US House Speaker Mike Johnson (R-LA) this week was quoted as saying House Republicans have begun work on a second, smaller budget reconciliation bill with an enactment timeline of "late fall." The Speaker indicated the follow-up bill would include provisions removed from the "One Big, Beautiful Bill Act" (OBBBA ) (H.R. 1) due to budget reconciliation rules, with the idea being to draft new measures that would be compatible with strict budget rules.

There has been speculation about a potential follow-on bill that could address outstanding tax and health issues, including Medicaid and other changes cut from the OBBBA to meet reconciliation rules, OBBBA technical corrections, tax extenders such as extension of the Work Opportunity Tax Credit (WOTC), and possible retirement items. It is unclear whether (1) those issues would be addressed in a Republican reconciliation bill, (2) such a bill could be followed by a bipartisan package addressing outstanding tax and health issues or (3) the one-party approach would preclude any later cooperation.

The House adjourned for the August recess this week. The Senate is scheduled to stay in session until 1 August, although President Trump is pressuring the Senate to stay in session to address outstanding nominations.

A senior Treasury official recently elaborated on the Group of Seven (G7) 28 June statement on global minimum taxes. The G7 stated that a "side-by-side" solution could preserve gains made by jurisdictions in tackling base erosion and profit shifting (BEPS) and provide clarity and stability in the international tax landscape. The statement responded to earlier comments made by the Treasury Secretary Scott Bessent, who set out a proposed side-by-side solution for BEPS Pillar Two in recognition of the existing US minimum tax rules.

The Treasury official clarified that US companies should not consider themselves fully exempt from the global minimum tax and remain subject to some of the provisions — for example, qualified domestic top-up taxes in jurisdictions that have enacted such measures. Referring to the G7 statement, the official said, "It is not the final agreement. It is not an agreement among G7 at all, and it is not about a full exclusion." Rather, the official said, the statement "does represent a common view and understanding of how to move forward."

The US official indicated negotiations on a global tax agreement are ongoing in the OECD, with the goal of having an agreement by the end of 2025. A Global Tax Alert has details.

The G20 also addressed the BEPS negotiations in a communique following their meeting in Durban, South Africa on 17-18 July. "We will continue engaging constructively to address concerns regarding Pillar Two global minimum taxes, with the shared goal of finding a balanced and practical solution that is acceptable for all."

The communique stated that a Pillar Two solution "will need to include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, including a discussion of the fair treatment of substance-based tax incentives, and risks of base erosion and profit shifting, are addressed and will facilitate further progress to stabilise the international tax system, including a constructive dialogue on the tax challenges arising from the digitalisation of the economy." A Global Tax Alert is pending.

President Trump's 1 August deadline for suspending additional country-specific tariff rates on countries with which the US has large trade deficits and trade barriers is bringing about new trade developments. President Trump on 23 July announced that he had reached a deal that provides for 15% reciprocal tariffs with Japan, and press reports since have indicated the Administration could be on the cusp of a similar deal with the European Union, which reportedly is preparing a package of 30% tariffs on $93b in US products if a deal with the US does not materialize. The trade deal with Japan reportedly also includes a pledge for a $550b US investment fund.