30 March 2026 This Week in Tax Policy for March 30 Congress: The House and Senate are scheduled to be out of session for two weeks, but the schedule remains fluid due to continued disagreement over DHS funding. Bloomberg Government reported that President Trump's FY2027 Budget proposal will be delivered to Congress on April 3. Treasury officials have created expectations that the Budget would not include many major new tax proposals. This Week in Tax Policy will not be published over the next two weeks if Congress is in recess, though other WCEY Alerts will be issued as events warrant. Big picture: While the Senate voted early March 27 to fund the Department of Homeland Security (DHS) except for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) to end the DHS shutdown, House leaders instead proposed a 60-day DHS "continuing resolution" stop-gap funding bill. The House late March 27 approved the 60-day measure 213-203, but Senate Democratic leader Chuck Schumer (D-NY) earlier said it would be "dead on arrival in the Senate." This leaves a resolution to the DHS shutdown and outlook for the scheduled two-week congressional recess unclear. In their approach, Senate Republicans were intending to leave open the potential for Republicans to use the budget reconciliation process to enact immigration enforcement provisions and possibly other priorities including the SAVE America Act voter ID bill and a $200 billion war supplemental. Tax provisions could be part of an eventual bill, including as revenue offsets, in addition to potential proposals to address waste, fraud, and abuse in various federal programs. While the DHS standoff heightened tensions between the parties and the Republicans pursuing reconciliation could highlight contrasting views with Democrats, the House Ways and Means Committee came together on a bipartisan basis this week to unanimously approve five noncontroversial bills on issues including disaster tax relief, educator tax deductions and tax administration. Several tax bills were introduced this week, including on IRC Section 163(j) interest deductibility, in addition to the latest in a series of income-based proposals by Democrats that seek to emphasize income inequality. Reconciliation: Prospects for a second budget reconciliation bill to follow the "One Big Beautiful Bill Act" (OBBBA) may be higher than they have been since the OBBBA passed last summer, with Republicans eyeing a party-line bill for issues with sharp policy differences with Democrats, like ICE practices and war funding. Senate Majority Leader John Thune (R-SD) had been more circumspect about a second reconciliation bill until this week, when the approach emerged as a potential way to largely end the DHS shutdown. Even before a March 23 White House meeting where Senate Republicans seemed to settle on that approach, Budget Committee Republicans were already planning to work on plotting out a reconciliation bill this week. "We need to do another one no matter what," Senate Budget Committee Chairman Lindsey Graham (R-SC) said of a second bill. Chairman Graham released a statement March 25 saying in part, "After consulting with President Trump and his team and Leader Thune, the Senate Budget Committee will expeditiously move toward creating a second budget reconciliation bill … The purpose of the second reconciliation bill is to make sure there is adequate funding to secure our homeland and to support our men and women in the military." There are increasing signs that some Republicans may want to include tax provisions in a second budget reconciliation bill. House Ways and Means Committee Chairman Jason Smith (R-MO), who has been one of the members most outspoken in expressing skepticism that a second bill could get the requisite votes in the House, said at a Wednesday event that, should a reconciliation package materialize, it will include tax provisions, Punchbowl News reported. House Budget Committee Chairman Jodey Arrington (R-TX), who has long advocated for a second reconciliation bill, was cited by the press as raising the issue of improper Earned Income Tax Credit (EITC) payments to offset the cost, and is among members who want to target waste, fraud and abuse in federal programs. In a March 27 Politico story, Chairman Smith said, "If there's a second reconciliation, the Ways and Means Committee will have a significant footprint or there won't be a second reconciliation."
The disaster relief bill (H.R. 5366) — under which "qualified net disaster losses" would be deductible to the extent they exceed $500 per casualty and without regard to whether aggregate net personal casualty losses exceed 10% of a taxpayer's adjusted gross income — was named after the late Rep. Doug LaMalfa (R-CA), who was a co-sponsor of the bill and to whom members of both parties paid tribute. During debate, Rep. Judy Chu (D-CA) discussed her bill on the same issue, the Disaster Survivors Tax Relief and Recovery Act (H.R. 6842), which includes provisions on charitable contributions, retirement plan withdrawals, and additional Low-Income Housing Tax Credit (LIHTC) allocations. There was also some discussion of the bill (H.R. 6985) by Reps. Max Miller (R-OH) and Steven Horsford (D-NV) to restore the 100% deduction of gambling losses against winnings, which was reduced to 90% in OBBBA. Committee approval of two tax administration bills — the Taxpayer Experience Improvement Act (H.R. 7971), to boost IRS customer service policies, and the IRS Whistleblower Program Improvement Act (H.R. 7959) — has spurred speculation about whether a compromise tax administration package could come together with the Senate. Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) in February introduced the "Taxpayer Assistance and Service Act," which includes an upgrade to the "where's my refund" tools as well as whistleblower provisions. A WCEY Alert has details. Energy tax: The Senate March 25 failed to advance a Congressional Review Act resolution (S. J. Res. 107) to overturn IRS Notice 2025-42 on "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." The vote was 47-53 along party lines. In introducing the resolution in February, Senator Catherine Cortez Masto (D-NV), Senate Democratic Leader Schumer, and Finance Committee Ranking Member Wyden said while previous BoC guidance included physical work on or off the job site and any project in which 5% of the total cost had already been spent, the Notice largely revokes the 5% standard. Meanwhile, Senate Democrats are putting up the proposed reversal of OBBBA energy tax credit rollbacks as another plank of the affordability agenda heading into the midterm elections. At the League of Conservation Voters Capital Dinner on March 25, Leader Schumer said his party passed "the greatest legislation that changed climate and worked for clean energy greater than any legislation ever passed," then Republicans took it away. "We will put it back and go even further," he said. 163(j): The Ensuring Better Interest Treatment and Deductibility (EBITDA) Act (S. 4221/H.R. 8101), introduced March 26 by Senator Shelley Moore Capito (R-WV) and Ways and Means member Ron Estes (R-KS), would allow inclusion of global income (Subpart F income, GILTI inclusions, and IRC Section 78 gross-up amounts) in Adjusted Tax Income (ATI) for purposes of the IRC Section 163(j) interest deduction limitation. "This anti-competitive provision shrinks the ATI base and reduces allowable interest deductions, even when such global income is fully subject to U.S. tax," the Senate sponsors of the bill said of the current limitation. "This limitation undercuts the key pro-growth outcome in the" OBBBA. "As it currently stands, our tax code is penalizing American businesses for growing — when a manufacturer borrows money in the United States to expand their global business, they shouldn't be slammed with a surprise tax bill because they're investing in their operations," Rep. Estes said. Wealth tax: The Ultra-Millionaire Tax Act (H.R. 8085/S. 4246) introduced March 25 by Rep. Pramila Jayapal (D-WA) and March 26 by Senator Elizabeth Warren (D-MA) would establish a 2% annual tax on the net worth of households and trusts valued at over $50 million and an additional 1% annual surtax (3% total annual tax) on the net worth of households and trusts above $1 billion. The House bill has more than 45 House co-sponsors. Senator Warren said, "While multi-millionaires and billionaires are getting richer and richer, families are getting squeezed by a rigged economy. My bill is about basic fairness and making the ultra-wealthy pay their fair share. It's time for the government to stop listening to the richest of the rich and start working for working people." Estate tax: The Strengthen Social Security by Taxing Dynastic Wealth Act (S. 4196) introduced by Senator Chris Van Hollen (D-MD) on March 25 would return the estate, gift, and generation skipping transfer tax to 2009 levels. Specifically, it would Increase the top estate and gift tax rate from 40% to 45% and exempt the first $3.5 million of an individual's estate from estate taxes ($7 million for married couples) and would deposit all of the revenues from the estate, gift, and generation-skipping transfer taxes into the Social Security OASI/DI Trust Fund. Mergers: The Stop Subsidizing Giant Mergers Act (S. 4185) introduced by Senator Sheldon Whitehouse (D-RI) March 25 would end the tax-free treatment of certain corporate reorganizations that involve large corporations. The bill targets a "major exception for certain types of mergers: if a corporate reorganization is structured so that the acquiring firm is exchanging stock, then the appreciation in value of the target firm's stock and/or assets may be fully tax exempt," the sponsors, which also include Senator Josh Hawley (R-MO), said. A similar bill was co-sponsored last Congress by then-Senator and now-Vice President JD Vance. Cryptocurrency: On March 24, Senator Ted Budd (R-NC) introduced S. 4171, to exclude from gross income de minimis gains or losses from certain sales or exchanges of virtual currency. Additionally, Punchbowl News reported that Ways and Means Committee members Miller and Horsford are set to unveil a revised version of their legislative proposal on cryptocurrency tax issues, after previously circulating a discussion draft in December 2025. IRS: In Notice 2026-23, the Internal Revenue Service solicited recommendations for the 2026 - 2027 Priority Guidance Plan. Tax-exempt organizations: An EY Tax Alert, "Congressional Research Service issues analysis of private inurement, private benefit and intermediate sanctions applicable to tax-exempt organizations," is available here.
Document ID: 2026-0746 | |||
