21 September 2026 This Week in Tax Policy for September 21 Congress: The Senate is in session, may consider a college sports bill, and is conducting bipartisan negotiations on energy permitting reform. The Senate Finance Committee is reportedly eyeing a vote on Thursday (September 24) on the nomination of James Gadwood to be IRS Chief Counsel. The House is scheduled to be out until after the elections. Big picture: 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. Some House members wanted to do more before leaving Washington, including on issues like fuel prices, even as House Speaker Mike Johnson (R-LA) asserted this week that lawmakers could be more effective in their districts rather than staying in session. The Senate is scheduled to be in session for two more weeks before breaking for the elections, but there is already attention on the list of issues that will await a lame-duck session, which is sure to be impacted by the election outcome. Reconciliation efforts that Republicans were pursuing for before the elections weren't to include tax proposals, at least under the terms prescribed by the full House and GOP Senate Budget Committee leadership in their respective budget resolutions, and even the nontax package that was being pushed looks unlikely to be enacted before the elections. Republicans could turn to the reconciliation process again following the elections, but it's unclear whether a post-election bill could include additional tax proposals and social program integrity provisions as some envision. A bipartisan package to address outstanding tax, health, and other items is also possible at the end of the year, but prospects for bipartisanship may sour if another Republican-only reconciliation bill is pursued. There are new items being added to the list for inclusion besides tax extenders and expiring IRC Section 48D credit for advanced manufacturing investment (CHIPS ITC): The House Ways and Means Committee this week approved a cryptocurrency tax bill that has been in development for well over a year, with bipartisan support; and Senate Finance Committee leaders formalized legislative text of a tax administration package that could lead to a compromise agreement on the issue with the House, which this week approved additional tax administration bills. 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:
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. 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. Crypto 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. The Committee's bipartisan support was notable. "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. A WCEY Alert on the markup is available here. The outlook for the issue in the Senate is unclear. Some Senators have expressed interest but, at least until now, crypto tax legislation has been more actively pursued by House tax-writing committee members. During a June 3 Finance Committee hearing with Treasury Secretary Scott Bessent on the Department's budget, Finance 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." Gambling loss deduction: At the very end of the Digital Asset Tax Certainty Act is the text of the FULL HOUSE Act, the bill by Committee members Horsford and Max Miller (R-OH) to roll back the One Big Beautiful Bill Act's (OBBBA) change to IRC Section 165(d) to limit the deduction for wagering losses to 90% of the amount of such losses during a tax year and restore the long-standing rule allowing a 100% deduction of losses against winnings. Rep. Blake Moore (R-UT), who has raised concerns about the negative risks of gambling, took issue with inclusion of the FULL HOUSE Act and said the bill can't be the last action taken on the provision. Tax administration: The Ways and Means Committee also approved by a 40-0 vote the EFIN Verification Act (H.R. 10334), which was introduced by Committee members Ron Estes (R-KS) and Jimmy Panetta (D-CA) September 10 and would require validation of electronic filing identification numbers used to electronically file tax returns and other documents. 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.
Disaster tax relief: On September 11, President Trump signed into law the Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366) which extends and codifies the Federal tax deduction for qualified disaster-related personal casualty losses and the exclusion from gross income of qualified wildfire relief payments. It was passed by the Senate prior to the August recess and by the House in April. "Previously, taxpayers hit by a federally declared disaster could generally only deduct personal casualty losses if they itemized, and only to the extent those losses exceeded 10 percent of their adjusted gross income," Ways and Means Republicans said in a news release. "The law now lets disaster victims deduct qualified losses above $500 per disaster without itemizing and removes the 10 percent adjusted gross income threshold for those losses. It also extends an exclusion from gross income for wildfire relief payments, so survivors are not taxed on compensation meant to help them rebuild." International tax: On September 16, Rep. Estes 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.
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. Regarding the purpose of the proposals generally, the summary said, "We are using this bill as a marker and menu of options that are ready to be included in future tax packages." Reconciliation: The Hill newspaper September 15 reported Senate Majority Leader John Thune (R-SD) as saying Senate Republicans will not consider another budget resolution to unlock a reconciliation 3.0 bill until after the election. "That'll probably be a post-election question," he said. The House FY2027 budget resolution (H. Con. Res. 113), with reconciliation instructions for a $95 billion GOP-only bill focused on defense funding and with some voter ID and farm aid provisions. Senate Budget Committee Chairman Ron Johnson (R-WI) released a Fiscal Year 2027 budget resolution August 7 with budget reconciliation instructions to several committees, but not to the tax-writing Finance Committee. There hasn't been movement on the Senate measure. There have been suggestions that Republicans could turn to reconciliation to act on deficit reduction in a post-election session if Republicans lose control of one or both chambers of Congress. A September 13 Wall Street Journal story, "Bessent Says the U.S. Can Grow Its Way Out of the Debt Crunch," said as opposed to tax increases or spending cuts, the Administration is focusing on the nation's growth potential to address the deficit. "That is the tale Treasury Secretary Scott Bessent and administration officials have touted as the U.S. crossed borrowing milestones, with publicly held debt hitting 100% of gross domestic product and gross debt topping $40 trillion," the story said. "Bessent sketched a scenario where the government benefits from growth fueled by the artificial-intelligence build-out, reshored manufacturing and tax cuts for consumers." 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. Education tax bills: The Senate-passed sanctions bill cleared by the House on September 16 was combined with the Supporting Early Childhood Educators' Deductions (SEED) Act (H.R. 5334), Ways and Means Committee member Rep. Panetta's bill to allow early-childhood educators to deduct classroom expenses from their taxable income. On September 17, Senator Bill Cassidy (R-LA) introduced a bill (S. 5420) to increase the qualified elementary and secondary education scholarships credit limit for married taxpayers filing a joint return. Another bill (S. 5421) to eliminate the State opt-in requirement for the qualified elementary and secondary education scholarship credit. Senator John N. Kennedy (R-LA) introduced a bill (S. 5423) to increase the deduction for certain expenses of elementary and secondary school teachers and to allow an equivalent deduction for home educators. A press release said the Support Our Educators Act would:
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