventually is passed by the House is likely to be modified in the Senate, raising questions about how differences will be resolved.

Beginning on 13 May, the House Ways & Means Committee and the Energy & Commerce Committee are expected to hold their markups of key portions of a budget reconciliation bill to extend TCJA provisions and make mandatory spending cuts. A "skinny" version of Ways & Means Chairman Jason Smith's (R-MO) mark of the committee's portion could be released as soon as 9 May and may mostly encompass only TCJA extensions; other provisions and revenue offsets are likely to be detailed in a substitute amendment later. After the two committees finish their work, the House Budget Committee will merge the disparate parts into a single budget reconciliation bill.

As noted earlier, issues remain unresolved even with markups on the schedule, and there are expectations that the size of the reconciliation bill may be scaled back. The tension revolves around conservative Republicans who want deep spending cuts in exchange for tax cut extensions, and more moderate Republican members wary of such spending cuts, especially if they reduce Medicaid benefits.

House Speaker Mike Johnson (R-LA) told members on 7 May that leaders are targeting a smaller package of $1.5t in spending cuts for $4t in tax cuts. The Ways & Means Chairman is expected to meet with President Trump on 9 May to discuss a pared-back package that still delivers on Republican priorities.

The Speaker continues to maintain that he expects the House will vote on the reconciliation bill before breaking for the Memorial Day recess at the end of the month.

In the international space, Senator Thom Tillis (R-NC) on 6 May introduced the International Competition for American Jobs Act (S. 1605), previously sponsored by former Senator Rob Portman (R-OH). The proposed legislation includes provisions to make permanent the controlled foreign corporation (CFC) look-through rule that expired at the end of 2025 and maintains the 37.5% deduction for Foreign Derived Intangible Income (FDII), 50% deduction for Global Intangible Low-Taxed Income (GILTI) and 10% rate for the Base Erosion and Anti-Abuse Tax (BEAT).

The proposed legislation also makes various changes to those provisions and to foreign tax credit limitation baskets, eliminates downward attribution from foreign persons to US entities for determining CFC status and repeals the 20% foreign tax credit "haircut" for GILTI taxes.

President Trump on 8 May announced a trade framework with the United Kingdom (UK). Details of the trade framework are intended to be finalized in the coming weeks. This week's deal is intended to be a step toward a comprehensive free trade agreement, which would be broad in scope and require congressional approval. Notably, the framework agreement does not remove the 10% blanket tariffs announced by President Trump on 2 April. Because the US has a trade surplus with the UK, the UK was not subject to a higher country-specific tariff rate as part of the 2 April tariff regime and the ongoing 90-day pause.

Based on remarks during a White House announcement, the US-UK deal includes reduced sectoral tariffs on UK steel, aluminum and automobiles and expanded market access for US exports of ethanol, machinery, beef and other agricultural products. The agreement reportedly will also include reduced market barriers for UK engines and plane parts, and additional purchasing commitments for US aircrafts.

The potential removal of imposition of the UK digital service tax on US companies does not appear to be part trade framework at this stage. Global Tax Alerts on the framework provide details from the US and UK perspectives