Programming Note: Taxation & Representation will return on March 26 after the one-week congressional recess.
Legislative Lowdown
Appropriations Update – House Republicans Pass Stopgap Government Funding Bill: On March 8, House Republicans released text of the Full Year Continuing Appropriations and Extensions Act, 2025 (H.R. 1968), a 99-page bill that would fund the federal government through Sept. 30. The continuing resolution (CR) would slightly increase defense spending and makes moderate cuts to some non-defense programs. On March 11, the House passed the bill by a 217-213 vote, with Rep. Thomas Massie (R-KY) being the lone Republican to vote against the bill and Rep. Jared Golden (D-ME) being the lone Democrat to vote in its favor. While Democrats have voiced opposition over efforts led by the Department of Government Efficiency (DOGE), passage by the Senate appears likely. President Trump has endorsed the CR and has been actively urging Congress to pass it prior to the current funding deadline on March 14.
Budget Update – Senate and House Republicans Continue to Work to Find Agreement: On March 3, Senate Majority Leader John Thune (R-SD) indicated that he and Senate leaders are still working with House Republicans to forge an agreement on a FY 2025 budget blueprint, and that he will not bring the House budget resolution to the Senate floor prior to Congress’ one-week recess beginning on March 14. Senate leaders have raised concerns about the depth of the spending cuts proposed by the House budget resolution, while also preferring a “current policy baseline” that would allow for the expiring TCJA tax provisions to be made permanent at no additional cost (or with no additional pay-fors), if such an approach were upheld by the Senate parliamentarian.
Ways and Means Republicans to Begin Reviewing Tax Package Proposals: This week, House Ways and Means Committee Republicans began reviewing options to construct a tax package that will extend certain tax provisions in the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) as well as other tax policy priorities proposed by President Trump. In addition to the individual expiring TCJA provisions, the group is expected to discuss the three business provisions (research and development expensing; bonus depreciation; and deductibility of business interest) that began expiring after 2021, as well as the child tax credit, the state and local tax (SALT) deduction limitation for individuals, and the Section 199A deduction for qualified business income.
Republicans must also consider Trump’s proposals, including limiting federal taxation of tips, overtime pay and Social Security benefits. However, the estimated costs of extending the TCJA and enacting Trump’s tax policy proposals, depending on their contours, would likely exceed the $4.5 trillion allocated to the tax package as part of the House Republicans’ fiscal year 2025 budget resolution. To offset some portion of these costs, Republicans may consider certain revenue raisers, including repealing or modifying certain Inflation Reduction Act (Pub. L. 117-169) energy-tax credits and enacting a SALT deduction limitation for businesses. House Ways and Means Committee Chairman Jason Smith (R-MO) continues to target Memorial Day (May 28) for passage of the reconciliation bill, despite continued disagreement between House and Senate leadership over the financing of the bill and whether to use a “currently policy baseline” to assess its budgetary effects. Chairman Smith has also stressed that passing a bill quickly is necessary to avoid intersecting with the national debt limit, which is expected to hit the current ceiling in early- to mid-summer.
Senate Finance Committee Holds Faulkender Nomination Hearing: On March 6, the Senate Finance Committee held a hearing to consider the nomination of Michael Faulkender to be deputy secretary of the treasury. Generally, Faulkender defended President Trump’s policy proposals and deferred to the goals of Treasury Secretary Scott Bessent when asked about initiatives the Department of the Treasury will prioritize in the future. Faulkender faced questions from Democrats regarding tax initiatives from the first Trump administration and the Biden administration, as well as financing the renewal or potential permanency of expiring provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97). Faulkender emphasized the savings in taxes taxpayers would enjoy if provisions of the TCJA are renewed. The Senate Finance Committee has not announced when the committee will meet in executive session to report Faulkender’s nomination, and his nomination is not expected to encounter particular delays that would complicate his confirmation by the Senate.
Trump Briefly Discusses Tax Policy During Joint Address to Congress: On March 4, President Trump delivered his first joint address to Congress of his second term, in which he discussed recent accomplishments, campaign promises and policy plans. During the address, Trump called for the swift passage of a permanent extension of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97). He also called on Congress to enact many of the tax-policy proposals unveiled during the 2024 presidential campaign, including ending federal taxation of tips, overtime pay and Social Security benefits. He also urged Congress to pass legislation making interest payments on consumer car loans tax-deductible for domestically manufactured vehicles.
Trump also introduced several new tax policy proposals, including incentives for domestic production and restoring bonus depreciation effective retroactively to Inauguration Day (Jan. 20, 2025). Finally, he announced the creation of the White House Office of Shipbuilding, saying that he would “offer special tax incentives to bring this industry home to America.”
More information and takeaways from President Trump’s joint address to Congress can be found here.
Senate Passes Legislation to Repeal Biden Administration Crypto Reporting Rules: On March 4, the Senate passed Congressional Review Act (CRA) legislation “Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Internal Revenue Service relating to ‘Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.’” (S.J. Res. 3)
The resolution reverses a Biden administration Treasury Department regulation issued in December 2024 providing reporting requirements for decentralized finance (DeFi) brokers engaged in cryptocurrency transactions. Under the rule, DeFi brokers would need to file IRS Form 1099-DAs for all digital asset transactions conducted, putting them under the same requirements as securities brokers and centralized digital asset trading platforms.
A companion resolution (H.J. Res. 25) was reported favorably by the House Ways and Means Committee on Feb. 26. The House is expected to take up the resolution of disapproval this week.
Tax Worldview
Bessent Discusses Tariff Policy and Inflation Concerns: In a speech to the Economic Club of New York on March 6, Treasury Secretary Scott Bessent discussed tariff policy and said that enacting tariffs would not spark prolonged inflation, calling it a “one-time impact” and a transitory price adjustment. He urged the Federal Reserve to view tariffs as transitory when making monetary policy decisions. He also defended criticism that enacting tariffs would inflict a regressive tax that would disproportionately affect low- and middle-income taxpayers. He suggested that tariff income could be used to pay for tax proposals targeted toward those constituencies, like ending the federal taxation of tips, overtime pay and Social Security benefits, as well as making automobile loans tax-deductible, to mitigate adverse effects.
1111 Constitution Avenue
Trump Administration Aims to Halve IRS Workforce: It has been reported that the Trump administration will seek to layoff as many as 50% of Internal Revenue Service (IRS) employees as part of larger ongoing efforts to reduce the size of the federal workforce. The agency has already terminated about 7,000 probationary employees and is expected to further reduce the number of IRS personnel from the 100,000-employee figure at the start of the Trump administration. It is unclear when the next round of mass layoffs could take place and which departments will be affected.
Senate Democrats Urge Investigation into IRS Layoffs and TAC Closures: Led by Sen. Elizabeth Warren (D-MA) and Senate Finance Committee Ranking Member Ron Wyden (D-OR), 18 Senate Democrats wrote a letter to Acting Treasury Inspector General for Tax Administration (TIGTA) Heather Hill, requesting that her agency investigate whether the firings and layoffs of about 7,000 probationary Internal Revenue Service (IRS) employees and the closure of 110 Taxpayer Assistance Centers (TACs) will undermine compliance and enforcement initiatives. The senators claimed that funding provided by the Inflation Reduction Act (IRA, Pub. L. 117-169) would help to revitalize IRS operations to modernize the agency, improve taxpayer service, and crack down on “sophisticated tax evasion structures used by ultra high-wealth taxpayers and large corporations,” and that the firings of IRS employees would hamper the agency’s abilities to continue these initiatives. The letter asks TIGTA to analyze how employee firings and TAC closures would “undermine progress the IRS has made in the past three years,” and whether it aligns with the agency’s mission to ensure quality service.
House Democrats Also Express Concern about IRS Workforce Cuts: Led by Reps. Deborah Ross (D-NC) and Lloyd Doggett (D-TX), 133 House Democrats wrote a letter to Internal Revenue Service (IRS) Acting Commissioner Melanie Krause expressing concern for the agency’s layoff of about 7,000 probationary employees during the 2025 tax-filing season, saying that these layoffs would “Exacerbate existing challenges faced by an already overburdened agency and threatens to undermine the IRS’ capacity to serve the American people effectively ….” The letter states that the IRS may struggle with providing services to taxpayers and enforcing tax-evasion laws against filers. The lawmakers request that Krause answer questions concerning the number of employees who have been laid off or are choosing to resign as part of the Office of Personnel Management’s Deferred Resignation Program, as well as mitigating the operational impacts of the layoffs and assessing revenue impacts of reduced enforcement.
At a Glance
Miller Reintroduces Bill to Reinstate $20,000 1099-K Threshold: On March 5, Rep. Carol Miller (R-WV) reintroduced the Saving Gig Economy Taxpayers Act (H.R. 1882), which would restore the de minimis reporting exception for third-party settlement organizations, as reported on Internal Revenue Service (IRS) Form 1099-K, to the same threshold that applied prior to the American Rescue Plan Act (ARPA, Pub. L. 117-2). ARPA substantially decreased the 1099-K reporting threshold from $20,000, with a 200-transaction minimum, to $600 with no minimum number of transactions. The IRS twice delayed implementing the lower 1099-K reporting threshold for tax years 2022 and 2023 and began implementing the provision in 2024 with a threshold of $5,000 as a way to “phase-in” implementation and “reduce taxpayer confusion.” The bill was previously approved by the House Ways and Means Committee in a September 2024 markup.
NTEU Estimates That 4,000–5,000 Employees Accepted the Deferred Resignation Offer: Speaking at a union legislative conference on March 4, National Treasury Employees Union (NTEU) President Doreen Greenwald stated that between 4,000 and 5,000 Internal Revenue Service (IRS) employees accepted a deferred resignation offer from the Office of Personnel Management (OPM) issued on Jan. 28. IRS employees deemed “critical” to the 2025 tax-filing season, even if they accepted the offer, were prohibited from exiting the agency until May 15.
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
The Senate Finance Committee has no tax hearings scheduled for this week.