The US Congress returns to Washington next week following a one-week recess after having attempted and failed to pass a stopgap measure to fund the federal government past the 30 September fiscal year deadline. The Senate on 19 September voted on two competing continuing resolutions (CRs) to fund the government, one Democratic and one Republican, but did not advance.

It is unclear how Congress will move forward. Lawmakers will have only the 29 and 30 September to act on a CR to prevent a government shutdown.

A Treasury official this week said the government would release a series of year-end notices to implement international tax provisions enacted in the "One Big Beautiful Bill Act" (OBBBA) that are effective in 2025. The official reportedly said that proposed regulations would follow the notices in the first half of 2026.

One such notice will address the OBBBA's one-month deferral election in IRC Section 898(c)(2) to provide guidance on allocating foreign taxes between the short year and the succeeding tax year. Another area of planned guidance will address the definition of deduction-eligible income for purposes of the new foreign derived deduction-eligible income (FDDEI) regime as well as the impact on the foreign tax credit of OBBBA's new 10% haircut on taxes paid on previously taxed earnings and profits. A notice providing guidance on the new pro-rata share rule for Subpart F under IRC Section 951 is also expected.

The IRS recently concluded that branch profits tax (BPT) relief is available under a US tax treaty for business profits earned by a reverse foreign hybrid. In a generic legal advice memorandum (AM 2025-002 or GLAM, released 19 September), the IRS addressed the application of a US income tax treaty to reduce the BPT applicable to a "reverse foreign hybrid" (i.e., a foreign entity treated as a corporation for US tax purposes but as fiscally transparent under the laws of its country of organization and its owners' countries).

The IRS concluded that the reverse foreign hybrid may qualify for a reduced rate of BPT on the portion of the dividend-equivalent amount corresponding to interests held by the owners who are resident in a treaty country and meet certain treaty eligibility requirements.

The discussion on the treatment of reverse foreign hybrids under US treaties is significant and provides guidance in an area that has been the subject of debate. The GLAM confirms that treaty benefits may be available in these cross-border structures, offering taxpayers a clearer framework for evaluating BPT exposure in foreign reverse hybrid scenarios. A Tax Alert provides details.

The OECD on 23 September published a compilation of the reports from the eighth annual peer review of the minimum standard with respect to BEPS Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting). The compilation, which covers 142 jurisdictions, indicates that jurisdictions' implementation of country-by-country reporting (CbCR) is largely consistent with the Action 13 minimum standard. In addition, more than 4,900 bilateral relationships for the exchange of CbC reports are in place.

According to the OECD press release, more than 120 jurisdictions have introduced legislation to impose a CbCR obligation on multinational entity (MNE) groups, collectively covering almost all MNE groups with consolidated group revenue at or above the €750m threshold. Additional Inclusive Framework member jurisdictions are working toward finalizing their domestic legal frameworks for CbCR. A Global Tax Alert has details.