This week (March 2-6)

Congress: The House and Senate are in session.

On Wednesday, March 4, there are three tax events on Capitol Hill:

• the House Ways and Means Committee has scheduled a 10 a.m. hearing with IRS Chief Executive Officer Frank Bisignano to discuss the 2026 filing season, implementation of the "One Big Beautiful Bill Act" (OBBBA), and the Trump Administration's priorities for the IRS
• the Joint Economic Committee has scheduled a hearing at 10:30 a.m. on "Evaluating the U.S. Competitiveness and Investment Advantages of a Destination-Based Cash Flow Tax (DBCFT)"
• the Joint Committee on Taxation is holding a "Panel on The Joint Committee's Role in the Tax Legislative Process in the Past and the Future" from 2:30 to 4:30 p.m.

Last week (February 23-27)

Big picture: It remains unclear how Congress may pass additional tax, and possibly trade and health, legislation this year. The two options are a bipartisan bill or a second party-line bill like last year's "One Big Beautiful Bill Act" (OBBBA), which some Republicans doubt can pass in the 218-214 House despite some recognition that it may offer the only opportunity to advance the party's additional priorities in the narrowly controlled chamber. Health care provisions have long been expected to feature prominently in a second reconciliation bill should one materialize, and the February 20 Supreme Court decision that the International Emergency Economic Powers Act (IEEPA) does not provide authority to impose tariffs has been refocusing attention on the possibility of a bill. Senator Bernie Moreno (R-OH) is pushing for legislation to codify President Trump's tariffs, which not all Republicans support, complicating the potential path for a second GOP-only bill. "I'm hopeful that my colleagues, we can get to work on creating a reconciliation bill that does other things … but in that same bill would have a major pay-for, which would be to put these tariffs into legislation," Moreno said in a February 24 Punchbowl News report. The debate over whether to pursue a reconciliation bill has simmered for months, with congressional Budget Committee chairmen in favor, GOP leaders largely neutral, and tax-writing committee leaders focused on bipartisan legislation. 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 given the close party ratio. "I would love a second reconciliation bill, but I can count votes," Ways and Means Chair Jason Smith (R-MO) said. "And we do not have the votes." Asked on Fox News February 25 whether Republicans are working on another reconciliation package this year ahead of the midterm elections, Senate Majority Leader John Thune (R-SD) said: "We are soliciting ideas from the relevant committees here in the Senate to see if there is an issue set that we could put up for a reconciliation bill that would get 50 votes."

SOTU: President Trump delivered the State of the Union Address to a joint session of Congress on Tuesday, February 24. On tax issues, the President celebrated provisions of last year's reconciliation bill, noting that Democrats were opposed. "But we held strong and with the great Big, Beautiful Bill, we gave you no tax on tips, no tax on overtime, and no tax on Social Security for our great seniors," he said. "And we also made interest on auto loans, tax deductible the first time, but only if the car is made in America." President Trump cited the Trump Accounts established under the OBBBA, which are tax-free investment accounts for every American child. "Millions will be pre-funded courtesy of the U.S. Treasury and private individuals … " he said. The President's speech didn't necessarily provide Congress with a road map on tax or other policy issues. "From a legislative perspective, Trump's State of the Union address was notable for what it didn't include. He gave Republicans a pass on trying to revive his global tariff campaign after a major Supreme Court setback. He didn't demand another party-line domestic policy bill before November … " Politico reported in a story, "Trump doesn't give Congress much to do before the midterms," on February 25. "Instead, Trump used the bulk of the speech to lean into red-meat issues like illegal immigration … while encouraging lawmakers to tackle a few relatively minor topics — many of which have already been churning behind the scenes for months."

Tax administration: Senate Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) on February 26 introduced the "Taxpayer Assistance and Service Act" (S. 3931), with provisions to:

• Digitize more tax returns to support faster refunds
• Upgrade the "where's my refund" tools so taxpayers know when to expect their refunds
• Upgrade IRS online accounts so taxpayers and representatives can review and respond online
• Strengthen standards for paid tax preparers
• Expand IRS call-back options
• Allow the US Tax Court to hear cases relating to refunds
• Increase the independence of the National Taxpayer Advocate and IRS Independent Office of Appeals
• Protect victims of fraud from indefinite IRS scrutiny

Senators Crapo and Wyden released a discussion draft on the topic in January 2025, and the Finance Committee has a long history of producing bipartisan tax administration bills. The House Ways and Means Committee has passed some narrower bills on taxpayer rights, the Tax Court, etc. "Taxpayer advocates inside and outside government have been eagerly awaiting the legislation from Crapo and Wyden, which includes tweaks to a number of provisions from last year's draft (and drops some portions altogether) … " Morning Tax said. "There's interest in both parties and chambers in passing further bipartisan tax administration measures this year. But it remains to be seen whether the House and the Senate have the bandwidth to pass something at the scale of Crapo and Wyden's measure."

IRS: Notice 2026-17, released February 25, announced the intention of Treasury and IRS to issue proposed regulations under IRC Section 987 regarding the determination of taxable income or loss and foreign currency gain or loss with respect to a qualified business unit. Notice 2026-17 announces forthcoming proposed regulations that would permit taxpayers to elect the equity and basis pool method for the computation of unrecognized IRC Section 987 gain or loss using a method that is substantially similar to the method provided in regulations proposed in 1991. It also announces that forthcoming proposed regulations would provide an election under which controlled foreign corporations would not compute or recognize foreign currency gain or loss under IRC Section 987(3), except in connection with certain inbound transactions.

The IRC Section 987 rules address determining the taxable income or loss and currency gain or loss for a qualified business unit (QBU) whose functional currency differs from that of its tax owner. At the D.C. Bar conference in January, Kevin Salinger, Deputy Assistant Secretary for Tax Policy at the Treasury Department, said that while final rules issued at the end of 2024 have sound policy reasoning behind them, it has been very difficult for taxpayers to deal with the rules. He previewed the forthcoming guidance under which Treasury planned to give taxpayers the option of following a modified version of the 1991 rules' method to calculate 987 gain or loss. Under the 1991 regulations, taxpayers would determine IRC Section 987 gain or loss by maintaining an equity pool in the QBU's functional currency and a basis pool in the taxpayer's functional currency. The equity and basis pools would be adjusted for taxable income or loss of the QBU as well as for contributions and remittances.

Depreciation: Notice 2026-16 released on February 20 announced that the Treasury/IRS intend to issue proposed regulations addressing the special depreciation allowance for qualified production property under IRC Section 168(n), as added by the OBBBA. In addition to defining qualified production activity, the Notice provides rules for electing to designate property as QPP, as well as special depreciation recapture rules for property that no longer qualifies as QPP because of a change in use.

International tax: Press reports have said 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.

CAMT: An EY Tax Alert, "Additional interim CAMT guidance allows new AFSI adjustments and expands the scope of AFSI adjustments provided in prior interim guidance," is available here.