This week (October 5-9)

Congress: The House and Senate are out of session until after the November 3 midterm elections.

House Ways and Means Committee Chairman Jason Smith (R-MO) announced that the Committee will hold a field hearing, "The One, Big, Beautiful Bill Delivering for Small Business, Manufacturing and Working Families." The hearing will take place on Tuesday, October 6, 2026, at the Orgill Innovation Center in Collierville, Tennessee, in the district represented by Ways and Means Committee member Rep. David Kustoff (R-TN).

This Week in Tax Policy won't be published on a regular basis while Congress is away, but other WCEY Alerts will be published as events warrant.

Last week (September 28-October 2)

Big picture: Only the Senate was in session again this week — the House has been in recess since September 16 — and held the final round of planned votes until after the November 3 midterm elections. Much of the attention had already turned from the business of Congress to the midterm elections and the long list of issues awaiting action in the post-election lame-duck session. The Senate was able to approve the Protect College Sports Act (S. 4468) to, among other things, establish requirements for name, image or likeness (NIL) agreements for college student athletes. Procedural votes on two other measures — the Stop Insider Trading Act (H.R. 7008), which would ban stock trading by members of Congress and require photo ID to vote, and the Ratepayer Protection Act (H.R. 9340), addressing recovery of data center costs — failed September 30. Republicans bemoaned the lack of requisite bipartisan support for the bills, which could have delivered some pre-election wins, while Democrats were critical of the data center bill — for including optional, not mandatory, requirements — and various aspects of the stock trading and voter ID measure. There were several press reports suggesting Senate Republicans had wanted to accomplish more on affordability issues prior to the elections.

There was movement on at least two tax issues that could be acted on in the lame-duck session, tax administration and cryptocurrency tax issues. The Senate was able to clear by unanimous consent September 30 the Taxpayer Assistance and Service (TAS) Act approved by the Finance Committee in July. Enactment of the bill likely isn't imminent: The House has approved narrower tax administration bills, as opposed to the single Senate bill, and the hope is for a compromise package to come together later this year. And Senate Finance Committee member Steve Daines (R-MT) officially introduced a cryptocurrency tax bill (S. 5616) that is similar to the Digital Asset Tax Certainty Act (H.R. 10357) approved by the House Ways and Means Committee September 16. House Ways and Means Committee Chairman Jason Smith (R-MO) noted that the Daines bill has much in common with his Committee's bill and said, "There is also clear momentum building to deliver tax certainty to digital asset owners and ensure America remains the crypto capital of the world." However, Senator Cynthia Lummis (R-WY), a non-Finance Committee member who has been active on the issue, isn't so sure that is true. Like Finance Chairman Mike Crapo (R-ID), she cited waning confidence about Senators' appetite for a year-end tax package, which looms over other possible additions including tax extenders, the expiring Sec. 48D credit for advanced manufacturing investment (CHIPS ITC), the 20% tax credit on compensation for qualified film and TV productions, and US-Taiwan tax relief.

Tax administration: The Senate-approved TAS bill (H.R. 5349) includes provisions that are intended to:

• Digitize more tax returns
• Expand online accounts
• Streamline Chief Counsel reviews of offers-in-compromise
• Allow the U.S. Tax Court to hear cases relating to refunds and otherwise clarify the court's authority
• Establish new tax preparer penalties
• Provide new authorization for the Office of Appeals

Crypto Tax: Similar to the House Ways and Means Committee-passed Digital Asset Tax Certainty Act (H.R. 10357), the Aligning Digital Assets with Principles of Taxation Act (ADAPT Act, S. 5616) introduced by Senator Daines provides a de minimis rule under which no gain or loss is recognized on a digital asset used to pay a digital asset transaction cost if the total value used is $10 or less; allows dealers and traders in covered digital assets to elect mark-to-market treatment; applies a safe harbor that foreign persons trading stocks, securities, or commodities through U.S. brokers or on their own are not engaged in a U.S. trade or business to trade digital assets; applies wash sale and constructive sale rules to digital assets; and adds digital assets to the appraisal exception for charitable contributions. The bill would also provide that income from digital asset validation supporting certain activities — staking, mining, etc. — is US-source if derived by a US person and foreign-source if derived by a foreign person. It further would apply a safe harbor, under which foreign persons trading stocks, securities, or commodities through U.S. brokers or for their own account are not engaged in a U.S. trade or business, to traded digital assets.

Finance Chairman Crapo has been noncommittal about whether the Committee plans to revise the House Ways and Means-passed crypto tax bill, and Ranking Member Ron Wyden (D-OR) said that the involvement of President Trump and his family in cryptocurrency may be an impediment to action on the bill. Punchbowl October 1 reported Senator Lummis as saying, "It will surprise me if anything tax-related on digital assets gets done this year," for reasons including the uncertainty surrounding a year-end tax package. She noted that the House bill provides a de minimis exemption from taxes for network and transaction fees but no such relief for other payments. "I think it's missing an important component, but I think that's all [Smith] could get passed on a bipartisan basis," Lummis said. Bloomberg Tax cited Senator Lummis — who, like Senator Daines, is retiring — as saying she has a few concerns about what the bill does not address and speculating that year-end chances are dimmed by the pitfalls of opening a bill to tax changes. "Because then the tax code becomes fair game for all kinds of ideas that differ from the Working Families Tax Cut bill," Lummis said, referring to the One Big Beautiful Bill Act. "So it will surprise me if anything tax-related on digital assets gets done this year."

Sports tax: Adding even another potential tax item to the conversation for a year-end bill is a bill (S. 5661) by Senators Raphael Warnock (D-GA) and Katie Britt (R-AL) to exclude athletic personnel of publicly traded professional sports teams from the expansion in the limitation on the deduction for certain employee renumeration under Section 162(m) set to take effect in 2027. The House bill (H.R. 10682) was introduced by Rep. Nicole Malliotakis (R-NY), Tom Suozzi (D-NY), Brian Jack (R-GA) and Lucy McBath (D-GA). The Tax Cuts & Jobs Act (TCJA) eliminated the performance-based compensation and commissions exceptions to Section 162(m) and expanded the definition of "covered employee" to include the CFO. The 2021 American Rescue Plan Act (ARPA) included a provision to deny the deduction for compensation over $1 million for the eight highest-paid employees (regardless of officer status), plus the CEO and CFO, at publicly traded companies, effective beginning in 2027.

LIHTC: On September 30, Senate Finance Committee member Sheldon Whitehouse (D-RI) introduced The Affordable Housing Construction Act (S. 5625), to:

• Make the temporary 12.5% increase to the Low-Income Housing Tax Credit (LIHTC) permanent;
• Triple the LIHTC state allocation to $9.79 per capita and triple the small state minimum to $11.34 million;
• Set aside one-third of each state allocation for boosts to projects that meet special requirements (prevailing wage, renewable energy sources, proximity to public transportation, etc.);
• Lower the private activity bond threshold for the rehabilitation credit from 50% to 15%; and
• Extend the required affordability period for LIHTC buildings from 30 to 50 years.

Windfall profits tax: On September 28, Senator Adam Schiff (D-CA) formally introduced the Oil Company Windfall Profits Tax Act (S. 5569) to impose a permanent 50% excess profits tax on big oil companies, and direct all revenues raised to the Highway Trust Fund and other accounts. Excess profit would be considered the excess of adjusted taxable income for the taxable year over the reasonably inflated average profit.

Trump Accounts: In regulations (TD 10056) released September 29, the Administration provided general requirements for Trump accounts and rules for establishing an initial Trump account, including automatic enrollment by the Treasury Department and the administration and claiming of auto accounts. Introducing auto enrollment, long a feature of retirement savings accounts, to the savings vehicles for children under 18 is viewed as aiming to increase participation. The regulations suggested the move could provide Trump Accounts to more than 60 million additional children this year. Treasury announced the completion of automatic enrollment for Trump Accounts on Thursday, October 1. "With automatic enrollment complete, every eligible child under the age of eighteen with a valid Social Security number now has a Trump Account," the Department said.

PGP: On September 29, IRS released the 2026—2027 Priority Guidance Plan that includes 121 guidance projects addressing continued implementation of the OBBBA; deregulation and burden reduction; and guidance addressing tax exempt organizations and digital assets. These include:

• final regulations under IRC Section 45Z on the clean fuel production credit, after proposed regulations were published on February 4, 2026;
• guidance on the domestic content bonus credit amount for the IRC Section 45Y clean electricity production credit and 48E clean electricity investment credit;
• regulations under IRC Section 162(m) for rules regarding excessive employee remuneration from controlled group members; and
• regulations and other guidance under IRC Sections 174 and 174A regarding research and experimental expenditures.

Washington Council Ernst & Young Announces Addition of Nationally Recognized Tax Policy Expert Ken Kies: Washington Council Ernst & Young (WCEY) today announced that Ken Kies, one of Washington's most respected tax policy professionals, has joined the firm as a senior advisor for tax policy. With more than four decades of experience spanning Congress, the U.S. Treasury Department and the private sector, Kies will help clients navigate an increasingly complex tax and fiscal policy landscape.

Kies most recently served as Assistant Secretary of the Treasury for Tax Policy and Acting Chief Counsel of the Internal Revenue Service following Senate confirmation in 2025. In that role, he was responsible for leading Treasury's tax policy efforts and implementation of major federal tax legislation.

"Ken is widely regarded as one of the premier tax policy minds in Washington. His unparalleled experience at the intersection of tax policy, legislation and regulatory implementation will be an extraordinary asset to our clients. As businesses face significant uncertainty and opportunity in the tax arena, there is no one better positioned to help them understand and navigate the policy environment."

Ray Beeman, Leader of WCEY

Kies has held senior positions on Capitol Hill, including serving as Chief of Staff of the Congressional Joint Committee on Taxation and Chief Republican Tax Counsel to the House Ways and Means Committee. He has also advised major corporations, trade associations and policymakers on federal tax legislation and regulatory matters.

Throughout his career, Kies has been involved in the development and analysis of major federal tax legislation, including the Tax Reform Act of 1986 and the Taxpayer Relief Act of 1997, as well as the implementation of last year's One Big Beautiful Bill Act during his tenure as Assistant Secretary for Tax Policy and Acting IRS Chief Counsel.

"Washington Council Ernst & Young has built a reputation for delivering strategic insight and practical solutions to clients facing complex policy and business challenges. I am excited to join this talented team and help clients understand the evolving tax policy landscape, anticipate legislative and regulatory developments, and achieve their long-term objectives."

Ken Kies, Senior Advisor, WCEY

"Few individuals have shaped and interpreted federal tax policy as directly as Ken. His expertise, relationships and deep understanding of the tax policy process will strengthen our ability to provide clients with timely, actionable guidance on some of the most important issues facing businesses today."

Martin Fiore, EY Americas Vice Chair of Tax