The US Senate on 11 December failed to advance competing health care bills — one Republican and one Democrat — that would have addressed the expiration of enhanced Affordable Care Act (ACA) premium tax credits at the end of this month. It is unclear at this time if and how Congress will act on the expiring ACA credits before members adjourn for the holidays.

The appropriations process is the other main issue facing congressional lawmakers, with the coming 30 January deadline for funding the federal government through the end of the government fiscal year. Congress must enact the remaining 9 of 12 outstanding annual appropriations bills. (Three appropriations bills were approved for the full duration of fiscal year 2026 in legislation that reopened the government on 12 November.)

President Trump this week also threw cold water on the idea of Congress moving a second budget reconciliation bill. The President said a second reconciliation bill is unnecessary because Republicans achieved all their tax, defense and border security goals in last summer's "One Big Beautiful Bill." Congressional Republicans remain mixed on whether another bill is possible or warranted.

The IRS on 12 December issued final, temporary and proposed regulations (TD 10042) under IRC Section 892 on the taxation of income from foreign governments' investments in the United States. The final rules specifically address when a foreign government is engaged in a "commercial activity" and when an entity is a considered a "controlled commercial entity." The regulations will be effective upon publication in the Federal Register. A Breaking Tax News has more information.

In general, foreign governments are exempt from US income taxation on certain qualified income, but the exemption does not apply to income derived from commercial activity or received from a controlled commercial entity. Proposed regulations on these topics were issued in 2011. The comment period on those proposed regulations was reopened in 2022.

The Trump Administration is still considering possible modifications to the December 2024 final regulations (TD 10016) under IRC Section 987 on foreign currency gains and losses, as part of ongoing deregulation efforts, according to an IRS spokesperson on 8 December.

The IRS also released two draft forms, draft Form 8964-ELE for revoking IRC Section 987 elections and draft Form 8964-TRA for reporting transition information. Accompanying instructions for Form 8964-TRA were also released.

A senior Treasury official told an International Fiscal Association USA virtual international tax conference on 11 December that the US government is optimistic that an agreement will be reached on a BEPS 2.0 Pillar Two global minimum tax side-by-side deal. The official said negotiations are in the final stages notwithstanding objections by some governments, noting that addressing concerns that are expressed is an ordinary part of international negotiations. He reiterated that the US goal continues to be to "reach an agreement before year-end, and we remain hopeful and optimistic that will happen."

The IRS concluded in Chief Counsel Advice Memorandum (CCA) 202548004 that a taxpayer is not liable for withholding tax on "borrow fees" attributable to its foreign partners. The CCA supersedes a previous memorandum from July 2025 and aligns with IRS Notice 2025-63, which allows for the sourcing of borrow fees based on the recipient's residence.

Although the memorandum is addressed to a specific taxpayer, it shows IRS support for allowing Notice 2025-63 to be applied retroactively, which would allow taxpayers to treat borrow fees incurred in prior years as foreign-source income provided they meet the criteria outlined in Notice 2025-63. Taxpayers that have been subjected to withholding tax on borrow fees in prior years should consider applying for refunds of these withholding taxes. A Tax Alert provides details.