This week (November 3-7)

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

Last week (October 27-31)

Big picture: The government shutdown that has lasted for a month will continue at least into next week, with the Senate having left Washington until Monday, November 3. Lawmakers may be nearing a turning point in the negotiations as the White House has cautioned Senate Republicans against consideration of more rifle-shot bills to ensure certain constituencies are being paid and there is more intense focus on the Affordable Care Act (ACA) enrollment period that begins November 1 and funding for the Supplemental Nutrition Assistance Program (SNAP) that may not be provided into November. The exact nature of a potential deal isn't known, but several press reports have suggested that bipartisan talks are picking up.

DSTs: Some of the trade deals the United States recently reached with other nations have a tax angle, in some cases including an agreement to stop imposing digital services taxes (DSTs) on US companies as a condition of more favorable tariff rates. For instance, an October 26 White House statement on an Agreement on Reciprocal Trade said, "Malaysia has committed to refrain from imposing digital services taxes that discriminate against U.S. companies." Malaysia has had a Service Tax on Digital Services (SToDS) in effect since January 1, 2020. Additionally, an Agreement Between the United States of America and the Kingdom of Cambodia on Reciprocal Trade says, "Cambodia shall not impose digital services taxes, or similar taxes, that discriminate against U.S. companies, in law or in fact." The Bloomberg Daily Tax Report said October 30, "The Trump administration's recent trade deals with Southeast Asian countries signal its intent to use such deals in place of treaties to combat digital services taxes or similar taxes that it deems to be discriminating against US companies." Further, "The Trump administration views DSTs as discriminatory, given the majority of companies facing the levies hail from the US," the report said.

Republicans in Congress share those concerns. Over the summer, House Ways and Means Committee member Rep. Ron Estes (R-KS) said lawmakers must "continue to work on the DST issue because that wasn't resolved and that wasn't as much a part of the agreement as the Pillar 2 piece," referring to the June G7 statement on calling for a side-by-side system that would exempt US multinationals from certain Pillar Two global minimum tax rules. More recently, in an October 27 statement, Ways and Means Committee Chairman Jason Smith (R-MO), Subcommittee on Tax Chairman Mike Kelly (R-PA), and Subcommittee on Trade Chairman Adrian Smith (R-NE) addressed the topic of France considering a proposal to increase its digital services tax (DST) from 3% to 15% and raise the applicable revenue threshold to levels that specifically target American innovators, saying in part: "France's proposed increase in its digital services tax would be an unwarranted attack on America's digital companies and leave the U.S. Congress and the Trump Administration with little choice but to pursue aggressive retaliatory actions." There have been subsequent reports about a proposed smaller increase in the French DST, to 6%.

Global tax: There is still no clear picture of how the OECD and Inclusive Framework will reach an agreement reflecting the June G7 statement calling for a side-by-side system, though progress is reportedly being made. The Bloomberg Daily Tax Report said October 28: "Countries are getting closer to finalizing the details on a deal that would exempt US companies from major parts of the 15% global minimum tax. People familiar with the OECD negotiations told Bloomberg Tax that countries have agreed the US won't get first taxing rights on American companies operating in foreign jurisdictions. The development marks a key concession by the US." Additionally, "OECD negotiators have also proposed more criteria to determine if a country's domestic tax system is eligible to be considered part of a so-called 'side-by-side regime,' which would exclude its companies from key minimum tax provisions."

Politico Morning Tax on October 27 cited Senator James Lankford (R-OK) as saying, "We have to get rid of Pillar Two. Period. Let's figure out the best way to be able to do it." There is also continued speculation that Republicans may revive the IRC Section 899 reciprocal tax proposal, which was dropped from the "One Big Beautiful Bill Act" (OBBBA). Senate Finance Committee Chairman Mike Crapo (R-ID) and Ways and Means Committee Chairman Smith in June issued a joint statement saying, "Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow-walk its implementation." The Morning Tax report said, "House Republicans have taken a harder line against the global tax deal and sounded more willing to respond aggressively to Pillar Two than their Senate counterparts — further underscoring that GOP lawmakers could push back hard if the U.S. faces the full force of the minimum tax."