Here’s a look at recent tax-related happenings on the Hill, including the U.S. House speaker’s re-election and whether there may be one or two reconciliation bills passed in an effort to extend the tax cuts from the Tax Cuts and Jobs Act of 2017 (TCJA).
Lately on the Hill
Mike Johnson (R-LA) was re-elected as the speaker of the U.S. House of Representatives, securing the position with the minimum number of votes required. Johnson promises to extend the tax cuts established by the TCJA and is a strong advocate for deregulation.
Reconciliation Bills – One or Two?
In a previous edition of From the Hill, we noted the incoming administration’s intention to pass both a reconciliation bill and a tax bill within the first 100 days of taking office. Since then, arguments have been made in favor of extending the TCJA tax cuts as part of a broader reconciliation bill, rather than passing it as a standalone measure.
The narrow House majority could complicate efforts to pass tax legislation through budget reconciliation, as conservative members of the Republican Party may push back in favor of more deficit-conscious measures. In addition, other issues such as presidential nomination hearings, government funding matters, and the debt ceiling discussions could further hinder the passage of a standalone tax bill due to a crowded floor calendar.
President-elect Donald Trump has expressed a preference for “one powerful bill” that addresses border issues, energy, and tax. Ensuring that the tax cuts do not expire is top of mind for Congressional Republicans. House Republicans are poised to take the first procedural vote in the reconciliation process as early as February, according to House Budget Committee Chair Jodey Arrington. Due to disagreements over top-line revenue and spending amounts, two reconciliations may be required, despite Trump’s preference for one.
Unpacking Deregulation
The incoming Trump administration is expected to impose a regulatory freeze and seek to overturn certain regulations, relying on the Congressional Review Act.
Further deregulation efforts may take the form of reduced IRS funding. Of the $80 billion in additional funding allocated to the IRS by the Inflation Reduction Act of 2022 (IRA), $20 billion has already been withheld via the American Relief Act, 2025. The administration is likely to continue efforts to erode IRS funding, which could result in diminished enforcement capabilities and a reduced capacity to provide taxpayer services. The Family and Small Business Taxpayer Protection Act, introduced by the House Ways and Means Committee, would seek to repeal all additional funding allocated to the IRS by the IRA.
From the Treasury & IRS
In IR-2025-10, the IRS announced tax relief for individuals and business affected by the California wildfires. Taxpayers have until October 15, 2025 to file individual and business tax returns and pay tax. Relief is granted to any area designated by the Federal Emergency Management Agency and also will be available to any counties later added to the disaster area.
The IRS announced in IR-2025-3 that it began accepting individual tax returns on January 10 through the IRS Free File program. Taxpayers with adjusted gross income of $84,000 or less are eligible to file through the IRS Free File Guided Tax software. In IR-2025-08, the IRS announced its Direct File Program will open January 27. The IRS will begin accepting all business tax returns on January 15. Click here for additional information.
Final Regulations (T.D. 10022) issued under Section 861 modify rules for classifying transactions involving computer programs and apply the rules to transfer of digital content. Rules regarding the classification of cloud transactions also are addressed. In addition, the IRS released guidance under Proposed Regulations (REG-107420-24) containing rules related to the sourcing of cloud transaction services income according to where the service is performed. Finally, Notice 2025-6 requests comments on the potential implications if the final regulations were to apply to all provisions of the Internal Revenue Code and determine if further IRS guidance is necessary on this topic.
The IRS released Final Regulations (T.D. 10024) providing guidance for taxpayers claiming the clean electricity production credit and the clean electricity investment credit established by the IRA under §45Y and §48E. The Final Regulations outline rules for determining greenhouse gas emissions rates, petitioning for provisional emissions rates, and determining credit eligibility. The rules apply to all taxpayers claiming the credit for qualified energy property or technology placed in service after 2024.
The IRS issued Final Regulations (T.D. 10025) concerning the program to allocate clean electricity low-income communities bonus credit amounts as established by the IRA under §48E. In addition, the IRS has issued guidance on the application process for an allocation of capacity limitation on the §48E credit in Revenue Procedure 2025-11.
The IRS released Final Regulations (T.D. 10026) that implement certain portions of the Proposed Regulations issued earlier this year, specifically the disregarded payment loss rules and the anti-avoidance rules. See our FORsights™ article, “The New Proposed DCL Regulations: Pillar 2 Impact and More,” on the impact of the proposed dual consolidated loss regulations and their impact on a global tax for multinational enterprises.
The IRS finalized regulations (T.D. 10027) providing guidance on the application, method of reporting, and payment of tax on U.S. citizens and residents, as well as certain trusts, who directly or indirectly receive gifts from certain individuals who have relinquished U.S. citizenship or whom are no longer permanent U.S. residents.
The IRS released Final Regulations (T.D. 10028) to identify certain partnership related-party basis adjustment transactions and similar transactions as a type of reportable transactions. The guidance finalized the Proposed Regulations (REG-124593-23) issued in June and requires material advisors and certain participants in these transactions to file disclosures, subject to penalties for failure to disclose.
The IRS issued Final Regulations (T.D. 10029) identifying transactions that are the same or substantially similar to certain micro-captive transactions. Material advisors and certain participants are required to file certain disclosures with the IRS and may be subject to penalties for failure to disclose.
The IRS issued Proposed Regulations (REG-123525-23) concerning the qualified commercial clean vehicle credit enacted by the IRA under §45W. Section 45W provides a tax credit with respect to each qualified commercial clean vehicle placed in service by a taxpayer during a taxable year.
The IRS released Proposed Regulations (REG-100669-24) under §414A, issuing guidance with respect to automatic enrollment requirements for certain retirement plans. The Proposed Regulations reflect provisions of the SECURE 2.0 Act of 2022 that required certain cash or deferred arrangements and salary reduction agreements to be eligible automatic contribution arrangements that satisfied additional requirements.
Proposed Regulations (REG-107895-24) were released late last week regarding the base erosion and anti-abuse tax regime in relation to the determination and reporting of qualified derivative payments with respect to securities lending transactions under §59A.
The U.S. Department of the Treasury has released an updated list of countries requiring cooperation with an international boycott for taxpayers who are required to file an International Boycott Report. Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, and Yemen were included in the list.
CCA 202501008 was issued by the IRS last week, expressing the view that §269 applies in a global intangible low-taxed income (GILTI) avoidance transaction and that the commissioner may disallow a §898(c)(2) election if the effect of that election is such that the income of the first 11 months of the entity’s tax year would not be included under the GILTI regime.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.