The OECD January 5 announced a political and technical agreement by the Inclusive Framework on a comprehensive package for a "side-by-side arrangement" exempting US multinationals from most Pillar Two global minimum tax rules. The administrative guidance is divided into five parts, including two safe harbors related to implementing the side-by-side system. EY's First Impressions Alert, including a link to register for a January 12 EY webcast on P2 developments, is available here.

"In close coordination with Congress, Treasury worked to reach agreement with the more than 145 countries in the OECD/G20 Inclusive Framework to have U.S.-headquartered companies remain subject to only U.S. global minimum taxes while exempting them from Pillar Two," Treasury Secretary Scott Bessent said in a January 5 statement. "This side-by-side agreement recognizes the tax sovereignty of the United States over the worldwide operations of U.S companies and the tax sovereignty of other countries over business activity within their own borders."

During consideration of the "One Big Beautiful Bill Act" (OBBBA), Republicans dropped the IRC Section 899 retaliatory tax provision that was included in the House version following a June 28 G7 statement welcoming an international agreement on such a side-by-side system, the details of which were awaited since then and until this week. That action — dropping 899 — was widely seen as facilitating the side-by-side agreement that caps an uncertain few years during which the prior Administration could not compel the Democratic-led Congress to enact changes to make the global intangible low-taxed income (GILTI) tax compliant with the international agreement for a 15% global minimum tax reached in 2021.

Republican tax-writing committee leaders applauded the Administration's role in securing the agreement and asserted that retaliatory measures are still on the table. "Back in June we agreed to remove those measures from the bill when the G7 publicly committed to respecting U.S. tax sovereignty. We warned at the time that we stand ready to revive retaliatory measures if other parties slow walk implementation of that agreement. That warning remains today as the work to implementing this milestone now begins," House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Mike Crapo (R-ID) said January 5. "We applaud the tireless work of the Trump Administration to ensure that the G7 commitment was adopted by over 140 countries. This step was made possible by great cooperation between the Executive Branch and Legislative Branch to prioritize American companies and workers."

Treasury officials are expected to brief House Ways and Means Republicans on Friday. The deal is expected to be a top agenda item at the 2026 D.C. Bar Tax Conference Wednesday-Thursday, January 7-8.

Press articles have asked, with release of the long-awaited agreement, 'Now what?' Morning Tax January 6: "Jason Yen of EY said it is still fair to wonder whether other governments and foreign businesses might have qualms about how the new system will treat the U.S. Multinationals based outside the U.S. obviously won't get the same benefits from the new system as American corporations."

"There are challenges ahead, and it is an open question whether the new system as updated Monday will prove to be administrable and durable," said a story in the January 6 Wall Street Journal (WSJ). "Some countries will still try to use low tax rates, tax breaks and nontax incentives to lure investment."

Health care — A vote on extending enhanced Affordable Care Act (ACA) premium tax credits (PTCs) that expired at the end of December, pursuant to a Democratic discharge petition that four House Republicans signed on to, is expected in the House later this week. The measure is expected to pass the House but would require 60 votes in the Senate and only four Republicans voted in favor of a similar Democratic bill to provide a three-year extension in December. A House-passed bill could help propel a Senate agreement on a modified measure, however.

A group of senators working on a solution to the issue that includes Susan Collins (R-ME), Bernie Moreno (R-OH), and Angus King (I-ME) met on Monday. Punchbowl News January 6 reported Senator Moreno as saying the group wants any bipartisan deal to include an extension of the open enrollment period through March 1. "If there's a deal to be made, it's going to be made very soon or not at all," he said.

President Trump delivered remarks to House Republicans during their retreat in Washington Tuesday and reportedly advocated for Health Savings Account-based (HSA) alternatives to an extension of the enhanced credits, which has been the Republican position thus far. Politico reported January 6 that "Trump encouraged Republicans to spring for health savings accounts to soften the blow of skyrocketing costs. 'Let the money go directly to the people where they can buy their own health care,' he said."

Senate Majority Leader John Thune (R-SD) said January 6 that any bipartisan deal on enhanced ACA credits "would have to deal with the income limits, you'd have to deal with the zero-dollar premium issue and make sure that everybody at least is paying something for coverage … "

Tax — Leader Thune opened his first post-policy lunch press availability of 2026 on January 6 by touting the benefits of the OBBBA that Republicans expect to be felt this year ahead of the midterm elections. "Not only do you get the permanent increase in the standard deduction; you get the permanent increase in the Child Tax Credit; you get all kinds of business incentives for businesses to invest, make capital investments in this country, whether that's bonus depreciation, interest deductibility, R&D expensing, the 199A deduction, permanent death tax relief … "

Recognizing the impact Republicans expect voters to feel from the new law this year, Senator Thune said, "So we think there are just benefits that are going to continue to play out through the course of this next year for the American people, and we think this year, when they start filing their tax returns, it's going to be a good day for them because they're going to have a lot more money in their pocket … "

Congress — With the resignation of Rep. Marjorie Taylor Greene (R-GA) and passing of Rep. Doug LaMalfa (R-CA), the House ratio is 218 Republicans to 213 Democrats. That ratio puts the Republican majority at two seats for passing legislation, or effectively one seat given that Rep. Thomas Massie (R-KY) has consistently voted in opposition to GOP leadership in this Congress. The Georgia special election is now set for March 10, and Democrats will likely gain an additional seat in the interim in the January 31 runoff election for the seat held by the late Rep. Sylvester Turner (D-TX), which is between two Democrats.

Elections — Some recent press stories have addressed the prevailing sentiment regarding prospects for a change from full GOP control of Congress after the midterm elections to divided government: that winning the House is possible for Democrats, but a wave election is unlikely, and that winning control of the Senate will be difficult.

"History, polling, a narrow Republican majority, a string of off-year victories and voter anxiety over the economy favor the Democrats, who lead in support for control of Congress by five percentage points in a Post average of November and December national polls … " said a story, titled "Democrats look primed to win the House, but a wave might be harder," in the January 5 Washington Post. "But the battlefield in the House is smaller than ever … Of the 39 seats Democrats are competing for, 28 are in districts that Trump won by five or more percentage points."

There are 35 Senate seats up for election in 2026: 22 held by Republicans, including two special elections in Ohio and Florida, and 13 held by Democrats. "Even if Democrats were to successfully defend all their vulnerable seats and sweep Maine and North Carolina — the two Republican seats most frequently rated as tossups — the party would still fall short of a majority," said a story, titled "Democrats Face Steep Climb to Reclaim Senate in 2026 Races," in the January 6 WSJ. "Democrats would be forced to find an additional pickup in deep-red territory that Trump carried in 2024, such as Iowa, Ohio, Texas and Alaska."