This week (October 6-10)

Congress: The Senate is in session and discussions on ending the government shutdown may continue. House Leadership has designated this week as a "district work period" and no votes are expected in the House.

Finance nominations votes: On Wednesday, October 8, the Senate Finance Committee plans to vote on Treasury nominations for Donald Korb to be IRS Chief Counsel, Derek Theurer to be Deputy Under Secretary of the Treasury for Legislative Affairs, and Jonathan Greenstein to be a Deputy Under Secretary of the Treasury.

Last week (September 29-October 3)

Big picture: The A federal government shutdown began after midnight October 1 following the Senate's failure to gain 60 votes for the Republican continuing resolution (CR) to patch funding until November 21. Democrats insist that a CR extend enhanced Affordable Care Act (ACA) premium tax credits that expire at the end of 2025, which Republicans won't add to the measure. They have generally implored Democrats to vote to reopen the government as a precursor to starting talks to extend the enhanced credits. The September 30 Senate vote on the House-passed GOP CR (H.R. 5371) was 55-45, short of the 60 votes required for passage but enough to lead some to envision a path forward. (An October 3 re-vote was 54-44 and didn't get the bill any closer to passage.) Democrats Catherine Cortez Masto (D-NV) and John Fetterman (D-PA) and Independent Senator Angus King (I-ME) voted in favor of the CR, while Senator Rand Paul (R-KY) voted against. The support of some Democrats was viewed as a sign that more may come aboard. However, an October 2 report cited Senator Fetterman as bearish on the prospects of winning enough Democratic votes. "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 Democratic members have previously suggested movement towards a vote on the enhanced ACA subsidies may be sufficient to win CR votes from some Democrats. There are discussions between members about plans for changes to the premium credits to spur a compromise, as well as some calling for a very short-term CR to allow a deal to happen, but no approach promises to break the logjam imminently. 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?" On October 3, he said the issue could be discussed during October to try to find consensus, if Democrats first vote to re-open the government.

Crypto hearing: 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 that 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. 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.

The staff of the Joint Committee on Taxation released a report (JCX-44-25) describing selected tax issues relating to digital assets under present law, "Examining the Taxation of Digital Assets."

IRS: The IRS shutdown plan called for the agency to remain open for the first five days of a shutdown, using money allotted to the agency under the 2022 Inflation Reduction Act. There was a sense that the agency was trying to move guidance ahead of a potential shutdown. In September 30 guidance:

• Notice 2025-50 provides a definition for "rural area" and guidance for applying the substantial improvement provisions for Opportunity Zone investments in rural areas under the One, Big, Beautiful Bill Act.
• Notice 2025-46 provides interim guidance regarding the application of the corporate alternative minimum tax (CAMT) to domestic corporate transactions, financially troubled companies (troubled companies), and tax consolidated groups.
• Notice 2025-49 provides additional interim guidance regarding the application of the CAMT and announced the intention to partially withdraw the CAMT proposed regulations and to issue revised proposed regulations that, in part, are anticipated to include rules similar to the interim guidance described in the notice.
• The 2025 — 2026 Priority Guidance Plan contains 105 guidance projects that are priorities for allocating Treasury Department and IRS resources during the 12-month period from July 1, 2025, through June 30, 2026.

An EY Alert on the CAMT guidance is available here.

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.