Programming Note: Taxation & Representation will return on April 30, following the two-week congressional recess
Legislative Lowdown
Senate Completes Vote-a-Rama to Advance Budget Resolution: On April 4 and 5, the Senate considered the FY 2025 budget resolution H.Con.Res.14, concluding in the traditional “vote-a-rama” on amendment and final passage by a vote of 51-48. Sens. Rand Paul (R-KY) and Susan Collins (R-ME) joined Democrats in opposing the resolution and Sen. Patty Murray (D-WA) was not present. Senators took roll call votes on 21 amendments and approved only one, offered by Sen. Dan Sullivan (R-AK), which is intended to protect Medicare and Medicaid. Seven additional amendments failed by voice vote, for a total of 28 considered amendments. Brownstein’s tracker of filed amendments can be accessed here.
The passage of the budget resolution is key to congressional Republicans’ hopes of enacting an extension of the expiring tax provisions in the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) in reconciliation legislation authorized by the resolution. Significant to these developments is Senate Republicans’ continued advocacy for the current policy baseline. The novel budget approach would allow Congress to make the expiring TCJA tax provisions permanent, with no apparent cost, even though the extension of the expiring TCJA provisions, as a practical matter, would still be deficit financed. Senate Parliamentarian Elizabeth MacDonough sidestepped a decision on whether the use of the current policy baseline is authorized under Senate procedure, deferring instead to the authority of the Senate Budget Committee chairman to designate budget assumptions, in this case a current policy baseline, under the Congressional Budget and Impoundment Control Act of 1974. Chairman Lindsey Graham (R-SC) included provisions for the current policy baseline in the Senate’s budget resolution, noting that the approach “will allow the tax cuts to be permanent.” Republicans have argued for permanency in the tax code, stressing that a stable tax code will help businesses in their long-term planning. In opposition, Senate Democrats have argued that the current policy baseline approach is fiscally irresponsible and a current policy baseline goes against long-standing precedent.
Proposed 40% Marginal Tax Bracket for Million-Dollar Earners Linked to CTC Expansion: To offset the cost of extending the expiring tax provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) and adding President Trump’s tax-policy priorities, some Republicans are reportedly considering creating a new 39% to 40% tax bracket for those earning $1 million or more annually. The TCJA had decreased the top individual rate to 37% and increased the threshold for the top tax bracket ($609,351 for single filers and $731,201 for joint filers in 2024). It is unclear whether the proposed $1 million bracket would apply to both single and married couples or include relief to such a marriage penalty. Interest in the proposal follows recent reports that consideration is being given to allowing the TCJA-enacted top tax rate to expire and revert to 39.6%, as discussed in the April 2 issue of Taxation & Representation.
These policies are reported to be under consideration to pay for other policy proposals that appeal to their increasingly working-class base—including President Trump’s proposals to end federal taxation of tip income, overtime pay and Social Security benefits, as well as expansion of the Child Tax Credit (CTC) beyond the $2,000 per child originally enacted in the TCJA. Senate Finance Committee Chairman Mike Crapo (R-ID) is reportedly considering the CTC expansion, and Sen. Josh Hawley (R-MO), a longtime CTC proponent, said that “more [working people] should be getting more of the [Child Tax] Credit.”
JCT Releases Updated Analysis of TCJA Cost Estimate, Lawmakers Respond: On April 3, Joint Committee on Taxation (JCT) Chief of Staff Thomas Barthold responded to an inquiry from Senate Finance Committee Ranking Member Ron Wyden (D-OR), Senate Budget Committee Ranking Member Sheldon Whitehouse (D-RI), House Ways and Means Committee Ranking Member Richard Neal (D-MA) and House Budget Committee Ranking Member Brendan Boyle (D-PA) with an analysis of the cost of extending the expiring tax provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97). While applying an unusual 11-year time frame, the report estimates the cost to be $4.6 trillion ($5.5 trillion when accounting for interest), an increase from JCT’s previous estimate that a clean TCJA extension would cost $4 trillion ($4.6 trillion when accounting for interest), but the latter estimate was based on the traditional 10-year budget window. Despite the inconsistent comparative time frames, the lawmakers issued a press release highlighting JCT’s analysis, stating that extending the TCJA would amount to “economic recklessness.”
Congressional Republicans Consider Raising SALT Cap, but Face Resistance from SALT Caucus: As the tax-writing committees continue to design a tax title to the anticipated reconciliation bill that extends expiring provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) and includes President Trump’s tax policy priorities, reports surfaced that it could include an increase in the individual state and local tax (SALT) deduction limitation to $25,000—a proposal intended to garner support from Republicans representing districts in high-tax states such as California, New York and New Jersey who have stated that SALT cap relief would be necessary to earn their vote. However, Reps. Young Kim (R-CA) and Andrew Garbarino (R-NY), the Republican co-chairs of the SALT Caucus, quickly dismissed the offer, stating that a $25,000 cap “does not get close to bringing relief to families unfairly burdened ...."
Tax Worldview
Trump’s Tariff Actions Potentially Affect OECD Global Tax Agreement, Transfer Pricing: On April 2, President Donald Trump issued a series of executive orders (EOs) to impose reciprocal tariffs on select countries and revoke China’s eligibility for the de minimis exemption. The EOs include an across-the-board 10% tariff on all countries that took effect on April 5, as well as additional country-specific reciprocal tariffs to take effect on April 9 based on “conditions reflected in large and persistent annual U.S. goods trade deficits,” with higher tariff rates applicable to countries with larger trade deficits with the United States.
The imposition of the reciprocal tariffs is expected to affect negotiations at the Organisation for Economic Co-operation and Development (OECD) with regard to the proposed two-pillar global tax agreement. Countries making up the Inclusive Framework that had previously signaled an openness to work with the United States on issues that congressional Republicans have raised, especially with regard to Pillar Two, may now see the global tax regime as part of a broader negotiation to mitigate the effects of U.S. tariffs. Among issues the United States has raised include digital services taxes (DSTs), which the Trump administration considers a trade barrier, and which France has pushed other European Union countries to impose in response to the tariffs. Responding to the developments, former Treasury Deputy Assistant Secretary for International Affairs Michael Plowgian said that “tariffs may put a lot more pressure on other countries to try to find a compromise on Pillar Two, as well as DSTs.”
The tariffs may also affect transfer pricing practices, with companies that have directed profits away from the United States in an effort to avoid U.S. tax potentially incentivized to repatriate assets to the United States in lieu of paying U.S. tariffs on import goods.
1111 Constitution Avenue
Krause to Resign as Acting Commissioner Over IRS-DHS Data Sharing Agreement: On April 8, acting Internal Revenue Service (IRS) Commissioner Melanie Krause reportedly informed staff that she would resign from the agency and take part in the Office of Personnel Management’s deferred resignation program. Her resignation comes after Treasury Secretary Scott Bessent and Department of Homeland Security (DHS) Secretary Kristi Noem finalized an agreement to share taxpayer data between the IRS and DHS in an effort to locate and deport people living in the United States illegally. Krause reportedly disagreed with this arrangement but was reportedly excluded in discussions between Treasury Department officials about the policy. Krause also reportedly cited the IRS’s direction under the Trump administration and the Department of Government Efficiency (DOGE), as well as the departure of other senior IRS executives, as reasons for her resignation.
Her resignation comes after the retirement of her predecessor, former acting IRS Commissioner Douglas O’Donnell, who refused to sign a data-sharing agreement with DHS. IRS legal counsel has reportedly advised that the data-sharing agreement likely violates Internal Revenue Code Section 6103, which states that taxpayer data is considered confidential and can only be shared by the IRS when collaborating with the IRS Criminal Investigations Division or external law enforcement agencies in conducting investigations. As of this writing, it remains unclear who the next IRS acting commissioner will be. President Trump has nominated former Rep. Billy Long (R-MO) to become the new commissioner of internal revenue, but his nomination has not yet been considered by the Senate Finance Committee.
IRS Layoffs Update – Agency Initiates Reduction in Force with Civil Rights Office, Modernization Office: On April 7, IRS Acting Chief Human Capital Officer Max Wyche reportedly informed Internal Revenue Service (IRS) employees that the agency would lay off about 75% of employees in the Office of Civil Rights and Compliance through a Reduction in Force (RIF) and move remaining employees to the Office of Chief Counsel. The email also reportedly noted that 5% of the office’s employees had resigned through the Office of Personnel Management’s deferred resignation program or through agency attrition. Communications regarding RIFs, for both the Office of Civil Rights and Compliance and for other potential agency offices and employees, will reportedly be sent out this week.
In a March 28 communication to IRS employees, Acting Commissioner Melanie Krause stated that the IRS will close the Transformation and Strategy Office (TSO), which was established with the enactment of the Inflation Reduction Act (IRA, Pub. L. 117-169) to implement various agency modernization initiatives directed under the IRA. Krause noted that the closure is part of a review of the “projects and initiatives under the IRS Strategic Operating Plan to determine their status and ensure alignment with future priorities.” The former head of TSO, David Padrino, resigned from the IRS in March.
Treasury Department Introduces Second Round of Deferred Resignation Offers: Beginning on April 7, some Treasury Department employees, including Internal Revenue Service (IRS) personnel, will reportedly receive an email offering them the opportunity to accept deferred resignation, as part of the Trump administration’s continued efforts to downsize the federal workforce. Employees will reportedly have one week to accept the offer if they receive it, with retirement effective between April 28 and June 2. In addition to the deferred resignation program, the Treasury Department is also offering employees with at least 25 years of experience (or 20 years of experience if they are over the age of 50), the opportunity to retire between Sept. 30 and Dec. 31 under the Voluntary Early Retirement Authority program.
House Democrats Probe IRS Regarding Agency Workforce Reductions: Led by Rep. Brad Schneider (D-IL), 22 House Democrats sent a letter to Treasury Secretary Scott Bessent on April 2 expressing concern for the layoffs and firings initiated at the Internal Revenue Service (IRS) and its potential effects on the agency’s operations. The letter noted that the Treasury Department has fired 7,400 IRS probationary employees, and 4,700 IRS employees accepted the Office of Personnel Management’s deferred resignation officer, saying that these workforce reductions will negatively affect the agency’s ability to provide taxpayer service, promote compliance, conduct enforcement efforts and collect revenue. The letter requests that Secretary Bessent answer questions concerning whether the Treasury Department has a target for the number of IRS personnel that will be laid off, which offices will be most affected, how much revenue loss these cuts may cause, and what the agency will do to ensure adequate taxpayer service.
IRS Invites Recommendations for Priority Guidance Plan Items: On April 4, the Internal Revenue Service (IRS) released Notice 2025-19, inviting stakeholders and the public to submit comments suggesting items to be included on the 2025-2026 Priority Guidance Plan (PGP). The PGP provides insight into issues the Treasury Department and the IRS have identified as important, often at the behest of taxpayers and practitioners for clarity on particular issues within the tax code, which the Treasury Department and the IRS intend to pursue during the year. The PGP is used as a workflow document to prioritize the tax issues to be addressed through regulations, revenue rulings, notices, revenue procedures and other published administrative guidance.
At a Glance
CEA Releases Report Analyzing Effects of TCJA Extension: On April 3, the Council of Economic Advisers (CEA) released a report concluding that extending the expiring tax provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) would stimulate economic growth and prevent families from facing a larger tax burden, predicting that, relative to expiration, extension would increase short-run gross domestic product (GDP) by 3.3%–3.8% and long-run GDP by 2.6%–3.2%, raise real wages and annual take-home pay for median-income workers, and prevent the loss of 4 million jobs. Senate Finance Committee Chairman Mike Crapo (R-ID) issued a press release highlighting the report’s findings, stating that “President Trump’s pro-growth agenda will raise trillions of dollars in revenue, increasing prosperity and opportunity across all segments of the economy.” However, the nonpartisan Committee for a Responsible Federal Budget criticized the CEA’s “flawed analysis” in a memo, stating that the CEA’s assertion of 3% GDP growth does not provide evidence on how this would be achieved, further claiming that CEA’s analysis also “misinterprets historic data and existing research on TCJA’s effects. In addition, other analyses of the effects of the TCJA’s extension, such as the Joint Committee on Taxation’s analysis (discussed above), conflict with CEA’s findings.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Committee has no tax hearings scheduled for this week.
Senate Finance Committee
On April 10, the Senate Finance Committee will hold nomination hearings, including the nomination of Kenneth Kies to be assistant secretary of the treasury.
Other
On April 8, the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship held a joint hearing titled “Prosperity on Main Street: Keeping Taxes Low for Small Businesses.”