The House ended its workweek Wednesday night and began a recess that is planned to last until after the elections, when a lame-duck session is scheduled to begin on November 9. A House Republican effort to pass a suspension of federal gasoline taxes to respond to high prices stalled. The chamber's exit a day earlier than planned, combined with previously announced plans to skip the next two weeks in session — when the Senate still plans to conduct business — left many outstanding issues to be addressed after the November 3 midterm elections, and the outcome will affect how the lame-duck session will proceed.

Some members wanted to do more before leaving Washington, even as House Speaker Mike Johnson (R-LA) asserted this week that lawmakers could be more effective in their districts rather than in a congressional environment in which they are "running in circles." A story in the September 18 Wall Street Journal, "Congress Heads Home Early as Contentious Issues Simmer," said, "Lawmakers on both sides of the aisle said the House has unfinished business, and they wanted to stick around." The question of how much can get done before the elections persists in the Senate, which may consider a college sports bill next week and is conducting bipartisan negotiations on energy permitting reform.

Some in the House blamed the Senate for inaction on the SAVE America voter ID bill. While the House in July approved a FY2027 budget resolution (H. Con. Res. 113), providing for a $95 billion GOP-only bill focused on defense funding and with some voter ID and farm aid provisions — reconciliation instructions weren't provided to the tax-writing Ways & Means Committee — the effort hasn't gotten off the ground in the Senate. Majority Leader John Thune (R-SD) this week said reconciliation would "probably be a post-election question." A bipartisan package to address outstanding tax and health items is also possible at the end of the year, but prospects for bipartisanship may sour if another Republican-only reconciliation bill is pursued.

A September 16 story in The Hill newspaper, "Trump's allies eye big spending cuts as part of post-election agenda," said, "Conservative Republicans in both chambers are having discussions about spending reforms they would want in return for any package that increases defense spending and raises the debt limit." The story cited Senator Rick Scott (R-FL) as saying the only way to get "the cost of living down is if we balance the budget" and that any reconciliation provisions must be paid for. Senate Budget Committee Chairman Ron Johnson (R-WI) said at least $250 billion in annual wasteful spending could be cut in the lame-duck Congress. "There will be multiple incentives. Can you thread the needle? It's a pretty small needle," he said.

The House this week did pass the Ratepayer Protection Act (H.R. 9340), addressing the recovery of costs related to data centers, but a unanimous consent request for Senate approval was blocked by Democrats who argued it didn't go far enough. A September 18 Politico story, "Economic nerves emerge as House Republicans call it quits till Election Day," cited inaction on fuel prices and other measures and said, "Many Republicans acknowledged the economic headwinds they are facing with the Iran conflict pushing gas and diesel prices to record territory in some parts of the country — plus growing anxiety about AI infrastructure increasing electric bills and a new Fed interest rate hike weighing on borrowing costs."

International tax — On September 16, Ways and Means Committee member Rep. Ron Estes (R-KS) introduced the U.S. Innovation and Global Competitiveness Act of 2026 (H.R. 10431) , which addresses international tax issues including Base Erosion and Anti-Abuse Tax (BEAT) changes, Net CFC Tested Income (NCTI) simplification, and foreign-derived deduction eligible income (FDDEI) expansion.

The U.S. Innovation and Global Competitiveness Act includes provisions that would:

• Exclude payments already subject to US tax from BEAT and count general business credits against BEAT liability
• Eliminate the 10% reduction (haircut) in foreign tax credits for NCTI and allow NCTI losses to be carried forward for up to five years
• Raise the FDDEI deduction to 40% from 33.34% and remove the deduction's taxable income limit

While the Estes bill is similar to prior international tax proposals, it is distinguished by an additional limitation on the proposed BEAT changes by denying the high-tax exception benefit for corporations operating in jurisdictions that impose discriminatory taxes, such as digital services taxes (DSTs) or UTPR-type regimes. "The High-Tax Exemption is a valuable privilege, not a punishment. The requirements we have put in eligibility for it are reasonable and necessary," an Estes summary said. "Discriminatory taxes like Digital Services Taxes (DSTs) and others erode and steal the U.S. tax base. They are the type of bad behavior that BEAT should be used to dissuade."

The bill also repeals the inclusion percentage applicable to the deemed-paid credit for taxes applicable to tested income, repeals the IRC Section 163(j) interest limitation changes enacted in OB3, and expands the practical value of the R&D tax credit.

Cryptocurrency tax issues — The House Ways and Means Committee September 16 approved by a 38-5 vote the Digital Asset Tax Certainty Act (H.R. 10357), which addresses issues including:

• a de minimis rule allowing no gain or loss to be recognized on smaller cryptocurrency transactions
• application of mark-to-market accounting rules to digital asset brokers and dealers
• allowing crypto to qualify for safe harbors to facilitate foreign investment in US markets
• streamlining rules on charitable contributions of digital assets, and
• applying wash sale rules and constructive sale rules to digital assets.

The bill has been under development for well over a year. Cryptocurrency tax issues were the subject of hearings in a Ways and Means subpanel and at the Senate Finance Committee, in July and October 2025 respectively, and then a full Ways and Means hearing on June 9, 2026, addressing specific crypto tax bills that formed the basis of the approved package. "After more than a year of working together, Republican and Democrat Members have come together to establish the first-ever tax framework for digital assets … " Chairman Jason Smith (R-MO) said in an opening statement. "This wasn't built overnight. Through months of careful study and input from Members, the Committee has worked to create the right rules of the road for an industry that has grown into a more than $2 trillion part of the global economy."

The package omitted the Committee's previous approach to mining and staking to provide deferral of newly minted digital assets from inclusion in gross income, akin to the treatment of self-created property, as opposed to being taxed upon receipt. The Joint Committee on Taxation (JCT) description (JCX-47-26) released ahead of the hearing said, under the heading "Character of income from digital asset validation supporting activities," that the bill provides that income from digital asset validation-supporting activities is treated as ordinary income. Press reports suggested there were industry concerns that the bill's approach would preclude gaining newly created property treatment through other avenues like courts and regulators.

All but five Democrats — Lloyd Doggett (D-TX), Judy Chu (D-CA), Gwen Moore (D-WI), Don Beyer (D-VA) and Dwight Evans (D-PA) — supported the measure. Some of the Democratic members who opposed the bill, and even some who voted for it, argued that the Committee's priorities should be focused on the affordability concerns of average Americans. Others suggested the bill is an important step forward to address the lack of clarity in cryptocurrency tax rules, even if it leaves more to be done later.

Rep. Linda Sánchez (D-CA) said she would vote in favor of what is "not a perfect bill but does leave room for further improvement," addresses the current "messy" tax treatment of cryptocurrency, and provides clear guidelines for mining and staking. Rep. Brendan Boyle (D-PA) said we are in the "first or second inning" of congressional work on cryptocurrency, the bill is not a cure-all, but lawmakers must act to make sure the US is a leader in cryptocurrency. Rep. Steven Horsford (D-NV), a leader on the issue with Rep. Max Miller (R-OH), said the package provides some rules and leaves others for further consideration, which won't end with the Committee's vote. A WCEY Alert on the markup is available here.

Full House plans for the Committee package are unclear, as is the outlook for the issue in the Senate. During a June 3 Finance Committee hearing, Chairman Mike Crapo (R-ID) said the Committee is engaged in bipartisan discussions on crypto tax issues and, "As the digital asset industry continues to grow and evolve, there's an increasing need for durable, common-sense rules of the road that provide certainty for taxpayers, support innovation and help ensure that the United States remains competitive in the global digital markets." Senator Steve Daines (R-MT) said members were developing a framework for clearer rules.

Punchbowl News noted that Senate efforts aren't as far along as the House and Chairman Crapo as saying the effort may be over a longer term. "I've thought that we would end up with a year-end bill for months," Crapo said in the report. "I think that's becoming a little bit questionable, but I just don't know yet."

Tax — The House Ways and Means Committee also approved by a 40-0 vote the EFIN Verification Act (H.R. 10334), which was introduced by Committee members Reps. Estes and Jimmy Panetta (D-CA) on September 10 and would require validation of electronic filing identification numbers used to electronically file tax returns and other documents.

Trade — The Committee also considered the Stop China's Exploitation of Congolese Children and Adult Forced Labor through Cobalt Mining Act (H.R. 10346) to require the Forced Labor Enforcement Task Force to conduct and report on an investigation into the practice. Rep. Sánchez, the Ranking Member of the Trade Subcommittee, derided the measure as insufficient for only requiring a report, suggesting that is an ineffective approach. The bill passed 32-8 with Democrats split. "No" votes were Ranking Member Richard Neal (D-MA) and Reps. Mike Thompson (D-CA), John Larson (D-CT), Doggett, Sanchez, Chu, Horsford and Boyle.

Health — Ways and Means also approved three health care bills:

• the Alzheimer's Screening and Prevention (ASAP) Act (H.R. 6130) was approved 40-0
• the Medically Tailored Home-Delivered Meals Program Pilot Act (H.R. 5439) was approved 39-0
• the Apples-to-Apples Comparison Act (H.R. 4093), to require Health and Human Services to publish information on expenditures under the Medicare program, was approved 25-15

Tax administration — On another area subject to hopes of House and Senate cooperation later this year, Senate Finance Committee Chairman Crapo and Ranking Member Ron Wyden (D-OR) September 18 announced the Committee has reported the legislative text of the Taxpayer Assistance and Service (TAS) Act (S. 5441) approved in July. The TAS Act would "modernize Internal Revenue Service (IRS) operations and improve taxpayer services, creating a more efficient and transparent tax administration system," a news release said. As a process matter, the Finance Committee marks up bills in concept and drafts language later.

IRS — The Finance Committee is reportedly eyeing a vote next Thursday (September 24) on the nomination of James Gadwood to be IRS Chief Counsel. The nomination was a focus of a September 15 Committee hearing on nominations, but health care issues dominated the member Q&A portion.

An EY Tax Alert, "IRS expands ability to make automatic accounting method changes for research or experimental expenditures and certain long-term contracts," is available here.