Here’s a look at recent tax-related happenings on the Hill, including new executive orders from President Donald Trump and the House passing a budget resolution.
Lately on the Hill
The House approved its budget resolution on February 25 in a narrow 217–215 vote. The resolution would provide for significant changes to tax policy, including an extension of certain provisions of the 2017 Tax Cuts and Jobs Act. Under the resolution, the Energy and Commerce Committee is tasked with identifying up to $880 billion in savings or spending reductions, which are expected to require changes in the funding of the Medicaid program. Following the resolution’s passage, authorizing committees are tasked with determining specific areas in which spending cuts will be implemented.
Debate has sparked around the permanency of proposed tax reform, which many Senate Republicans and Trump support.1 In addition, some congressional Republicans are pushing for a full repeal of the Inflation Reduction Act energy tax credits.2 To further complicate matters, Congress must pass a continuing resolution by March 14, 2025 to prevent a government shutdown.
Executive Orders
The executive order titled “America First Investment Policy” aims to reshape foreign and domestic investment practices to prioritize U.S. national security by restricting foreign investment in critical sectors like technology and infrastructure to allies and partners, while targeting adversarial jurisdictions, identifying the–People’s Republic of China (PRC) and political regimes of Iran, North Korea, and Russia, among others.
Key provisions include:
- Limiting foreign investor access to critical technology, critical infrastructure, personal data, and other sensitive areas
- Establishing a streamlined process to facilitate U.S. investments from specified allies and partners
- Accelerating environmental review for investments exceeding $1 billion in the U.S.
- Countering PRC influence by blocking PRC-affiliated entities from acquiring critical American businesses and assets, deterring U.S. persons from investing in the PRC’s military-industrial sector, considering restrictions on U.S. outbound investments in key PRC sectors, and exploring the suspension or termination of the 1984 United States-The People’s Republic of China Income Tax Convention.
The February 25 executive order, “Addressing the Threat to National Security From Imports of Copper,” directs the Secretary of Commerce to investigate U.S. reliance on copper imports and assess domestic production capabilities. The review will consider foreign supply chains, subsidies, trade practices, and potential export restrictions. Recommendations may include tariffs, export controls, incentives for domestic production, and strengthening the U.S. copper supply chain through investments, reforms, and recycling initiatives.
On February 26, the Trump administration issued the executive order, “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative,” to implement a transformation in federal spending on contracts, grants, and loans with the goal to enhance transparency and accountability. The order mandates a system to document and justify all federal payments, a review of all existing contracts and grants currently outstanding, a freeze on agency employee credit card usage, and a comprehensive report on real property and leases held by each agency for evaluation and potential disposition.
Judicial Report
Following the decision in Smith, et al. v. U.S. Department of the Treasury, et. al. (implications outlined in this FORsights™ article), the Financial Crimes Enforcement Network (FinCEN) announced on February 27 that it will not issue fees or penalties or otherwise take enforcement action against companies that fail to file beneficial ownership information (BOI) reports under the Corporate Transparency Act (CTA) by the March 21, 2025 deadline. FinCEN intends to issue an interim final rule to extend BOI reporting by no later than the current reporting deadline. On March 2, Treasury announced it will not enforce fines or penalties against U.S. citizens or domestic reporting companies and their beneficial owners in light of forthcoming rule changes from FinCEN. Treasury intends to issue proposed rules to narrow the CTA to apply exclusively to foreign reporting companies.
In Eaton Corp. v. Commissioner, Judge Kathleen Kerrigan denied foreign tax credits (FTCs) for income tax paid by a lower tier controlled foreign corporation (CFC) held by a domestic partnership. She concluded that Section 960, which permits taxpayers to claim deemed-paid tax credits for §951(a) (Subpart F) inclusions, was inapplicable because the §951(a) inclusion was not attributable to a domestic corporation. Furthermore, Kerrigan ruled that the partnership’s §951(a) inclusion did not constitute a dividend under §902. However, she noted that any potential double taxation would be temporary, as FTCs could be claimed upon distribution of the lower tier CFC’s earnings and profits.3
Judge William H. Alsup of the U.S. District Court for the Northern District of California has issued a temporary block on the Office of Personnel Management (OPM) from conducting mass firings of probationary employees. In his ruling, Alsup stated that the OPM had exceeded its authority by attempting to direct the workforce of other federal agencies. This decision comes in the wake of approximately 7,000 probationary employees being removed from the IRS as of February 25. However, the ruling does not reinstate their positions.4
From the Treasury & IRS
Secretary of the Treasury Scott Bessent announced that Melanie Krause will serve as acting IRS commissioner following the retirement of acting IRS Commissioner Doug O’Donnell.
The American Institute of CPAs (AICPA) has submitted comments on the Proposed Regulations (REG-11661-20) that suggest changes to Treasury Department Circular No. 230, the regulations governing practice before the IRS. These proposed changes were published in the Federal Register on December 26, 2024. In addition, the AICPA has formally requested the opportunity to testify at the public hearing on these proposed rules scheduled for March 6, 2025.
The AICPA’s recommendations aim to refine and clarify several aspects of the proposed regulations. Key suggestions include:
- Revising the requirement for practitioners to obtain a client’s agreement to disclose identified errors or omissions, instead advising clients to disclose such errors and informing them of potential consequences for nondisclosure.
- Removing the provision that mandates tax practitioners to assess their own mental fitness or that of their peers, as this is deemed outside their professional qualifications and already addressed under other sections of Circular No. 230.
- Modifying the proposed ban on contingent fees to allow them in specific, limited circumstances, aligning with the AICPA’s Code of Professional Conduct.
- Avoiding the disclosure of specific valuation methods used by appraisers representing clients before the IRS, instead requiring adherence to generally accepted appraisal standards.
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.
- 1“Debate Ramps Up on Tax Cut Permanency,” checkpoint.riag.com, February 28, 2025.
- 2“Policy Fights Await Rewrite of Tax and Budget Roadmap,” taxnotes.com, February 27, 2025.
- 3“Eaton Denied Foreign Tax Credits Over Subsidiary Partnership,” news.bloombergtax.com, February 24, 2025.
- 4 “Judge Says Trump Administration Memos Directing Mass Firings Were Illegal,” nytimes.com, February 27, 2025.