This week (October 27-31)

Congress:The Senate is in session. The House is expected to be out of session.

The Senate may vote on additional bills related to the government shutdown:

• S. 3002 by Senator Dan Sullivan (R-AK), to provide continuing appropriations for military pay for any period during which interim or full-year appropriations for FY2026 are not in effect (i.e., a government shutdown)
• S. 3031 by Senator Ted Cruz (R-TX) to pay air traffic controllers during the shutdown

Last week (October 20-24)

Big picture: The government shutdown of the past three weeks-plus shows no signs of ending. Neither side appears imminently poised to compromise over the central issue of whether to attach an extension of enhanced Affordable Care Act (ACA) premium tax credits to the continuing resolution (CR) — Democrats insist on it, Republicans refuse. President Trump is traveling to Asia today, leading to lowered expectations for any government funding breakthroughs that he would undoubtedly need to be a part of. At the end of next week, there is another scheduled paycheck for active-duty military members, though the Administration covered a previous deadline with a separate funding source. There are pressure points, but it's unclear what might break the impasse. After next week is the ACA health care open enrollment period beginning on November 1, as well as pressure on the Supplemental Nutrition Assistance Program (SNAP). Then, after that, is the Thanksgiving holiday, when travel disruptions would be most pronounced. As the shutdown wears on, there is speculation about a later end date for a continuing resolution (CR) to patch government funding than the current House-passed CR until November 21, perhaps into sometime in 2026, but no firm plans have been announced.

Prospects for year-end tax bill: Even with the government shutdown, there are signs that members still prioritize yearend bipartisan legislation on tax, health, and trade issues. Morning Tax reported October 23 that Senate Finance Committee Chairman Mike Crapo (R-ID) said he remains hopeful about a tax extenders package given that some provisions were omitted from the "One Big Beautiful Bill Act" (OBBBA). "Looking ahead, Crapo also said he wouldn't oppose reversing the megabill provision that prevents gamblers from deducting all of their losses," the report said. Tax extenders not included in the OBBBA include the Work Opportunity Tax Credit (WOTC), the IRC Section 181 100% deduction for film/TV production costs, and the seven-year recovery period for motorsports entertainment complexes. Members of both parties are interested in rolling back the OBBBA deduction for 90% of gambling losses that takes effect in 2026 and reinstating the prior 100% deduction.

President Trump was viewed as perhaps downplaying prospects for a second reconciliation bill during a meeting with Senate Republicans on Tuesday. "We don't need to pass any more bills," he said of the OBBBA. "We got everything in that bill." However, Punchbowl News reported that during a Wednesday meeting, some Senate Republicans pressed Majority Leader Thune about using a second budget reconciliation to address GOP priorities on health care policy. "The sentiment is a reflection of some Republicans' belief that Democrats will never actually negotiate with them over ways to address the threat of rising health care premiums due to the expiration of the Obamacare enhanced premium tax credits," the report said. "Using budget reconciliation would allow Republicans to address these issues without requiring Democratic votes."

There is also continued speculation about Republicans reviving the IRC Section 899 reciprocal tax proposal, which was dropped from the OBBBA.

IRS: The Treasury Department and IRS on October 20 released proposed regulations (REG-109742-25) 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). The prior 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 where 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 pre-existing QIEs.

IRS Notice 2025-57 provides transitional guidance for returns relating to certain interest on specified passenger vehicle loans received in a trade or business from individuals that are required to be filed under new Section 6050AA as enacted by section 70203 of the OBBBA. The Notice describes what information must be provided to individuals and penalty relief for the 2025 tax year.

An October 21 news release providing an update on shutdown operations said IRS operations are limited but "the underlying tax law remains in effect, and all taxpayers must continue to meet their tax obligations as normal." Additionally, "Tax refunds will generally not be paid during this period with one key exception. For taxpayers filing a Form 1040 … "