This week (August 10-14)

Congress: The Senate is scheduled to be out for the August recess until September 14. The House is out until August 31.

Friday, August 14 is the EY Webcast, "EY Center for Tax Policy monthly update: legislative, economic, regulatory and IRS developments."

This Week in Tax Policy won't be published when Congress is gone for the August recess, but other WCEY Alerts will be issued as events warrant.

Last week (August 3-7)

Reconciliation: Senate Budget Committee Chairman Ron Johnson (R-WI) released a Fiscal Year 2027 budget resolution August 7 with budget reconciliation instructions to several committees — Agriculture, Armed Services, Commerce, Energy, Foreign Relations, Homeland Security, Indian Affairs, Intelligence, Judiciary, Rules and Administration, and Veterans' Affairs — but not to the Finance Committee. The House FY2027 resolution authorized a $95 billion GOP-only bill just for the SAVE America Act voter ID and citizenship provisions, defense funding and farm aid, without revenue offsets. Chairman Johnson similarly cited armed services, supporting farmers, intelligence services, and election integrity in releasing the Senate resolution. The Senate was still sorting through a variety of outstanding issues as members prepared to leave for the August recess tonight or this weekend, and support for the resolution as released wasn't immediately clear. Press reports suggested a budget-related vote is possible before the Senate leaves town.

There were prior indications the Senate resolution could have been much broader than the House plan, and some members indicated they would insist on revenue offsets. A story in the August 4 Washington Post, "Senate GOP rushes to pass budget bill, avoid shutdown ahead of midterms," said of the reconciliation effort — which is separate from the CR for government funding — "multiple GOP senators have expressed other concerns with the House framework for reconciliation, including" Senators Lisa Murkowski (R-AK), Bill Cassidy (R-LA) and Susan Collins (R-ME). Asked on Fox Business August 6 whether he is a "no" without revenue offsets, Senator Cassidy — a Finance member and HELP Committee Chair — said: "No, without paying for it. You're seeing mortgages back up to like 6.8%. We cannot continue to spend money we don't have and expect no consequences. So, the average person can't afford a home because mortgage rates are so high, because the government is borrowing so much money." He said, "But I will offer offsets if what we're voting on is so important. We should be able to pay for it, and I will offer things that will pay for it."

Leaders are cognizant of the fact that opening the reconciliation process to a broader set of issues also makes a broader range of amendments germane to the bill and subject to a simple-majority, rather than 60-vote, threshold. That means tax and health amendments could be germane with a 50-vote threshold during a Senate vote-a-rama, for the budget and the follow-on consideration of a reconciliation bill. Last week, Senate Majority Leader John Thune (R-SD) said: "Budget resolutions and reconciliation bills are very challenging. This one is no exception. Some of the things that are being contemplated being done in this reconciliation bill or in this budget resolution are things that could implicate a number of committees." Thune said if there is a significant broadening of the measure to many committees, "all of the amendments offered on the floor would be germane to the bill, making them 50-vote amendments instead of 60. And obviously, that creates an uphill challenge, in terms of trying to ensure that you have 50 not only to get on the bill, 50 to defeat every amendment that comes across, but then also 50 to ultimately pass it."

Data centers: Senate Finance Committee Ranking Member Ron Wyden (D-OR) August 6 unveiled a draft proposal to change the tax treatment of data centers that he said are being built to advance new artificial intelligence (AI) tools. The white paper focuses on two sources of potential revenue:

1. Removal of the existing investment incentives in the tax code as they apply to data centers; and
2. Creation of a Data Center Public Investment excise tax to provide a consistent revenue stream.

Wyden's white paper said Democratic staff is "seeking comment on use of the revenue from this excise tax. It is the view of the Ranking Member that a priority should be to directly aid those adversely affected … "

CHIPS ITC: Finance Chairman Mike Crapo (R-ID) and Ranking Member Wyden August 5 reaffirmed their bipartisan commitment to extending the Advanced Manufacturing Investment Credit (CHIPS ITC) for domestic semiconductor manufacturing, which will not apply to property the construction of which begins after December 31, 2026.

Disaster tax: Senator Wyden August 7 received unanimous consent for the Senate to pass H.R. 5366, the Doug LaMalfa Federal Disaster Tax Relief Certainty Act, 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. The bill was introduced by Ways and Means member Rep. Greg Steube (R-FL), and was approved by the House, also by UC, on April 27.

International tax: An EY Alert, "Proposed regulations address the IRC Section 898(c) transition rule and the IRC Section 960(d)(4) foreign tax credit disallowance rule," has been posted here.