Here’s a look at recent tax-related happenings on the Hill, including the latest on tariffs, movement on a budget resolution, and six bipartisan bills.
Lately on the Hill
President Trump Declares Sweeping Tariffs
On April 2, 2025, President Donald Trump signed an executive order imposing a variety of reciprocal tariffs. According to the order, the tariffs are in response to a “lack of reciprocity in our bilateral trade relationships.” The Trump Administration determined a rate based on an analysis of several factors, including tariffs imposed by a country, non-monetary barriers, and other payments, e.g., VAT, on the importation of goods. More details are included in our FORsights™ released last week.
Senate Passes a New Budget Resolution to Include Tax Policy
In a 51–48 vote, the Senate passed a budget resolution over the weekend introducing tax policy alongside defense, border, and energy measures. The House passed a significantly different resolution over a month ago. It remains to be seen what adjustments will be made to the Senate’s version, if any. Both chambers must pass identical resolutions, which they hope to do this week before a two-week recess begins.
Here’s where both resolutions stand:
| House Budget Resolution | Senate Budget Resolution |
|---|---|
| · Current Law Baseline – estimates consider the Tax Cuts and Jobs Act of 2017 (TCJA) expiring at the end of 2025 and would have a cost to re-enact the tax provisions | · Current Policy Baseline – treats the extension of the TCJA as a continuation of existing tax policy, effectively estimating the cost to be zero. Note: This approach still requires every impacted Code section to be amended |
| · Temporary extension of the TCJA | · Permanent extension of the TCJA |
| · $4.5 trillion allocated to the Committee on Ways & Means for tax extenders (approximately equal to what the Congressional Budget Office (CBO) estimated the cost of extending the TCJA) | · $1.5 trillion allocated for tax cuts. With the use of the current policy baseline, this allocation would be used for other tax provisions outside the scope of the TCJA, such as immediate research and development expenses, enhanced business interest deductions, increased deductions for state and local taxes, and Trump’s tax relief proposals, e.g., no tax on tips1 |
| · $2 trillion in spending cuts, anything below this figure will reduce the Committee on Ways and Means’ $4.5 trillion allocation | · $4 billion in spending cuts |
| · $4 trillion increase to the debt limit | · $5 trillion increase to the debt limit |
At the request of four Democratic members of Congress, the Joint Committee on Taxation calculated a $5.5 trillion price tag to permanently extend the TCJA. The estimate included the retroactive application of three significant business provisions, namely the addback for depreciation and amortization to the calculation for the allowable deduction of business interest retroactive to tax years beginning after December 31, 2021, 100% bonus depreciation retroactive to tax years beginning after December 31, 2022, and immediate deductibility of research and experimental expenditures retroactive to tax years beginning after December 31, 2021.
Senate Relies on 1974 Act to Score Tax Bill
The Senate moved forward with its resolution without official input from the Senate Parliamentarian Elizabeth MacDonough on the use of the current policy baseline methodology to estimate the cost of the resolution. The method has not been historically used to score budget reconciliation measures, and it was thought her ruling on its use would be needed.
However, Senate Republicans felt comfortable advancing with the current policy baseline at the discretion of Senate Budget Committee Chair Lindsey Graham (R-SC). Republican leadership is said2 to be relying on Section 312 of the Congressional Budget Act of 1974, which states, “the levels of new budget authority, outlays, direct spending, new entitlement authority, and revenues for a fiscal year shall be determined on the basis of estimates made by the Committee on the Budget of the House of Representatives or the Senate, as applicable.”
Republican Majority Bolstered by Florida Elections
Republicans in the House increased their numbers as the two special elections in Florida went their way. Jimmy Patronis and Randy Fine won their races, filling seats vacated by former Representative Matt Gaetz and Mike Waltz.
The additional seats bring the House’s balance of power to 220 Republicans and 213 Democrats. The remaining two seats left to be filled were held by Democrats Sylvester Turner of Texas and Raúl Grijalva of Arizona, who both passed away this year. The election to replace Turner has not been scheduled and the election to replace Grijalva will occur in September.
Revenue Proposals Call for a Business SALT Cap & Higher Top Tax Rate
As the budget resolution process progresses, Republicans have also begun drafting plans for the tax bill itself. Some provisions have been floated, including changes to deductions for state and local taxes (SALT) and a new top income tax rate.
The $10,000 cap on SALT deductions for individuals has been a sticking point for Republicans from high-tax states where the cap has had the greatest impact on taxpayers. President Trump also promised to address the issue during a campaign stop in New York last year.
Reports indicate that Republicans are considering increasing the cap to $25,000 and offsetting the decreased revenue that would result by introducing a cap on SALT deductions businesses can claim.3 Although the concept has been referred to as “C-SALT” (corporate SALT), the limitation would apply not only to corporate structures but also to pass-throughs such as partnerships and S-corporations.
Additionally, a new 40% tax rate for taxpayers earning more than $1 million has been discussed while also raising the current top rate of 37% back to 39.6%.4 With the extensive costs of new tax cut proposals, Republicans are looking for ways to offset the costs as required under the rules for budget reconciliation that such bills must be deficit-neutral.
Bipartisan Bills Passed Out of the House
Last week, the House passed six bipartisan bills affecting tax administration and disaster relief. Here is a summary of the bills:
| Bill Title | Description |
|---|---|
| H.R. 1152, Electronic Filing and Payment Fairness Act | Electronically submitted documents and payments to the IRS are recorded on the date sent rather than the date received. |
| H.R. 998, Internal Revenue Service Math and Taxpayer Help Act | Math or clerical errors provided by notice must include clear descriptions and other detailed information and procedures to correct the error. |
| H.R. 517, Filing Relief for Natural Disasters Act | Authorizes IRS to postpone federal tax deadlines for taxpayers affected by disasters upon the request of state governors. |
| H.R. 1491, Disaster-Related Extension of Deadlines Act | Postponement of the federal tax return deadline due to a federally declared disaster is also an extension of the lookback period to tax refund filings. |
| H.R. 997, National Taxpayer Advocate Enhancement Act of 2025 | Authorizes the National Taxpayer Advocate to appoint legal counsel within the Taxpayer Advocate Service. |
| H.R. 1155, Recovery of Stolen Checks Act | Allows eligible taxpayers to receive a replacement by direct deposit of a federal tax refund that was initially issued as a paper check that was lost or stolen. |
Office of U.S. Investment Accelerator Established by Executive Order
On March 31, 2025, President Trump issued an executive order directing the establishment of the United States Investment Accelerator within the Department of Commerce.
According to the order, “The Investment Accelerator shall facilitate and accelerate investments above $1 billion in the United States by assisting investors as they navigate United States Government regulatory processes efficiently, reduce regulatory burdens where consistent with applicable law, increase access to and use of our national resources where appropriate and consistent with applicable law, facilitate research collaborations with our national labs, and work with State governments in all 50 States to reduce regulatory barriers to, and increase, domestic and foreign investment in the United States.”
The Judicial Report
Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission, No. 24-154
On March 31, 2025, the Supreme Court heard oral arguments to decide whether Catholic Charities, a nonprofit affiliated with the Catholic Church, should be exempt from Wisconsin state unemployment taxes (SUTA).
A Wisconsin state statute5 provides an exemption for entities “operated primarily for religious purposes,” however, the Wisconsin Supreme Court in March 2024 found that Catholic Charities’ was akin to other secular organizations that provide charitable services. The court pointed to the organization’s separate incorporation from the Catholic Church and that it did not proselytize participants in the Catholic faith.
The case could be impactful, not only under the Free Exercise Clause with respect to religion, but also under the Establishment Clause, which forbids government actions that favor religion generally. If Catholic Charities were to prevail, similarly organized secular nonprofit organizations may argue for exemption from SUTA.
U.S. Department of Treasury v. National Treasury Employees Union Chapter 73, No. 2:25-cv-00049
Treasury has filed suit in the District Court for the Eastern District of Kentucky against a union representing Treasury employees in an effort to terminate a collective bargaining agreement between the two parties. The move from Treasury followed an executive order, Exclusions from Federal Labor-Management Relations Programs, issued on March 27, 2025. The order determines that Treasury and several other government agencies “have as a primary function intelligence, counterintelligence, investigative, or national security work.”
The filing asserts, “Congress further empowered the President to issue an order excluding ‘any agency or subdivision thereof’ from collective-bargaining requirements if the President determines that the entity has intelligence, counterintelligence, investigative, or national security work as ‘a primary function,’ and that collective-bargaining requirements cannot be applied to the entity consistent with both national security ‘requirements and considerations.’ 5 U.S.C. §7103(b)(1) (emphases added).”6
Maryland v. USDA, et al., No. 1:25-cv-00748
The U.S. District Court for the District of Maryland issued a preliminary injunction, preventing Treasury and other governmental agencies from further pursuing terminations without complying with governing statutes regulating reductions in force. The order also directs the reinstatement of those already terminated. The order only applies to employees represented by plaintiff states. The terminated IRS employees are scheduled to return to work by April 14.7
From the Treasury & IRS
Final Regulations Almost Ready on Foreign Government Income Exception
Daniel McCall, IRS deputy associate chief counsel international, indicated that regulations under Section 892 are close to being completed.8 The code section exempts from taxation certain income of foreign governments not included income received from commercial activities.
Hearing Set for Kies Nomination
Chairman of the Senate Finance Committee Mike Crapo (R-ID) has set a date for a hearing on the president’s nomination of Kenneth Kies to become the next Treasury assistant secretary. According to the announcement, the hearing will take place on April 10, 2025 at 10 a.m. ET.
Treasury & IRS Forming Priority Guidance Plan
Notice 2025-19 issued by Treasury and IRS requests recommendations for items to be included in the 2025–2026 Priority Guidance Plan. The agencies use the plan to help identify and prioritize issues on which to publish guidance.
- 1 Note that the CBO’s May 2024 estimate of extending the TCJA included resetting bonus depreciation to 100%, perhaps indicating that full bonus depreciation would be included as a TCJA tax extender with a zero cost under the current policy baseline.
- 2 “GOP’s Tax Bill Scoring Plan Hinges on Using Obscure Budget Law,” bloomberglaw.com, April 1, 2025.
- 3“Corporate SALT Cap Proposal Puts States, Businesses on Notice,” bloomberglaw.com, April 4, 2025.
- 4 “Republicans Debate Hiking Tax Rate to 40% for Millionaires,” bloomberglaw.com, April 3, 2025.
- 5 Wisconsin Statute §108.02(15)(h)2.
- 6 “Treasury Seeks to Void Bargaining Agreement After Executive Order,” taxnotes.com, March 28, 2025.
- 7 “Work Set to Resume in Mid-April for Fired Probationary Employees,” taxnotes.com, April 3, 2025.
- 8 “IRS Close on Final Rules for Foreign Government Income Exception,” bloomberglaw.com, March 28, 2025.