The Senate on December 11 failed to pass both the Democratic bill (S. 3385) to provide a three-year extension of enhanced Affordable Care Act (ACA) premium tax credits (PTCs) expiring at the end of this month, and a Health Savings Account-based (HSA) Republican alternative (S. 3386) crafted by Senate Finance Committee Chairman Mike Crapo (R-ID) and HELP Committee Chairman Bill Cassidy (R-LA). The vote tally for both bills was 51-48, with 60 votes required for passage. Republicans Susan Collins (R-ME), Josh Hawley (R-MO), Lisa Murkowski (R-AK), and Dan Sullivan (R-AK) voted in favor of the Democratic bill (S. 3385). Senator Rand Paul (R-KY) joined Democrats in opposing the GOP alternative (S. 3386).

The votes demonstrate that neither party's favored approach can win sufficient support, but the next steps are unclear. With the Senate stalled, bipartisan negotiations could see an uptick, though with Congress set to depart for the holidays at the end of next week, any potential deal may need to wait until January. "When we get through this exercise this week the question is, 'Are there enough Democrats who want to fix the problem?' " Majority Leader John Thune (R-SD) said Wednesday, as reported by Politico. "I think there's a path forward. … Obviously we don't have a lot of time to do this, but I think there are ways in which you could, where there's a will."

The House may vote next week on a GOP health bill with HSA and other provisions, but the ACA credits issue will persist. As has been the case in the Senate, there are some House members who insist that the credits be addressed. Rep. Jim Jordan (R-OH) was cited in multiple press reports as, during a GOP meeting on health issues, calling for an extension of the credits to be included in a package of conservative priorities.

The Senate did pass by unanimous consent on December 11 the "Disaster Related Extension of Deadlines Act" (H.R. 1491), which requires IRS to treat the postponement of the federal tax return deadline due to a federally declared disaster or other event as an extension of the deadline for calculating the limit on a tax refund. It was passed by the House on April 1, meaning the Senate action sends the bill to the President.

The Senate is out today, returning Monday, December 15, with a procedural vote at 5:30 p.m. related to consideration of the House amendment to S. 1071, the FY2026 National Defense Authorization Act (NDAA). The bill passed the House on a 312-112 vote December 10.

Tax and trade — The House Ways and Means Committee on December 10 approved tax and trade bills including:

• the "AGOA Extension Act" (H.R. 6500), to extend the African Growth and Opportunity Act (AGOA) retroactively from September 30, 2025, to the end of 2028, by a 37-3 vote
• the "Haiti Economic Lift Program Extension Act" (H.R. 6504) to extend the HOPE/HELP textile and apparel trade programs with Haiti retroactively from September 30, 2025, to the end of 2028, by a 41-0 vote
• the "Taxpayer Notification and Privacy Act" (H.R. 6495) addressing third-party notice requirements by a 41-0 vote
• the "Taxpayer Due Process Enhancement Act" (H.R. 6506) addressing collection due process proceedings by a 41-0 vote

The trade bills to extend lapsed programs could provide momentum for an eventual bipartisan tax/trade/health bill, though the outlook for such a package is obscured by the impasse over enhanced ACA credits and the uncertain status of the appropriations process ahead of the January 30 expiration of funding for 9 of 12 annual appropriations bills (three others were approved for the full duration of fiscal year 2026 in legislation to reopen the government on November 12). Tax Notes reported of the Committee-passed tax bills, "It's unclear when the legislation might be voted on by the full House, which is scheduled to be in session for only another week and a half this year."

Retirement — The December 10 Senate Health, Education, Labor and Pensions (HELP) Committee hearing on "The Future of Retirement" included discussion related to the following bills:

• the Helping Young Americans Save for Retirement Act (S. 1707), to give those aged 18 to 20 years old access to employer-sponsored retirement plans, by HELP Committee Chairman Cassidy and Senator Tim Kaine (D-VA)
• the Auto Reenroll Act (S. 1831), to permit more frequent opportunities for employees to opt in to retirement plans, by Senators Cassidy and Kaine
• the Restoring Integrity in Fiduciary Duty Act (S. 3086) to clarify the criteria by which a fiduciary may evaluate and select investments based on nonpecuniary (i.e., non-financial) factors, by Chairman Cassidy
• the Catching Up Family Caregivers Act and the Improving Retirement Security for Caregivers Act (S. 5149 and S. 5148 in the previous Congress, respectively), to allow family caregivers to make catch-up contributions to employer-sponsored retirement plans and contribute up to $7,000 annually to a Roth IRA even if their income falls below that threshold, by Senator Collins
• the Promotion and Expansion of Private Employee Ownership Act of 2025, to remove tax and regulatory barriers that prevent S corporations from shifting the ownership of a business to their employees through Employee Stock Ownership Plans (ESOPs), cosponsored by HELP member John Husted (R-OH)

Some Democratic members raised concerns about allowing private equity (PE) investments in retirement accounts. An August 7 Trump administration Executive Order, "Democratizing Access to Alternative Assets for 401(k) Investors," called for a reexamination of making available to participants an asset allocation fund that includes investments in alternative assets, including private market investments, certain interests in real estate, and investment vehicles that are investing in digital assets. This followed the Labor Department May 28 rescinding the prior administration's 2022 guidance directing plan fiduciaries to exercise "extreme care" before adding cryptocurrency to investment menus. Press reports said there are efforts underway to encourage members to pass legislation reflecting the EO permitting PE and crypto investments.

Cryptocurrency - Rep. Max Miller (R-OH) — who in July released a discussion draft on cryptocurrency tax issues addressing the same set of issues as Senator Cynthia Lummis' (R-WY) June bill (S. 2207), including a de minimis rule, staking, and wash sales — is aiming to introduce a bill on the issue in the new year with the support of some Democrats, Politico Inside Congress reported December 10. Miller and Steven Horsford (D-NV) said they wanted to act on the issue during a July Ways and Means Oversight Subcommittee hearing.

The Bloomberg Daily Tax Report December 10 reported on Rep. Miller saying at the Blockchain Association's policy summit in Washington on Tuesday that he is trying to line up Democratic support for the bill and hopes that it could be enacted by next summer. "We believe we can get this thing through by hopefully next August," he said. The report cited Rep. Horsford as saying he's "fine-tuning" the bill with Miller "and hopes to have something out very soon."

Senate Banking Committee Republicans are also pressing to hold a markup next week of their bill establishing a regulatory market structure for digital assets. (The House passed its own version, the CLARITY Act, in July.) Democratic and Republican negotiators in the Senate have exchanged offers on the market structure bill over the last 10 days, with both sides reporting progress on thorny issues like how to treat decentralized finance (DeFi) platforms and applying anti-money-laundering safeguards. Nonetheless, Democrats such as Sen. Ruben Gallego (AZ) this week said the number of outstanding issues to be resolved on the crypto bill are likely still too many to proceed with a markup next week. It is possible Banking Committee Chairman Tim Scott (R-SC) could schedule the markup anyway and defer action on a final bipartisan compromise for the Senate floor.

Artificial intelligence - On Thursday night, President Trump signed an executive order that seeks to limit the ability of states to regulate artificial intelligence while taking aim at existing state AI laws. The order directs Attorney General Pam Bondi to create a "Litigation Task Force" within 30 days whose "sole responsibility shall be to challenge State AI laws" that the administration deems excessive. The order also instructs Commerce Secretary Howard Lutnick to identify existing state laws that "require AI models to alter their truthful outputs," part of the administration's push to block what it calls "Woke AI," NBC News reported. States that have such laws on the books may have to enter into agreements not to enforce them in order to receive discretionary federal funding. The order tasks senior White House officials like AI/crypto "czar" David Sacks with drafting recommendations for congressional legislation that would preempt state laws regulating AI.

Republicans had tried to insert language in the must-pass defense authorization bill (NDAA) imposing a similar moratorium on state AI laws, but that language was dropped from the final agreement. At the signing ceremony, the president said AI companies "want to be in the United States, and they want to do it here, and we have big investment coming. But if they had to get 50 different approvals from 50 different states, you could forget it."

Elections — The Indiana Senate failed to pass a redistricting plan that could have resulted in Republicans gaining two additional Republican seats in the 2026 midterm elections, as part of a broader multistate redistricting effort.

IRS — New this morning are regulations on the Income of Foreign Governments and of International Organizations.

Today, December 12, is the EY Center for Tax Policy monthly update for December 2025, formerly known as "Tax in a Time of Transition." Register here.