This week (February 16-20)

Congress: The House and Senate are not in session because of the President's Day recess.

With Congress scheduled to be out this week, This Week in Tax Policy will not be published.

Last week (February 9-13)

Big picture: Tax issues were front and center on the Senate floor this week, with votes on two separate issues — a Congressional Review Act (CRA) resolution addressing a Corporate Alternative Minimum Tax (CAMT) notice, and a House-passed resolution disapproving of District of Columbia Council legislation to exclude some "One Big Beautiful Bill Act" (OBBBA) provisions. The OBBBA was also a focus given the release of the Congressional Budget Office Budget and Economic Outlook: 2026 to 2036, which attributes some of the deficit increase to the new law. The IRS issued a notice regarding new IRC Sections 45X, 45Y, and 48E credit restrictions under the OBBBA related to material assistance from a prohibited foreign entity. And the House Ways and Means Committee held a hearing on nonprofit tax issues.

DC OBBBA conformity: The Senate February 12 approved, on a 49-47 vote along party lines, H.J. Res. 142, disapproving of the District of Columbia Council's D.C. Income and Franchise Tax Conformity and Revision Temporary Amendment Act, to exclude some "One Big Beautiful Bill Act" (OBBBA) provisions. The joint resolution, approved by the House February 4, nullifies legislation enacted by the District of Columbia (D.C.) City Council, and reinstates certain D.C. tax code provisions in place before the enactment of the D.C. legislation on the standard tax deduction, taxation of tipped wages, and depreciation of qualified property, etc. There continues to be confusion about the validity of the congressional action, as the D.C. Council reportedly contends their legislation is still law and the review period ended February 11. A spokeswoman for Delegate Eleanor Holmes Norton said the city contends the 30-day review period begins when a bill is transmitted to Congress. "Congress says when the 2nd chamber publishes it in the record," she said. "A court has never weighed in."

OBBBA conformity is an issue elsewhere too. "Most states use federal definitions of income as the starting point for their own income taxes, and so the federal tax breaks can also reduce the amount of money states can tax," the New York Times reported February 11. "That means the tax law passed in Congress is hitting state revenues, prompting some states to proactively exclude the new federal tax cuts from their tax codes."

CAMT resolution: The CRA resolution by Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Senator Angus King (I-ME) would have blocked IRS Notice 2025-28, addressing partnership issues under the CAMT. The procedural motion related to the CRA resolution was not agreed to, on a 47-51 vote February 10. In Notice 2025-28, released on July 29, 2025, IRS announced its intent to partially withdraw proposed regulations on the CAMT applicable to corporate investments in partnerships and to propose new CAMT regulations on those investments. A Wyden release said the Notice "makes changes to the rules governing how corporate giants and private equity firms can count income coming from partnerships they own" and "under the new system, a multibillion-dollar corporation or PE firm can now choose one of six different ways to count how much money it made in a partnership." The release said the Joint Committee on Taxation confirmed the cost of the changes will exceed $10 billion.

Nonprofit tax: During the February 10 House Ways and Means Committee hearing on "Foreign Influence in American Non-profits: Unmasking Threats from Beijing and Beyond," Chairman Jason Smith (R-MO) implored that "Republicans and Democrats should work together to stop foreign actors from interfering with our politics and public discourse through nonprofits … " While Ranking Member Richard Neal (D-MA) and other Democrats focused on scrutiny of donations related to the President, Neal did acknowledge, "We need a serious and good-faith conversation about corruption and foreign influence that's bending politics to benefit the well-connected and costing taxpayers."

Inspired by some common themes in witness testimony, Rep. Dave Schweikert (R-AZ) suggested there be a bipartisan effort focused on redesigning the Form 990 filed by tax-exempt organizations, nonexempt charitable trusts and certain political organizations, which attracted some Democratic interest. Witnesses suggested changes including redesigning the form in a way that information could be easily used by the IRS for transparency, including questions about fiscal sponsorships and beneficial owners. Additionally, witnesses said the form could include information about who sponsors projects, budgets, the principal officer, dates when sponsorship began, and the presence of any foreign funding.

Energy tax: The IRS on February 12 released Notice 2026-15, which provides guidance under IRC Sections 45X, 45Y, and 48E for determining the material assistance cost ratio (MACR) for a qualified facility, energy storage technology, or eligible component for purposes of determining whether there was material assistance from a prohibited foreign entity (PFE). The notice also provides limited general guidance related to the definition of a PFE and requests comments regarding definitional, anti-circumvention, and other issues for future guidance. The 45X Advanced Manufacturing Production Credit, 45Y Clean Electricity Production Credit, and 48E Clean Electricity Investment Credit were subject to new credit restrictions under OBBBA to provide that the terms qualified facility, energy storage technology (EST) and eligible component do not include items that include material assistance from a PFE. IRS said the Notice "provides that Treasury and IRS intend to propose regulations with respect to the definition of a PFE and the calculation of the material assistance cost ratio that taxpayers must use to determine whether there was material assistance from a PFE. The notice also details how to use interim safe harbors authorized by the OBBB and provides example calculations under those safe harbors."

On February 13, Senator Catherine Cortez Masto (D-NV), Senate Democratic Leader Chuck Schumer (D-NY), and Senate Finance Committee Ranking Member Wyden introduced a joint resolution providing for congressional disapproval of the rule submitted by the Internal Revenue Service relating to "Beginning of Construction Requirements for Purposes of the Termination of Clean Electricity Production Credits and Clean Electricity Investment Credits for Applicable Wind and Solar Facilities." A press release said the new IRS rule "makes it much harder for projects to benefit from these tax credits, raising the cost of building long-needed clean energy infrastructure."

CBO outlook: The CBO Budget and Economic Outlook released on February 11 stated:

• The deficit will total $1.9 trillion in fiscal year 2026 and grow to $3.1 trillion in 2036
• Debt held by the public will rise from 101% of GDP in 2026 to 120% in 2036

The report said the 2025 reconciliation act (OBBBA, Public Law 119-21) increased CBO's projections of deficits by $4.7 trillion, while higher tariffs reduced deficits by $3 trillion. House Budget Committee Chairman Jodey Arrington (R-TX) released a statement taking "exception with CBO's confoundingly low assumptions for economic growth."

International tax: On February 11, Senate Democratic Whip Dick Durbin (D-IL), Senator Jack Reed (D-RI), and Rep. Lloyd Doggett (D-TX) reintroduced the "Stop Corporate Inversions Act." According to a press release, the bill would:

• treat a combined foreign corporation as a domestic corporation under two circumstances:
• if the shareholders of the former U.S. corporation own more than 50% of the new combined foreign corporation, or
• if the affiliated group that includes the combined foreign corporation is managed and controlled in the United States and engages in significant domestic business activities in the United States
• repeal the 60% and 80% ownership tests as well as the inversion gain applicable under such circumstances
• maintain the foreign substantial business exception under Section 7874 by exempting the affiliated group if it has substantial business activities in the foreign country where the new combined corporation is incorporated

The Stop Corporate Inversions Act has been introduced in Congress several times over the past dozen years.

Housing: On February 9, House Ways and Means members Rudy Yakym (R-IN) and Gwen Moore (D-WI) introduced the Affordable Housing Bond Enhancement Act (H.R. 7414), to expand housing investment with mortgage revenue bonds by updating and expanding the Mortgage Revenue Bond (MRB) and Mortgage Credit Certificates (MCC) programs.