Congress returns to session from a one-week recess without a resolution to extend lapsed Department of Homeland Security funding and with President Trump set to address a joint session tomorrow (Tuesday, February 24) for the State of the Union Address, on the heels of the February 20 Supreme Court ruling that the International Emergency Economic Powers Act (IEEPA) does not provide authority to impose tariffs. (A WCEY Alert on the decision is available here.)

The President's responses and the many uncertainties in the wake of the decision continue to unfold. The Trump administration has thus far amended previous executive orders, imposed new tariffs under Section 122 of the Trade Act of 1974, and detailed investigations that may be forthcoming under Section 301 of the Act. President Trump issued a Proclamation detailing a temporary import surcharge of 10% ad valorem on articles imported into the United States, effective February 24, under Section 122 for a period of 150 days (until July 24, 2026). He later said he would raise the rate to 15%.

U.S. Trade Representative (USTR) Jamieson Greer put out a statement on February 20 saying that his agency would launch several new investigations under Section 301. On CBS's "Face the Nation" February 22, Greer said of the 150-day duration, "During that time, we're going to conduct investigations that can allow us to impose tariffs if it's justified by the investigation. So, we expect to have continuity in the President's tariff program. We know that these laws work. They're tried and true, and so we'll have continuity."

On CNN's "State of the Union," Treasury Secretary Scott Bessent said, "The president, the administration remains undeterred in reshoring American factories and getting rid of these massive trade imbalances. That's the big story here, is that we are immediately going to go to Section 122 tariffs and that the revenue for the U.S. Treasury for 2026, the projections, are unchanged."

A story in the February 22 Washington Post said, "Assembling that presidential 'Plan B' will take months, meaning the tariff-fueled confusion that has weighed on the economy will linger as the November congressional elections draw nearer." Other press reports suggested that some Democrats view indications of President Trump's relentlessness in pursuing the tariff issue ahead of the elections as a boon to the party for political purposes.

Wednesday, February 25 at 12 p.m. is the EY Webcast, "Tariffs after IEEPA: What the Supreme Court's decision means for your business." Register here.

Congressional reaction — Members of Congress may seek to advance legislation to replicate the overturned tariffs, and address other issues related to the SCOTUS decision. On February 20, Ways and Means member Rep. Mike Thompson (D-CA) introduced the Illegal Tariff Refund Act (H.R. 7636) to establish the individual tariff refund credit "that would return money from unlawful tariffs directly to American households." According to a news release, "If a court strikes down a tariff and orders repayment, the Treasury Department would distribute the funds as IRS rebates calculated per person in each household."

Another Democratic bill, offered by Ways and Means member Steven Horsford (D-NV) and Janelle Bynum (D-OR), the RELIEF Act, would allow small businesses to receive refunds automatically without having to file individual applications or formal protests. Instead, the bill would require U.S. Customs and Border Protection to automatically refund tariffs and customs duties collected under IEEPA since January 1, 2025, to small and independent businesses within 90 days of enactment. Analysts said the bill's approach could offer a template for other Democrats to use in the midterm campaigns.

SOTU — Prior to the SCOTUS ruling, the President said the address would focus on the economy. In remarks in Georgia February 19, President Trump again touted the tax cuts under the "One Big, Beautiful Bill Act" (OBBBA) and suggested the economy would be a focus of his address. "Airfares, hotels, car payments, rent, sports events, groceries, everything's down … " he said. "Core inflation is now the lowest of any time in more than seven years. The last three months we've had the lowest inflation we have had in over a decade. The last three months [it] is 1.4%. We had record inflation. You don't have it anymore. I'm going to make a State of the Union Address on Tuesday. I hope you're going to watch, and we're going to be talking about it."

Reconciliation — There are differences among Republicans over whether to continuing campaigning on the party's legislative accomplishments thus far, highlighted by the OBBBA, or do more, including through a second reconciliation bill. Politico reported February 20 that, "A number of Republicans are holding out hope for another party-line megabill," despite President Trump's statement February 10 that "we have gotten everything passed that we need" under the OBBBA. Some members have suggested a second bill would be desirable but not necessarily feasible in the 218-214 House. "I would love a second reconciliation bill, but I can count votes," Ways and Means Chair Jason Smith said. "And we do not have the votes."

Punchbowl News on February 21 reported that the tariff developments are leading to new calls for a reconciliation bill: "Sen. Bernie Moreno (R-Ohio) is already seizing on it to demand another party-line reconciliation bill to codify Trump's tariffs. There's a lot of skepticism even among Republicans about another reconciliation package — for good reason. But supporters of the idea may draw on the tariff decision to make their case and tout a big pot of potential revenue."

Congress — Winter weather is causing a delay in Congress returning to session. The Senate was scheduled to convene at 3 p.m. today (Monday, February 23) but has postponed most business for a day. The Periodical Press Gallery reported: "After a short session the Senate will adjourn until 3:00pm on Tuesday, February 24th. Vote at 5:00 pm on Tuesday on motion to invoke cloture on the motion to proceed to Cal. #311, H.R.7147, DHS Appropriations Act, 2026."

Press reports said House business would also be postponed until tomorrow. The chamber was set to reconvene today and begin votes on suspension bills under the jurisdiction of the Science, Space, and Technology Committee, Oversight and Government Reform Committee, and Transportation and Infrastructure Committee.

On Tuesday, February 24 at 10 a.m., the House Ways and Means Health Subcommittee is scheduled to hold a hearing on "Advancing the Next Generation of America's Health Care Workforce."

CAMT — Treasury last week issued guidance addressing concerns that more companies become subject to the corporate alternative minimum tax (CAMT) because of tax benefits in the OBBBA, including making the R&D provision permanent (as IRC Section 174A) and providing the option to elect to retroactively deduct domestic research or experimental expenditures. Notice 2026-7, released February 18, would allow taxpayers to adjust applicable financial statement income (AFSI) for certain domestic research amortization deductions claimed in tax years beginning after December 31, 2024. Previous reports have suggested Treasury and IRS plan to issue a reproposed package of CAMT rules before the end of 2026.

CAMT was already in the news after some Senate Democrats challenged other guidance, Notice 2025-28, on partnership issues, through a Congressional Review Act (CRA) resolution that failed to advance in a February 10 procedural vote. Democrats in Congress expressed opposition to the new Notice 2026-7. For example, House Ways and Means Committee Ranking Member Richard Neal (D-MA) said, "This new guidance ignores the clear language of the tax code … "

International tax — According to press reports, Treasury is reconsidering December 2025 regulations under IRC Section 892, under which foreign governments are generally exempt from US income taxation on certain qualified income received from US investments. The exemption does not apply to income from "commercial activity," or received by or from a "controlled commercial entity" (CCE), or income received from a disposition of an interest in a CCE.

Politico Morning Tax reported February 18 that Treasury said it would take a fresh look at the rules, which would govern investments made in the US by foreign governments. A Treasury spokesperson was cited as saying that "after robust engagement, we are revising the proposal to address key issues and ensure it supports stable, long-term capital flows." The Bloomberg Daily Tax Report said February 20, "Government officials made the decision after feedback from the investment and real estate industry," citing a Treasury spokesman.

IRS — On February 20, Notice 2026-16 announced that the Treasury/IRS intend to issue proposed regulations addressing the special depreciation allowance for qualified production property under IRC 168(n), as added by the OBBBA.