Taxation & Representation, Dec. 17, 2025
Legislative Landscape
T-14 Days Until the Expiration of the ACA eAPTCs: In 14 days, the enhanced Affordable Care Act premium tax credits (eAPTCs) expire and neither chamber has landed on a solution. Last week, House Republicans released H.R. 6703, the Lower Health Care Premiums for All Americans Act led by Rep. Mariannette Miller-Meeks (R-IA) and plan to vote on the bill this week. The bill excludes an extension of the eAPTCs. Instead, it primarily focuses on expansions of health savings accounts, health association plans and funding for cost-sharing reductions to lower premiums for low-income enrollees.
On Wednesday morning, Reps. Brian Fitzpatrick (R-PA), Mike Lawler (R-NY), Rob Bresnahan (R-PA) and Ryan Mackenzie (R-PA) joined 214 Democrats on their discharge petition to vote on a three year extension of the eAPTCs.
On the other side of Capitol Hill, a bipartisan group led by Sens. Susan Collins (R-ME) and Bernie Moreno (R-OH) met on Monday evening to negotiate a deal to extend the eAPTCs. They discussed a two-year framework with income eligibility caps, fraud prevention measures, cost-sharing reductions and greater health savings account flexibility. The group included Senate Finance Committee Chairman Mike Crapo (R-ID), Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Bill Cassidy (R-LA), Sens. Jeanne Shaheen (D-NH), Dick Durbin (D-IL), Mike Rounds (R-SD) and Jacky Rosen (D-NV). The group is aiming to announce a plan this week with implementation expected in January.
Senate Majority Leader John Thune (R-SD) said it is unlikely that anything will pass before the holidays and deferred to January for further discussion.
POTUS, Lawmakers Conflicted on Reconciliation 2.0: During a press conference last week, President Trump indicated that Congress does not need to do another reconciliation bill because the One Big Beautiful Bill Act (OBBBA, Public Law 119-21) already delivered the administration’s main goals. House Ways and Means Tax Subcommittee Chairman Mike Kelly (R-PA) and House Budget Committee Chairman Jodey Arrington (R-TX) see President Trump’s statement as leaving the door open and argue that a second reconciliation bill could potentially include health care reforms tied to eAPTCs.
In early November, Senate Budget Committee Chairman Lindsey Graham (R-SC) said he met with other Senate Republicans to explore a new reconciliation package to potentially address health care, taxes, spending and policy priorities to bypass Democratic filibusters via simple-majority votes. While both the House and Senate appear open to a second reconciliation bill, the primary consideration likely will come down to the main policy driver for such a legislative effort, with health care and potential adverse action on the president’s trade agenda as the leading contenders.
In an interview this morning, Speaker Johnson expressed openness to a second reconciliation bill next year.
Ranking Member Neal’s Priorities for a Democratic-Controlled House: House Ways and Means Committee Ranking Member Richard Neal (D-MA) detailed his future priorities for the committee if Democrats regain control of the House in next year’s midterm elections. He highlighted the OBBBA’s Medicaid cuts that are expected to heavily affect hospitals as one of his main priorities, along with trade policy and the Department of Government Efficiency’s (DOGE) handling of data.
House W&M Committee Approves Bipartisan Taxpayer Privacy, Due Process Legislation: On Dec. 10, the House Ways and Means Committee advanced bipartisan legislation including the Taxpayer Due Process Enhancement Act (H.R. 6506) and Taxpayer Notification and Privacy Act (H.R. 6495).
The Taxpayer Due Process Enhancement Act suspends refund limitations during collection due process, prohibits overpayment credits against disputed liabilities and expands Tax Court jurisdiction in response to Commissioner v. Zuch (passed 41-0). The Taxpayer Notification and Privacy Act (H.R. 6495), requiring Internal Revenue Service (IRS) notice of specific third-party data requests with 45 days for taxpayers to self-provide, passed 41 to 0.
Titus Sends Letter to Smith, Neal on Consideration of the FAIR Bet Act: Rep. Dina Titus (D-NV) sent a letter to House Ways and Means Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) urging the committee to consider her bill, H.R. 4304, the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET) Act. The bill would repeal the 90% cap on gambling loss deductions imposed by the OBBBA and would restore the full 100% deductibility. In a July field hearing, Chairman Smith indicated a willingness to consider such a measure before it affects the 2027 filing season.
Energy-Tax Mainlines
Treasury Department to Issue 45Q GHGRP Guidance: Before the end of the year, the Treasury Department is expected to issue guidance establishing a new verification process for taxpayers claiming the section 45Q Carbon Oxide Sequestration credit. The anticipated guidance will allow sequestration data to be verified by an independent engineer or geologist beginning in tax year 2025 to ensure continued compliance until a long-term solution replaces the greenhouse gas reporting framework. The change follows the Environmental Protection Agency ( EPA)’s September proposal to terminate its Greenhouse Gas Reporting Program (GHGRP) for industrial facilities, which current regulations require section 45Q credit claimants to use for verification of sequestration volumes.
In early November, Senate Environment and Public Works Committee Ranking Member Sheldon Whitehouse (D-RI) and Sen. Kevin Cramer (R-ND) sent a letter to Environmental Protection Agency (EPA) Administrator Lee Zeldin and Treasury Secretary Scott Bessent urging them to withdraw the proposed cancellation of the GHGRP. The lawmakers highlighted its critical role in supporting the section 45Q tax credit for carbon capture, utilization, and storage (CCUS), and they stressed that the program’s repeal could lead to uncertainty that could jeopardize billions of dollars in CCUS investments and tax revenues. They also emphasized that repealing the program would have minimal savings over the next decade and would be outweighed by risks to the jobs and energy production that could come from the projects.
Newhouse, Tenney Introduce Bill to Expand Sections 48E and 45Y: Last week, Reps. Dan Newhouse (R-WA), Claudia Tenney (R-NY) and Chuck Fleischmann (R-TN) introduced H.R.6474, the Parity for Nuclear Energy Investment Act. The bill would expand the new “nuclear energy community,” adopted as part of the OBBBA, to apply to the section 48E clean electricity investment tax credit and also expand the geographic reach of the energy communities bonus credit to include non-metropolitan statistical areas. Currently, the energy communities bonus credits apply to projects in certain energy communities, such as areas with closed coal mines or plants, with the nuclear energy community limited to the section 45Y production tax credit.
Davids Introduces Bill to Increase 45Z Credit Rates: Last week, Rep. Sharice Davids (D-KS) introduced H.R.6518, the Securing America’s Fuels (SAF) Act. The bill would restore the bonus credit for qualifying SAF producers to receive up to $1.75 per gallon and would extend the credit through 2033. Reps. Mike Flood (R-NE), Troy Carter (D-LA) and Tracey Mann (R-KS) are cosponsoring the bill.
1111 Constitution Avenue
IRS Issues Guidance on Scholarship Granting Organizations: On Dec. 12, the IRS issued Rev. Proc. 2026-6, which establishes procedures for states to make an Advance Election to become a “covered state” under the new Section 25F credit for contributions to qualified scholarship granting organizations (SGOs), established by the OBBBA. The guidance allows a state to notify potential SGOs of the state’s participation in the new federal scholarship tax credit program before formally submitting the state’s SGO lists for calendar year 2027. States making the Advance Election must file Form 15714 between Jan. 1, 2026, and the deadline for submitting their SGO lists.
Treasury Department to Issue R&D Guidance Soon: The Treasury Department is preparing guidance that would allow corporations to utilize the research and development (R&D) tax incentives from the OBBBA. The guidance is intended to ease the effects of the corporate alternative minimum tax from the Inflation Reduction Act (IRA, Public Law 117-169). The guidance is also expected to let companies claim R&D deductions and tax credits that the minimum tax currently limits.
Bessent Criticizes States for Severing from Federal Tax Code: Last week, Treasury Secretary Scott Bessent issued a statement aimed at certain states, including Colorado, New York, Illinois and the District of Columbia that have taken steps to eliminate the state’s conformity with the federal tax law.
In recent months, states have been enacting state measures to decouple from certain aspects of the federal tax code primarily because the changes enacted in the OBBBA, such as no tax on tips, overtime and auto loans, are creating significant revenue shortfalls in state budgets. Secretary Bessent stressed that nonconformity prevents residents in those states from receiving corresponding state-level tax relief and increases their overall tax burden.
Tax Worldview
OECD Side-by-Side Deal Expected to Take Effect in 2026: Treasury Department officials expect the United States’ proposed “side-by-side” system to take effect on Jan. 1, 2026. The proposal is meant to exempt U.S. multinationals from parts of the global minimum tax, including the income inclusion and undertaxed profits rules. Isaac Wood, an attorney in the Treasury Department’s Office of Tax Policy, said the plan would let the U.S. tax code operate alongside the global framework without overlap. If no deal is reached by year-end, congressional Republicans, including House Ways and Means Chairman Jason Smith (R-MO), have threatened to resurrect retaliatory measures against countries imposing such taxes, which they view as extraterritorial and unfair to American companies.
European Countries Ask for Extension of Exemption from Global Minimum Tax: Leveraging the United States’ demand for a side-by-side approach to the Pillar Two global minimum tax, five European Union (EU) countries are pushing the European Commission to extend the EU’s small-country exemption from the Pillar Two framework for an additional six years to 2036. The countries—Estonia, Malta, Latvia, Lithuania and Slovakia—contend that they will face excessive administrative burdens if forced to implement the Pillar Two regime by the current 2030 deadline. Despite already being exempt from major parts of the framework, Estonia is looking at a permanent exemption as a way to protect the country’s global edge.
Treasury Department to Review Rules on Treatment of Foreign Currency Gains, Losses: Last week, the Treasury Department indicated that it plans to reevaluate final regulations issued by the Biden administration regarding the treatment of foreign currency gains and losses under section 987. The previous regulations addressed how companies treat foreign currency gains and losses for qualified business units (QBUs). Deputy Assistant Secretary for Tax Policy Kevin Salinger also indicated that final regulations on qualified derivative payments under the Base Erosion and Anti-Abuse (BEAT) tax, section 892 income exemptions for foreign governments, and adjustments to Section 871(m) are coming soon.
IRS Issues Guidance on Foreign-Government Income: On Dec. 12, the Treasury Department and the IRS issued proposed and final regulations under section 892 that update and clarify the treatment of income earned by foreign governments from their U.S. investments. The proposed rules would redefine “commercial activity,” establish new standards for determining government control of entities, and clarify that partnerships are not considered government-controlled even if wholly owned by a sovereign government. The final regulations confirm that income from qualified, government-controlled entities such as foreign pension funds remains eligible for U.S. real-estate tax exemptions.
Treasury Department Requests Comments on OBBBA Tax Year Change for Foreign Subsidiaries: The Treasury Department and the IRS are requesting comments for proposed regulations addressing foreign tax allocation for U.S. companies’ controlled foreign corporations following the OBBBA’s elimination of the “one-month deferral rule.” The rule previously allowed subsidiaries to adopt a tax year starting one month before their U.S. parent’s tax year. After the OBBBA, the tax years are now required to be aligned, creating a one-month transition year that can create complications with respect to foreign tax credits.
The Treasury Department and the IRS are looking for input on desirable fact patterns for allocating taxes to the one-month short year, cases where non-allocation is preferable, handling liquidations or other events without a succeeding year, and treatment of Section 903 substitute taxes.
At a Glance
Hill, Davids Introduce the HIRE Act: Reps. French Hill (R-AR), Mike Carey (R-OH), Sharice Davids (D-KS), Debbie Dingell (D-MI) and Nicole Malliotakis (R-NY) introduced H.R. 6524, the Helping Individuals Rejoin Employment (HIRE) Act to support hiring individuals with disabilities. Currently, the work opportunity tax credit is set to expire Jan. 1, 2026, and the bill would extend it by five years. It would also include Social Security Disability Insurance (SSDI) recipients to its targeted groups, alongside veterans, formerly incarcerated individuals, long-term unemployed workers and Supplemental Security Income beneficiaries.
Klobuchar, Cassidy and Jacobs Introduce the Working Families Disaster Tax Relief Act: Last week, Sens. Amy Klobuchar (D-MN) and Bill Cassidy (R-LA) introduced S. 3432, the Working Families Disaster Tax Relief Act, which would allow disaster-affected taxpayers in presidentially declared major disaster areas to use prior-year earned income for earned income tax credit (EITC) and refundable child tax credit (CTC) eligibility to avoid losing benefits from temporary income drops. Rep. Sara Jacobs (D-CA) leads the companion bill, H.R. 6645, in the House.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Committee does not have any hearings scheduled for this week.
Senate Finance Committee
The Senate Finance Committee does not have any hearings scheduled for this week.