The US federal government shutdown, which began on 1 October, continued this week with no end in sight as Republicans and Democrats spar over whether a Republican-sponsored continuing resolution (CR) should include enhanced Affordable Care Act credits — Democrats insist on it, Republicans refuse. The House-passed CR that has stalled in the Senate has a fast-approaching 21 November government funding end-date. As a result, Republicans reportedly are now looking to a new CR bill that would extend government funding beyond that date, perhaps into 2026.

Treasury Assistant Secretary for Tax Policy Kenneth Kies this week addressed the government shutdown's impact on IRS guidance, particularly in regard to "One Big Beautiful Bill Act" (OBBBA) guidance. The Treasury official, who also holds the role of acting IRS Chief Counsel, pending Senate confirmation of nominee Donald Korb, said guidance will not be affected by the shutdown and the IRS has a plan to catch-up. He also was quoted as saying the agency on 20 October brought back 45 chief counsel attorneys with responsibility for drafting OBBBA guidance.

The IRS further released a statement on 21 October, indicating that "taxpayers must continue to meet their tax obligations as normal" even though IRS operations are limited due to the lapse in appropriations since the shutdown. The IRS referred taxpayers to the IRS lapse plan for further details.

Treasury and the IRS on 20 October released proposed regulations (REG-109742-25) under the Foreign Investment in Real Property Tax Act (FIRPTA) that would remove the domestic corporation look-through rule, which was finalized in 2024, for determining domestic control of a qualified investment entity (QIE). The proposed regulations would treat all domestic C corporations as non-look-through persons for purposes of IRC Section 897(h)(4)(B) and provide conforming amendments to Treas. Reg. Section 1.897-1(c)(3). A Tax Alert is forthcoming.

The final regulations (T.D. 9992), which were issued in April 2024, provided guidance as to when QIEs, which include real estate investment trusts (REITs) and certain regulated investment companies (RICs), are considered domestically controlled for purposes of the FIRPTA rules of IRC Section 897. The 2024 final regulations had narrowed the application of the domestic corporation look-through rule to privately held domestic C corporations if more than 50% of the fair market value of stock is owned, directly or indirectly, by foreign persons (rather than 25%, as in the 2022 proposed regulations). The final rules had also included a 10-year transition rule for certain preexisting QIEs.

Treasury and the IRS on 23 October released Notice 2025-63, announcing their intent to issue proposed regulations that will specify how to determine the source of payments referred to as "borrow fees" or "negative rebate" (collectively, "borrow fees") paid with respect to securities lending and sale-repurchase transactions.

Under the proposed regulations, borrow fees would be sourced to the recipient's place of residence. A Tax Alert is forthcoming.

President Trump announced on social media on 23 October that the US was ending trade negotiations with Canada, effective immediately. The President said the action was in response to a Canadian ad that he said was meant to influence a pending US Supreme Court decision on the legality of his tariff policy under the International Emergency Economic Powers Act. The Court will hold oral arguments on the case on 5 November.

The OECD on 22 October published the third installment of updated transfer pricing (TP) country profiles for 25 jurisdictions, including several new countries. The profiles focus on the key transfer pricing aspects of each country's domestic tax legislation, with the latest installment also addressing hard-to-value intangibles and the simplified, streamlined approach for baseline marketing and distribution activities coming out of the work on Pillar One Amount B.

The latest batch of TP country profiles brings to 83 the total number to covered jurisdictions; a fourth installment will be released in December.