Legislative Lowdown
Budget Reconciliation Outlook—Committees Schedule Markups as Congress Addresses Details of Reconciliation Measure: After the two-week recess for Easter/Passover, congressional Republicans returned to Washington looking to finalize tax and other provisions to be included in a comprehensive budget reconciliation bill that President Trump wants to sign this summer, even though the exact timeline remains unclear. While House Speaker Mike Johnson (R-LA) has pushed for House passage by Memorial Day (May 26), that goal is ambitious and may not provide enough time to resolve internal debates on key items (e.g., state and local tax deductions) that Republicans have been working through since the start of the 119th Congress. Treasury Secretary Scott Bessent recently called for passage by July 4, which some House Republicans view as more reasonable, and still ambitious. Of the 11 House committees that have jurisdiction over parts of the reconciliation bill, seven (Armed Services, Education and Workforce, Financial Services, Homeland Security, Judiciary, Oversight and Government Reform, and Transportation and Infrastructure) have scheduled markups for this week. The House Ways and Means Committee has not yet scheduled a markup of the reconciliation bill, although there are indications that Republican leaders would like the tax-writing committee to mark up its part of the bill by the end of next week.
Trump and Johnson Reject Proposal to Raise Taxes on Wealthy: On April 23, House Speaker Mike Johnson (R-LA) publicly stated his opposition to creating a new, higher marginal income tax rate on the most affluent taxpayers, an idea that has been floated in some Republican circles as a potential revenue raiser for the budget reconciliation package. Speaker Johnson said that he is “not in favor of raising the tax rates because our party is the group that stands against that traditionally.” President Trump also expressed skepticism over the political viability of the proposal, stating that while he likes the idea “in concept,” he said that it would likely lead wealthy taxpayers to leave the country.
Hassett Predicts That Tax Bill Will Pass Congress by ‘Early Summer’: On April 18, National Economic Council (NEC) Director Kevin Hassett said that he hopes “that the tax bill [reconciliation bill] will be passed by … early summer,” adding that President Trump should finalize his thoughts on the tax agenda “by sometime next week.” Hassett’s timeline roughly lines up with House Speaker Mike Johnson’s (R-LA) goal of passing a tax bill through the House by Memorial Day (May 26).
Bessent Reportedly Proposes Expanding Tax Benefits for Factory-Building: According to Deputy Treasury Secretary Michael Faulkender, Treasury Secretary Scott Bessent has reportedly proposed to expand accelerated depreciation for constructed factories. Further details have not been shared on this proposal, but it falls in line with the Trump administration’s initiatives to increase domestic manufacturing activities.
Trump Signs Bill to Repeal Biden Administration Crypto Reporting Rules: On April 11, President Trump signed Congressional Review Act (CRA) legislation (Pub. L. 119-5) reversing a Biden administration Treasury Department regulation issued in December 2024 establishing reporting requirements for decentralized finance (DeFi) brokers engaged in cryptocurrency transactions. Under the rule (now overturned), DeFi brokers needed 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.
Tax Worldview
EU Considering Changing Minimum Corporate Tax Law: On April 29, European Union (EU) officials met to discuss several policy options to potentially modify the EU’s 15% global minimum tax law, known as the Minimum Tax Directive, as well as the undertaxed profits rule (UTPR) that allows countries to levy top-up taxes to ensure a multinational business’s effective tax rate is at least 15%. Currently, a safe harbor is in place, exempting non-EU companies from being taxed in countries with a statutory corporate tax rate above 20% until the end of 2026. The UTPR has been the centerpiece of grievances the United States has had about global minimum tax laws, as many large U.S. companies are multinational corporations and could lose billions of dollars in revenue under the law.
Italy Joins United States in Opposing DSTs: Following Italian Prime Minister Giorgia Meloni’s visit to the White House on April 18, the prime minister and President Trump issued a joint statement calling for “a non-discriminatory environment in terms of digital services taxation” in order to “enable investments from cutting-edge tech companies.” Currently, Italy applies a 3% digital services tax (DST) on internet transactions for tech companies with sales of at least 750 million Euros (about $855 million). Italy’s executive leadership has had mixed views on whether to abandon the nation’s DST, as U.S. pressure to abandon DSTs contends with pressure from the European Union (EU) to retain them, as well as domestic concerns about the country’s public finance in the absence of a DST. After the visit, Italian Economy Minister Giancarlo Giorgetti called for DST negotiation with the United States to be conducted bilaterally rather than through the EU.
Treasury Department, IRS Issue Notice of Intent to Rescind Basis-Shifting Guidance: On April 17, the Treasury Department and Internal Revenue Service (IRS) issued Notice 2025-23, a Notice of Intent that Treasury Department and IRS would issue a forthcoming Notice of Proposed Rulemaking (NPRM) to remove regulations enacted during the Biden administration concerning basis-shifting. The Biden-era regulations required the reporting of basis-shifting transactions as “transactions of interest” (TOIs) subject to IRS disclosure guidelines and penalties for noncompliance. The forthcoming NPRM would seek to repeal these regulations as well as waive any fees incurred for failing to file disclosure statements.
1111 Constitution Avenue
Key Democrats Call for Investigation of Donations to IRS Commissioner Nominee: According to Federal Election Commission (FEC) Q1 2025 filings, former Congressman Billy Long (R-MO), currently the nominee-designate to be the commissioner of the Internal Revenue Service (IRS), received $137,000 in donations to his 2022 U.S. Senate campaign account, despite not having announced that he is running for political office since his loss in the 2022 Missouri Senate Republican primary. Long reportedly used the donations to repay $130,000 in personal loans made to his campaign. Many of the donors listed in the FEC filing reportedly are listed as employees of several tax and financial advising companies Long worked with or had ties to, including White River Energy Corp. and Lifetime Advisors. These companies have allegedly promoted so-called “Native American Federal Income Tax Credits” or “Sovereign Tribal Tax Credits,” which the IRS has confirmed do not exist. On April 15, Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Sen. Catherine Cortez Masto (D-NV) sent a letter to then-Acting IRS Commissioner Melanie Krause calling on the IRS to open a criminal investigation of promoters of these “Tribal” tax credits, whether Long was personally and financially involved in the promotion of the credits, and whether his confirmation as IRS commissioner could undermine criminal enforcement efforts against companies he was formerly involved with. In addition, Sen. Cortez Masto called for the withdrawal of Long’s nomination via a post on social media platform X on April 17. At present, a confirmation hearing for Long in the Senate Finance Committee has not been set.
IRS Reportedly Plans to End Direct File Program: On April 17, sources within the Trump administration reportedly stated that the IRS Direct File program would be terminated. The Direct File program, piloted in 2024 and expanded for the 2025 tax-filing season, allowed eligible taxpayers to file their federal tax return directly with the Internal Revenue System (IRS) at no direct cost to the taxpayer. The Biden administration, which promoted the program, argued that Direct File would make it easier for taxpayers with simple returns to file. In contrast, congressional Republicans and the commercial tax-preparation industry argued that the program was costly, duplicative of existing free-tax filing options, and raised compliance concerns due to its lack of coordination with state tax-filing software. They also argued that the program was unpopular with taxpayers, with only about 141,000 taxpayers transmitting an accepted tax return with Direct File during the 2024 pilot and initial estimates indicating that about 300,000 taxpayers transmitted an accepted return with Direct File by the tax day (April 15) deadline in 2025. In response to the news, Sen. Elizabeth Warren (D-MA) led a letter with 175 Democratic members of Congress calling for the preservation of Direct File, arguing that the program saved eligible taxpayers an average of $160 in tax preparation fees and was easy to use.
IRS Leadership Update—Faulkender Becomes Acting IRS Commissioner, CIO Departs: On April 18, Treasury Secretary Scott Bessent announced that Deputy Treasury Secretary Michael Faulkender would serve as the next acting commissioner of the Internal Revenue Service (IRS), as reports surfaced that Special Advisor Elon Musk and the Department of Government Efficiency (DOGE) had urged the appointment of Gary Shapley to be IRS acting commissioner without Secretary Bessent’s knowledge, consideration or consent. Shapley, an IRS agent who became a whistleblower, alleged that the agency took deliberate action to sabotage the Hunter Biden tax evasion case. Shapley had assumed the role of IRS acting commissioner on April 15, with Musk’s support, even though the IRS commissioner reports to Treasury Secretary Bessent. Days after Shapley’s appointment, Secretary Bessent reportedly raised this issue with President Trump, prompting Faulkender to replace Shapley. In a post on social media platform X, Secretary Bessent stated that Shapley would remain “among my most important senior advisors at the Treasury as we work together to rethink and reform the IRS.”
In addition to Shapley’s replacement, IRS Chief Information Officer Rajiv Uppal left the agency on April 28, with his announcement that he would accept the Office of Personnel Management’s deferred resignation offer being circulated in an internal email on April 14. Uppal joined the IRS in January 2024, having first served as the chief information officer for the Centers for Medicare and Medicaid Services. Uppal will be succeeded by Kaschit Pandya, the current IRS chief technology officer.
IRS Personnel/Layoffs Update: On April 15, reports surfaced that the Internal Revenue Service (IRS) could see a reduction of about 40% of its workforce, with about 20,000 employees applying for the Office of Personnel Management’s (OPM) deferred resignation offer and other affected employees laid off through an agencywide Reduction in Force (RIF) order. The RIF adds to the IRS’ previous firings of 7,000 probationary employees earlier this year, as well as the roughly 5,000 employees who accepted the OPM’s first deferred resignation offer. Of the 20,000 employees who applied to take the most recent deferred resignation offer, about 2,100 were reportedly denied, with Chief Tax Compliance Office leadership stating that these positions were crucial for the agency and that they are not eligible for the offer.
The employment status of the probationary employees remains unclear as court battles continue over the legality of the firings. After a court ruling allowed the Trump administration’s planned firings of probationary employees to continue, the IRS notified those employees that they would remain on administrative leave. Meanwhile, the Treasury Inspector General for Tax Administration (TIGTA) confirmed on April 18 that the office is reviewing the firings of probationary employees.
Finance Committee Democrats Call for TIGTA Investigation into Potential Violations of Taxpayer Privacy Laws: Led by Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Sens. Catherine Cortez Masto (D-NV), Elizabeth Warren (D-MA) and Alex Padilla (D-CA), all Senate Finance Committee Democrats wrote a letter to Acting Treasury Inspector General for Tax Administration (TIGTA) Heather Hill requesting an investigation into the taxpayer data-sharing agreement between the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS) and personnel affiliated with the Department of Government Efficiency (DOGE) in an effort to deport individuals suspected of living in the United States illegally. The lawmakers argued that taxpayer data collected by the IRS should only be used for tax administration purposes, and that the data-sharing agreement may violate Internal Revenue Code Section 6103, which outlines terms for protecting the confidentiality of taxpayer information. In the letter, the lawmakers questioned whether several IRS senior personnel, including then-Acting IRS Commissioner Melanie Krause and then-Chief Privacy Officer Kathleen Walters, resigned from their roles “to avoid being a party to a criminal conspiracy to violate tax privacy law.”
At a Glance
Former Treasury Secretary Warns of Revenue Loss Due to IRS Downsizing: In a television appearance on April 22, former Treasury Secretary Lawrence Summers argued that the Trump administration’s efforts to reduce the Internal Revenue Service (IRS) workforce would likely incentivize large-scale tax noncompliance, potentially leading to the loss of “more than $1 trillion in revenues” over the next 10 years. He also argued that the downsizing efforts would lead to “the most competent people” at the agency being the “most likely to leave” to find jobs elsewhere.
IRS Whistleblower Office Releases Operating Plan: On April 18, the Internal Revenue Service (IRS) released its inaugural multiyear operating plan, which outlines “guiding principles, strategic priorities, recent achievements, and the efforts currently underway to drive progress” for the IRS Whistleblower Program. The operating plan outlines six priorities to help ensure the speedy, safe and effective handling of whistleblower claims and information.
Trump Administration Threatens Revocation of Harvard’s Tax-Exempt Status: Over the last two weeks, tensions have escalated between the Trump administration and Harvard University over the university’s defiance of the administration’s demands on educational and diversity practices and turning over visa records of international students. On April 15, Trump proposed revoking Harvard’s tax-exempt status via a post on Truth Social.
White House Denies Rumors of Revocation of Environmental Nonprofits’ Tax-Exempt Status: On April 22, a White House official denied rumors that it is drafting an executive order or other action that would revoke the tax-exempt status of energy and environmental policy nonprofits. These groups raised concerns after President Trump signaled that he would begin taking steps to revoke the tax-exempt status of Harvard University.
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 29, the Senate Finance Committee held an executive session to consider favorability reporting the nominations of William Kimmitt to be undersecretary of commerce for international trade, and Kenneth Kies to be an assistant secretary of the Treasury Department for tax policy. Both nominees were favorably reported by a 14-13 vote along party lines.