This week (January 12-16)

Congress: The House and Senate are in session.

A procedural vote related to Senate consideration of the Commerce, Justice, Science/Energy and Water Development/Interior and Environment appropriations package (H.R.6938) will be held after the Senate reconvenes on Monday, January 12.

Hearings: Ways and Means Trade Subcommittee Chairman Adrian Smith (R-NE) announced a hearing on "Maintaining American Innovation and Technology Leadership" to be held on January 13.

Webcast: On Monday, January 12 at 10 a.m. is the EY Webcast , "BEPS 2.0 Pillar Two: the latest OECD releases — first impressions."

Last week (January 5-9)

Global tax: The biggest tax news last week was the January 5 OECD announcement of 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. "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."

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."

EY's First Impressions Alert is available here.

Hill reaction: 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. 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 briefed House Ways and Means Republicans on the plan on January 9, led by Treasury Deputy Assistant Secretary for International Tax Affairs Rebecca Burch, who is the lead US negotiator on Pillar Two. Punchbowl News reported Chairman Smith as saying after the briefing that oversight of how foreign nations implement the agreement will continue. "It's nonstop. It's a continuous exercise," he said.

Congress: There was some progress made this week toward each of the main deadline-driven issues facing lawmakers — possible extension of enhanced Affordable Care Act (ACA) premium tax credits (PTCs) that 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).

The House January 8 approved a three-year extension of the enhanced ACA credits in a 230-196 vote brought up on the floor by a Democratic discharge petition that had been joined by four Republicans late last year. The measure isn't expected to pass the Senate, as 60 votes are required and only four Republicans voted in favor of a similar Democratic bill to provide a three-year extension in December. Having a House-passed bill could help propel a Senate agreement, however. A group of senators working on a solution to the expired enhanced ACA credits issue that includes Susan Collins (R-ME) and Bernie Moreno (R-OH) is reportedly looking to have a proposal in the coming days that could include a two-year extension of the credits with an income limit and minimum payment requirement. 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 … "

The House January 8 also approved the Commerce, Justice, Science/Energy and Water Development/Interior and Environment appropriations package (H.R.6938) on a 397-28 vote. The package would provide full-year funding for an additional three of 12 annual appropriations bills.

As has long been observed, long-term bills on ACA credits or government funding could provide a vehicle for a bipartisan tax/trade/health package that addresses tax extenders, expired trade programs with Africa and Haiti, US-Taiwan tax relief, etc. Democratic congressional aides at this week's 2026 D.C. Bar Tax Conference suggested that a resolution of the ACA credits issue needs to precede action on any business tax matters. Republicans are split on the ACA issue, so a deal isn't as imperative on that side, but GOP aides suggested that tax-writing committee leaders on their side of the aisle would welcome the opportunity to act on a bipartisan tax-plus package. There was also discussion of positive prospects for a bipartisan cryptocurrency tax bill coming out of the House Ways and Means Committee.

OBBBA and an election year: Leader Thune opened his first post-policy lunch press availability of 2026 on January 6 by touting the benefits of the "One Big Beautiful Bill Act" (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 … "

IRS: Also at the D.C. Bar conference, Kevin Salinger, Deputy Assistant Secretary for Tax Policy at the Treasury Department, said that while final rules under IRC Section 987 have sound policy reasoning behind them, it has been very difficult for taxpayers to deal with the rules. Therefore, in soon-to-be forthcoming guidance, Treasury plans to give taxpayers the option of following a modified version of the 1991 rules' method to calculate 987 gain or loss. He said the government doesn't intend to pull the final IRC Section 987 regulations — as they provide a certain amount of certainty and stability, and some taxpayers have updated their systems — but Treasury will allow taxpayers to go back to a modified version of the 1991 set of rules. Salinger said Treasury also plans to deal with controlled foreign corporations (CFCs), given the outstanding question of whether IRC Section 987(3) applies to CFCs.

The IRC Section 987 rules address determining the taxable income or loss and currency gain or loss for a qualified business unit (a QBU) whose functional currency differs from that of its tax owner. Several regulations on the application of these rules have been issued and withdrawn since 1991. See the 2024 EY Alert, "Final and proposed regulations on qualified business units retain foreign exchange exposure pool method under Section 987, with simplifying elections."

An EY Alert, "Proposed regulations implement deduction for interest on qualified passenger vehicle loans and lender reporting requirements," has been posted here.