The House and Senate return this week for the 2nd session of the 119th Congress, with enhanced Affordable Care Act (ACA) premium tax credits (PTCs) having expired at the end of December and government funding for nine of 12 annual appropriations bills expiring January 30 (with the other three having received full-year funding in the November continuing resolution). Neither issue has a clear-cut resolution at this point, but each could perhaps provide a vehicle for unfinished business on tax, health and trade issues — which could also be addressed in a second budget reconciliation bill that was attracting some attention just as lawmakers broke for the holidays.

Prior to the holidays, four House Republicans signed on to a Democratic discharge petition to force a vote on the ACA credits issue — likely to take the form of extending the enhanced credits for three years — which is expected to be held soon after members return. The measure would require 60 votes in the Senate and only four Republicans — Susan Collins (R-ME), Josh Hawley (R-MO), Lisa Murkowski (R-AK), and Dan Sullivan (R-AK) — voted in favor of a similar Democratic bill (S. 3385) to provide a three-year extension in December.

While there are Republicans in the House and Senate who want the enhanced ACA credits to be extended, the issue has split the party, with some GOP leaders contending — as the GOP has for years — that the structure of the ACA is flawed and that a different approach is warranted. 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) was offered alongside the Democratic bill and also failed.

Some members continued to criticize the ACA in recent press interviews:

• On Fox News December 31, Senator Markwayne Mullin (R-OK) said, "So, instead of giving the subsidy to the health care, we want to give it to the individuals through what we call health care savings plans, HSAs. And so, what we're trying to do is say, 'Hey, we don't have to completely scrap the system, but let's rework the system and put it in the hands of the American people again, instead of the hands of the providers.'"
• In a December 31 Fox Business interview, Rep. Beth Van Duyne (R-TX) said, "We've got a number of bills that would actually help address the issue. But what we found is that the Unaffordable Care Act was basically created 100% by Democrats to fail. They wanted to raise prices to force us into socialized medicine, like in Canada — failing systems in Canada, in Great Britain. It's riddled, riddled with waste, fraud and abuse."

Punchbowl News reported January 1 that, "The White House believes that there's an appetite in the Senate for a compromise, possibly an amended version of a House-passed Obamacare subsidies extension that includes program reforms. Should that happen, it would reignite the question of whether [Speaker Mike] Johnson will put a compromise on the floor."

Appropriations — Democrats have not sought to tie the ACA credits issue — which prompted the government shutdown last year — to the upcoming January 30 government funding deadline. Senate Democratic leader Chuck Schumer (D-NY) confirmed that approach on ABC's "This Week" January 4. "There are two separate tracks here. Democrats want to fund the appropriations, the spending bills, all the way through 2026. We want to work in a bicameral, bipartisan way to do it," he said. "And the good news is our Republican appropriators are working with us, and we're making good progress in that regard."

Just prior to the holidays, there were signals from top appropriators that topline spending numbers had been informally agreed to. The annual topline number debate centers on spending levels for defense spending, which is traditionally the greater priority of Republicans, and nondefense discretionary spending, which is typically advocated by Democrats. House Republicans usually pass appropriations bills with deep spending cuts and partisan policy riders, while the Senate Appropriations Committee works in a more bipartisan fashion. The House and Senate must compromise and agree on the same bills, and the support of some Democrats is required because appropriations bills require 60 votes in the Senate.

The continuing resolution (CR) deal to end the shutdown included approval of the Military Construction-Veterans Affairs, Agriculture (which includes the Food and Drug Administration), and Legislative Branch appropriations bills, which are traditionally regarded as the easiest for lawmakers to agree on.

The Senate did not consider before the break a minibus appropriations package encompassing the Labor-HHS-Education, Defense, Transportation-HUD, Interior-EPA and Commerce-Justice-Science appropriations bills, which first faced holds from multiple Republican senators and then the Colorado delegation — Democrats John Hickenlooper and Michael Bennet — over the Administration's effort to dismantle the National Center for Atmospheric Research. Democrats are expected to seek guardrails in a spending package to prevent the Administration from gutting projects in states represented by Democrats.

The House agenda for the week noted that consideration of items related to FY26 Appropriations is possible, and this morning the Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act, 2026, was released. Politico reported that the package "could also become a vehicle for a stop-gap continuing resolution in the Senate."

Prospects for a bipartisan package — Both the ACA credits and appropriations deadline could provide a vehicle for a bipartisan tax/trade/health package. It is unclear what tax items could be pursued, but a sampling of proposals on the tax side that could be addressed in future legislation may include:

• Work Opportunity Tax Credit (WOTC)
• Seven-year recovery period for motor sports entertainment complexes
• IRC Section 181 expensing rules for film, television, and theater productions
• US-Taiwan tax relief
• Deduction limit of 90% of gambling losses (restore 100% deduction)
• Retirement provisions

Another potential driver for a legislative package is a pair trade bills approved by the House Ways and Means Committee on a bipartisan basis December 10:

• the "AGOA Extension Act" (H.R. 6500), to extend the African Growth and Opportunity Act (AGOA) retroactively from September 30, 2025, until the end of 2028
• 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, until the end of 2028

Reconciliation — With or without a bipartisan health bill or an opportunity to put additional items on a long-term spending package, another option for Republicans to enact policy changes is the budget reconciliation process. The chairmen of the House and Senate Budget committees have been among the most vocal proponents of another reconciliation bill to follow the "One Big Beautiful Bill Act" (OBBBA). Other Republicans have expressed doubts, and the President has at various times said a second bill is unnecessary. Tax policy is seen as unlikely to anchor a second bill, though health policy and trade changes potentially could.

Semafor December 24 reported House Budget Committee Chairman Jodey Arrington (R-TX) as saying Republicans will enact another party-line reconciliation package, with a likely focus on health care, in 2026. "My prediction is [Democrats] will not work with us on any consensus health care reform bill, so therefore Republicans will turn their attention back to reconciliation and use [that] as the vehicle to advance the health care reforms that will make it affordable … for 100% of the American people," Arrington said.

A December 23 Politico story titled, "The internal dispute that could derail the GOP's 2026 agenda," said that Republican unanimity over whether to pursue a second reconciliation bill has been lacking for months. "Some see it as the party's last, best chance to put wins on the board before Election Day, while others believe it is a recipe for failure given the small Republican majorities in the House and Senate and major internal divides over health policy," the story said, adding that Speaker Mike Johnson (R-LA) is leaning into the idea. Still, Ways and Means Committee Chairman Jason Smith (R-MO) is among those who are skeptical: "I don't see a path of a second reconciliation ever passing," he said.

Global tax — Pending their satisfaction with the outcome of Pillar 2 of the OECD-led global tax deal, Republicans could seek to revive the IRC Section 899 retaliatory tax provision that was included in the House OBBBA but dropped following a G7 statement welcoming an international agreement on a side-by-side system that would exempt US multinationals from most Pillar 2 global minimum tax rules. A long-awaited announcement reflecting that statement was released this morning.

Cryptocurrency — One issue previously eyed for inclusion in an early 2026 tax package but that may move to a longer runway is cryptocurrency tax rules, an effort that has bipartisan support and a significant industry push for clarity of the rules.

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 — circulated a more detailed draft bill in late December with fellow Ways and Means Committee member Steven Horsford (D-NV). The draft bill includes a provision "intended to establish a per-transaction de minimis threshold of $200, consistent with the foreign currency transaction exception under section 988, to eliminate low-value gain recognition arising from routine consumer payment use of regulated payment stablecoins." As the Bloomberg Daily Tax Report noted, "It would not establish a safe harbor for the trading of other cryptocurrencies, however."

There is also the stated policy goal of addressing constructive sales involving digital assets, to prevent an opportunity to lock in gains on appreciated stock or other financial positions while deferring tax. Applying wash sale and constructive sale rules to digital assets goes back at least to the House-passed Build Back Better Act (BBBA) in 2021, which included proposals on these issues.

The draft Miller-Horsford bill includes a wash sale provision to prohibit a deduction if, within 30 days of a sale or disposition at a loss, there is the acquisition of substantially identical assets or a contract to do so. The Lummis bill also includes a 30-day wash sale rule that applies to digital assets. "Because virtual currencies are taxed like property, crypto users can sell an asset like Bitcoin at a loss and gain a tax deduction for their trouble, before then quickly repurchasing the very same asset," Morning Tax reported December 24.

On the issue of staking, the draft bill includes a placeholder for a forthcoming provision "intended to reflect a necessary compromise between immediate taxation upon dominion & control and full deferral until disposition." The draft bill also states the goal to "modernize the charitable contribution rules for digital assets by distinguishing between highly liquid, widely traded assets and speculative or illiquid assets."

Rep. Miller was reported earlier in December as saying he hopes a cryptocurrency tax bill can be enacted by next summer. "We believe we can get this thing through by hopefully next August," he said.

A main issue in the cryptocurrency tax debate is whether digital assets are treated as property, not currency, triggering tax implications that impede its use for routine transactions. The Financial Accounting Standards Board (FASB) is also considering the issue of whether cryptocurrency is a cash equivalent.

Trade — On December 31, President Trump signed a proclamation postponing for one year the duty rate increase for upholstered furniture from 25% to 30% and the duty rate increase for kitchen cabinets and vanities from 25% to 50%, from January 1, 2026, to January 1, 2027.

Health Care — Health care affordability will be a driving force for policy in 2026 and could shape political messaging heading into the 2026 midterms. As noted above, Congress will be pressured to resume discussions around the Affordable Care Act's enhanced premium tax credits (PTCs), which expired on December 31, 2025. Without the enhanced PTCs, many exchange plan enrollees are seeing premium costs more than double, with many switching to lower-cost less-comprehensive Bronze plans, policies outside the exchanges or alternatives such as short-term plans.

While moderate Republicans in the House and Senate continue negotiations on a solution to the enhanced PTCs, no plan has surfaced that would gain the 60 votes needed to pass the Senate. The likelihood of a compromise to address the expired PTCs may diminish in the coming weeks, particularly as the end of the federal open enrollment period approaches on January 15.

If no compromise is reached and the premium costs remain unchanged, health care affordability may play a larger role in the midterm elections, particularly as states prepare for Medicaid changes under last year's "One Big Beautiful Bill Act." In addition, the health care affordability debate could resurface as part of a potential second GOP reconciliation bill. Whether or not Republicans will pursue a second reconciliation bill, and whether it will have the support needed to advance, remains unclear.

As part of the health care affordability discussions that are expected in 2026, Congress may also revisit bipartisan policies to reform pharmacy benefit managers (PBMs), including a 2024 year-end deal that would have prohibited PBMs from linking their payments to drug prices in Medicare, increased transparency and reporting to employers, and banned spread pricing in Medicaid. The package also contained provisions to update drug patent laws and increase access to generic drugs, which could resurface in 2026.

In addition, cost pressures may lead Congress to a focus on hospital spending, such as re-examining the 340B Drug Pricing Program, expanding price transparency and increasing scrutiny on tax-exempt hospitals. While significant legislative action on health care is unlikely given the narrow margins in Congress and partisan differences, the Trump Administration is expected to drive much of the health policy agenda in 2026. Key areas of anticipated administrative focus include drug pricing, prior authorization, price transparency, digital health and interoperability, AI and digital privacy, and other regulatory and payment reforms including the continued expansion of site-neutral payment reforms.

The Administration in early 2026 is expected to announce new "Most Favored Nations" drug pricing deals with pharmaceutical companies and will be working to implement the existing deals, including launching the administration's direct-to-consumer drug pricing portal, TrumpRx.gov. The Administration also will oversee the implementation of the first negotiated drug prices for the 10 Part D drugs subject to the Inflation Reduction Act's drug price negotiation program and negotiations for the first round of Part B drugs.

The health care industry, in particular the pharmaceutical industry, will also continue to watch for the outcomes of the Administration's Section 232 tariff investigations for pharmaceuticals and medical devices. Other areas of focus are expected to include continued implementation of the One Big Beautiful Bill Act's Medicaid provisions and Rural Health Transformation Program, roll-out of changes to the 340B program, and policies and payment aligned with the Make America Health Again (MAHA) agenda.

Financial Services - Early 2026 at the banking committees will likely be devoted to a bill establishing a regulatory market structure for digital assets and bipartisan housing bills, with other possible agenda items including community banking, deposit insurance and bank capital rules. Senate Democrats are also pressing for hearings with financial regulators such as the Consumer Financial Protection Bureau (CFPB), SEC Chairman Paul Atkins, Federal Reserve Vice Chair of Supervision Michelle Bowman and others. Fed Chair Jerome Powell will testify before both the House and Senate in February on monetary policy and the economy. Powell's term as chairman expires on May 15 and as his replacement, President Trump is expected to nominate either White House National Economic Council Chair Kevin Hassett or Kevin Warsh, a Stanford professor and former Fed Board member, with an early announcement from the president this month and a Senate confirmation hearing in the spring.

Republicans in both the House and Senate, along with substantial numbers of Democrats, want to pass a crypto market structure bill this year before the midterm election cycle gets too far along to allow bipartisan cooperation. The House in July passed the CLARITY Act (HR 3633) by a vote of 294-34, with 78 House Democrats in favor. Senate Republicans have been agitating for months to mark up their draft version of the market structure bill, sponsored by Chairman Tim Scott (R-SC), Cynthia Lummis (R-WY) and Bill Hagerty (R-TN), which would require the votes of at least seven or eight Democrats on the Senate floor to surmount a filibuster. Because the market structure legislation defines many crypto products as commodities and assigns considerable new responsibilities to the Commodity Futures Trading Commission (CFTC), the Senate Agriculture Committee is also a key player on the bill. While definite progress was made on negotiating a bipartisan product in recent weeks, Democratic negotiators have said several sticking points are yet to be resolved, including: 1) how to regulate decentralized finance (DeFi) platforms and their developers; 2) safeguards against illicit finance through anti-money-laundering (AML) and Know Your Customer (KYC) standards; 3) ethics concerns surrounding the Trump family's crypto business; 4) adequate funding for the CFTC and the absence of Democratic commissioners at both the SEC and CFTC; and 5) whether to ban stablecoin platforms from paying yield in the form of rewards programs, a dispute held over from the stablecoin debate last summer.

While those issues were too thorny to get a markup done in December, Banking Committee Republicans have nonetheless expressed confidence that a markup will be set for January 15. In a social media post on December 18, White House AI & crypto "czar" David Sacks said that both Chairman Scott and Agriculture Committee Chairman John Boozman (R-AR) "confirmed that a markup for Clarity is coming in January … we are closer than ever to passing the landmark crypto market structure legislation that President Trump has called for."

Another area where there seems to be enough bipartisan momentum to get something enacted is housing supply and affordability, a stated priority for both House Financial Services Committee Chairman French Hill (R-AR) and Senate Banking Chairman Scott. Scott mounted a push to have his committee's bipartisan ROAD to Housing Act (S. 2651), which was approved 24-0 at its July markup, included in the must-pass defense authorization bill (NDAA) last month), but his bid was rejected on the House side by Chairman Hill. Hill said he wanted to get his own committee's housing product out and then negotiate a compromise with the Senate, and the Financial Services Committee then approved Hill's Housing for the 21st Century Act (HR 664), which is also sponsored by Ranking Member Maxine Waters (D-CA), at its December markup. The next step is for the full House to approve HR 664. While both the House and Senate bills are bipartisan, the House version emphasizes streamlining and modernizing federal regulatory requirements, while the Senate bill is more piecemeal and targeted at housing supply frameworks rather than the wholesale redesign of regulations.

A third area in financial services where Republicans and Democrats could make progress in early 2026 is easing regulations for community banks, a priority for both Chairman Hill in the House and Chairman Scott on the Senate side. Hill linked the issue to the affordable housing problem at a December markup, saying, "Early next year, we'll be taking steps to advance our Making Community Banking Great Again agenda as well … The reforms in our housing package, coupled with reforms to ensure community banks can focus less on compliance and more on lending in their communities, will help ease this housing access and availability crisis." Numerous community banking regulatory relief bills have already passed the committee and could be packaged together for the floor. The Senate Banking Committee at least partly addressed these issues by including Sen. Mike Rounds' (R-SD) TAILOR Act in the committee's bill targeting allegations of "debanking," the FIRM Act (S. 875), which the committee approved on a party-line vote in March. The TAILOR Act requires federal financial regulators to consider the risk profile and business model of each bank and credit union when issuing regulations, and tailor their actions to minimize the compliance burden for smaller institutions.

Deposit insurance is an issue where members from both parties have for years sought a federal response to the March 2023 failures of Silicon Valley Bank and other banks. A bipartisan Senate bill (S. 2999) led by Sens. Hagerty and Angela Alsobrooks (D-MD) would increase federal deposit insurance coverage for transaction accounts like payroll or business checking accounts up to $10 million per depositor, a sizable bump up from the current level of $250,000. At a November hearing at House Financial Services, however, several senior Republicans expressed reservations about the Senate bill, citing its potential costs to banks and taxpayers, and argued that deposit insurance was not a cause of the 2023 crisis and that FDIC data did not justify such a dramatic change. It's possible that a more narrowly drawn bill, with a lower insurance limit and provisions allowing the FDIC to use more "least-cost" liquidation tools, could have better luck in the House.

Other agenda items for the committees in 2026 include groups of bills promoting capital formation and changes to the SEC's rules on issues like securities market structure and proxy access. The House passed its capital formation package, the INVEST Act (HR 3383), on December 11 with 300 votes in support; Senate Banking Chairman Scott has a similar goal. Both Scott and Chairman Hill have also highlighted oversight of regulators' promulgation of new, more industry-friendly bank capital rules such as Basell III Endgame as the committees wait for the Federal Reserve and other agencies to unveil the rules sometime this year. Insurance issues such as flood insurance and renewing the 2019 Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), which expires at the end of 2027, are also on the docket.

Schedule — The Senate returns today (January 5) with a vote on a Defense Department nomination at 5:30 p.m. The House is back in session on Tuesday, January 6, with votes this week on two Energy and Commerce Committee bills: the SHOWER Act (H.R. 4593) to amend the Energy Policy and Conservation Act to revise the definition of a showerhead; and the Affordable HOMES Act (H.R. 5184) to prohibit the Secretary of Energy from enforcing energy efficiency standards applicable to manufactured housing.