Both sides remained dug in as the federal government shutdown continues. Republicans, including Vice President JD Vance, implored Democrats to vote to reopen the government and suggested talks to extend enhanced Affordable Care Act (ACA) premium tax credits that expire at the end of 2025 would follow. Democrats want the issue addressed in the current CR, though some, like Senator Jeanne Shaheen (D-NH), have suggested movement toward action on the credits, like assurances from GOP leaders, could suffice.

"I think this is an opportunity for us to talk to each other. I think we can address both keeping the government open and the healthcare needs of so many of our people. There's urgency about this because we know that if we don't address the premium tax credits, the subsidies that so many people have been getting to help afford health insurance, that they're going to see their rates double by November," Senator Shaheen said in an October 2 television interview. "And health insurance companies right now this month are setting those rates. So, we need to get together. We need to address this."

There is an ongoing effort, articulated by VP Vance and others, to convince five more moderate Democrats to support the House-passed GOP continuing resolution (CR, H.R. 5371) to patch funding until November 21. Three Democratic senators voted in favor of the CR prior to the shutdown, making the total 55-45 — short of the 60 votes required for passage but enough to lead some to envision a path forward. However, an October 2 report cited Sen. John Fetterman (D-PA), one of the three Democratic "yes" votes on the GOP CR, as bearish on the prospects of additional Democrats coming aboard. "I'm not sure what's going to open this up," he said, adding that the pool of additional potential Democratic supporters is small.

Some have suggested that election dynamics aren't helping members from either side to retreat from their positions and compromise. Only three Senate races are rated by the Cook Political Report as toss-ups:

• The open North Carolina seat currently held by Senator Thom Tillis (R-NC), who is retiring
• The open Michigan seat held by Senator Gary Peters (D-MI), who is retiring
• Senator Jon Ossoff (D-GA)

It may be difficult for House Speaker Mike Johnson (R-LA) to put an ACA subsidies measure on the House floor, given that conservatives loathe the policy to the point that any movement could threaten Johnson's speakership. The Speaker said during an October 2 news conference, "Conservatives are very concerned about the subsidies. Not only that, but they're subsidizing not American citizens, they're subsidizing insurance companies with that, which has driven premiums up. It's got lots of problems, OK?"

Speaker Johnson further said that the President, in the context of a shutdown, has the authority to make changes in the federal workforce and federally funded projects. He said OMB Director Russ Vought has a subjective determination on the priorities for funding and is going to attend to "the Administration's priorities first and ensure that those are funded." White House press secretary Karoline Leavitt said October 2 that federal job cuts are likely to number in the thousands.

The Senate was out on Thursday and today is scheduled to again vote on the Republican CR (H.R. 5371) to patch funding until November 21, and the Democratic alternative that extends enhanced ACA premium tax credits. Senate Majority Leader John Thune (R-SD) and Democratic leader Chuck Schumer (D-NY) are expected to meet today to discuss the shutdown. The House was out this week but is scheduled to return next week.

Crypto tax — The October 1 Senate Finance Committee hearing on "Examining the Taxation of Digital Assets" aired some differences of opinion on some of the main tax issues related to cryptocurrency, including whether a de minimis rule to exempt small-dollar transactions is appropriate or creates the potential for abuse, and whether a new subset of tax rules is required for crypto or current law is sufficient. Members and witnesses in favor of changing the rules invoked the oft-cited example that even buying a cup of coffee with crypto triggers a taxable event that must be tracked and reported.

In addition to a de minimis rule, there was discussion of Revenue Ruling 2023-14, which dictated that the taxpayer should include the fair market value of the staking rewards in gross income in the taxable year in which the taxpayer gained dominion and control over the rewards. Senator Todd Young (R-IN) asked whether the ruling is inconsistent with longstanding tax principles and should be rescinded, which industry representatives replied should be the case. "It should be taxed when you monetize it, not when you create the property. So, I think rescinding it is extremely important," said Lawrence Zlatkin of Coinbase. "It will attract more mining activity into the United States. We discourage by taxing parties only when they receive the mining rewards themselves or when they stake through validators within the United States."

Witness Andrea Kramer, an attorney, said the existing tax code "is flexible enough to have been called upon to tax new asset classes over the years and digital assets are no exception," but did allow there is room for "a few tweaks." Some Democrats are pushing back against the need for special, and beneficial, tax rules for crypto. Senator Elizabeth Warren (D-MA) was opposed to providing more favorable rules that the industry is calling for and argued for similar treatment for risks and other factors across financial products. She said the purchase of a small amount of gold or stock would require reporting, meaning a de minimis rule would provide special treatment; and there are proposals for miners and stakers to defer taxes on income until they sell, meaning they could pay less in taxes than accountants for the same work.

Senator Tina Smith (D-MN) noted that miners and stakers get paid for validating the blockchain, which is performing an essential service, and the tax system imposes a tax when someone is paid for providing a service in return for compensation. "I understand that the crypto industry isn't asking for a tax exemption but … there's a benefit to deferral of your taxes," Smith said.

A WCEY Alert has details.

Next steps for crypto tax in Congress are unclear, though the issue is seen as a candidate for inclusion in a possible year-end tax bill. Republicans in the Senate considered adding some of these provisions to the One Big Beautiful Bill Act (OBBBA) but more time was needed to settle policy and technical questions. Senators Steve Daines (R-MT) and Marsha Blackburn (R-TN) added their names to the list of members interested in working on the issue. Proposals have been put forward in both chambers. Rep. Max Miller's (R-OH) July discussion draft and Senator Cynthia Lummis' (R-WY) June bill (S. 2207) address a similar set of crypto tax issues, including a de minimis rule, staking, and wash sales.

Bill introductions — On October 1, Senator Jim Banks (R-IN) introduced S. 2962, to allow the pass-through deduction under section 199A to apply to qualified business development company (BDC) interest dividends in the same manner as qualified REIT dividends. The proposal was included in the House version of the OBBBA but omitted by the Senate.