The partial government shutdown ended last night after President Trump signed five of the remaining FY2026 appropriations bills plus a two-week extension of Homeland Security funding, meaning most of the government is now funded through September 30. The House February 3 passed the five-bill package — Defense, Labor-Health and Human Services-Education, Transportation-Housing and Urban Development, Financial Services and General Government, and National Security-State Department — plus the DHS patch (H.R. 7148) on a 217-214 vote, with 21 Republicans voting against and 21 Democrats in favor. House Democratic leaders had declined to compel their members to support the package, and some Republicans demanded that the Safeguard American Voter Eligibility (SAVE) Act voter ID bill (H.R. 22) be attached.

The next two weeks are to be spent crafting reforms to Department of Homeland Security (DHS) enforcement procedures, a process that promises to be difficult given competing priorities of members of the two parties. Reforms that have been enumerated by Senate Democratic leader Chuck Schumer (D-NY) focus on issues such as ending "indiscriminate patrols," accountability standards commensurate with those applicable to other law enforcement agencies, and the use of body cameras.

The enacted bill includes an extension of two expired trade programs, the African Growth and Opportunity Act (AGOA) and the Haiti Economic Lift Program, through 2026. That sets up a year-end deadline for the programs that could drive a broader bipartisan package that could include tax items. Punchbowl News reported of AGOA February 3 that tax-writing Committee leaders are "interested in a long-term extension, but that will likely require changes to the trade program, which aids exports from sub-Saharan African countries. That would require a complex negotiation that's proven difficult to work through. Senate Finance Committee Chair Mike Crapo (R-Idaho) said work on the next AGOA deadline will be immediate." The House Ways and Means Committee, led by Chairman Jason Smith (R-MO), "has been working on tweaks to the program with the Trump administration," the report said.

Politico reported that the previous House-passed approach, to extend the program through 2028, "faced a difficult road in the Senate, where at least two lawmakers were pushing for changes to AGOA that would expand eligible projects and force a review of the African countries that are part of the pact — with a particular eye towards South Africa, whose government has come under withering criticism from Trump."

Health care — In addition to providing funding for the Department of Health and Human Services (HHS) for fiscal year (FY) 2026, the enacted appropriations "minibus" package extends several health care programs, including Medicare telehealth flexibilities and additional transparency provisions for pharmacy benefit managers (PBMs) and hospitals. A WCEY Alert on the health provisions, "President Trump signs into law FY 2026 HHS funding, health extenders package," is available here.

Energy tax — On February 3, Treasury and IRS released proposed regulations (REG-121244-23) regarding the IRC Section 45Z Clean Fuel Production Credit enacted by the Inflation Reduction Act of 2022 and amended by the "One, Big, Beautiful Bill Act" (OBBBA). The proposed regulations would provide rules for determining clean fuel production credits, including credit eligibility rules, emissions rates, and certification and registration requirements.

"The proposal incorporates changes from Republicans' reconciliation bill, including the exclusion of indirect land use changes from determining emissions rates and restricting eligibility to feedstocks grown in the United States, Canada and Mexico," Politico reported. "It also addresses looming questions around the term 'qualified sale.' It proposes clarifying that the term 'sold for use in a trade or business' includes the sale of fuel to an unrelated person that subsequently resells the fuel in its trade or business. And it made clear 'fuel' would not include electricity production."

"The biofuels industry got a win with Tuesday's IRS proposal to implement the Section 45Z clean fuel production credit," the Bloomberg Daily Tax Report said. "After years of seeking guidance, fuel producers will now have greater certainty, likely spurring investment, biofuel groups said." Tax Notes said the regulations "offer guidance to address previous taxpayer concerns regarding elective payments and credit transfers, qualified sales, and determining emissions rates."

Bill introductions - On February 2, Senator Jerry Moran (R-KS) and a bipartisan group of cosponsors (Senators Cortez Masto, Ernst, and Klobuchar) introduced the Securing America's Fuels (SAF) Act (S. 3759), to reinstate the special rate calculation of the clean fuel production credit with respect to sustainable aviation fuel, and to extend the credit through 2033. The bill would reinstate the SAF bonus credit that would allow qualifying SAF producers to receive up to $0.35 or $1.75 per gallon, and it would extend the 45Z Clean Fuel Production Tax Credit for all clean fuels through 2033.

Financial services — Today (February 4) at 10 a.m. is the House Financial Services Committee hearing on The Annual Report of the Financial Stability Oversight Council, with Treasury Secretary Scott Bessent as the sole witness. A Senate Banking Committee hearing on the same topic is tomorrow (February 5) at 10 a.m.