Legislative Lowdown
Trump Gives the Green Light for a Clean CR: House Republicans have introduced a short-term continuing resolution (CR) to fund the government through Nov. 21 to avoid a shutdown by the Sept. 30 deadline. House Republicans want to vote on it this week, but the Senate may struggle to vote before its in-state work period (Sept. 20–28). Democrats insist that any funding bill must be bipartisan and include an extension of the ACA’s enhanced Advance Premium Tax Credits (eAPTCs) set to expire at year-end, a demand Republicans are still trying to address. Without Democratic support, Republicans face challenges in passing the bill in the Senate where 60 votes are needed to avoid a shutdown. Minority Leader Chuck Schumer (D-NY) warned that a CR without eAPTC subsidies is unacceptable, but some Democrats might support a clean CR temporarily while negotiating eAPTC subsidies.
House Ways and Means Committee Republicans recently held a meeting to discuss whether to extend the eAPTC credits, which are estimated to cost $383 billion over 10 years. However, most fiscal hardliners in both chambers oppose the extension. Failing to extend the credits would severely affect swing districts and states. On the opposite side of Capitol Hill, Senate Republicans are working on legislation to extend the eAPTC credits, with policy changes aimed at appeasing conservatives such as an income cap.
Senate Finance Committee Holds Korb Hearing: On Sept. 10, the Senate Finance Committee held the nomination hearing for Donald Korb to be the chief counsel of the Internal Revenue Service (IRS). Korb focused his testimony on oversight, independence and implementation of the One, Big, Beautiful Bill Act (OBBBA, Public Law 119-21). He pledged to issue timely IRS guidance, particularly on provisions such as the Section 45Z Clean Fuels Production tax credit and said working with the Office of Tax Policy to ensure clarity and enforceability is a top priority. Korb also committed to improving the IRS whistleblower program by addressing delays in claim processing and confirmed that enforcement must be applied equitably, without unfairly targeting small businesses.
Gallego Introduces Bill to Include Auto-Gratuity Under No Tax on Tips: Sen. Ruben Gallego (D-AZ) introduced the No Tax on Large Party Tips Act, which would include automatic gratuities and recommended tips under the “no tax on tips” provision of the One, Big, Beautiful Bill Act (OBBBA, Public Law 119-21). The bill would treat auto-gratuities as cash tips for income tax purposes. The Treasury Department has identified deductions for tips, overtime, car interest and seniors as top priorities for implementation, underscoring the Trump administration’s focus on supporting workers and households under the OBBBA.
On the agency side, the Office of Information and Regulatory Affairs (OIRA) has completed its review of the no tax on tips provision, moving official guidance one step closer to being released.
Energy-Tax Mainlines
Governors Work with Trump Administration to Protect Wind Energy: President Trump has sought to halt several major offshore wind projects along the East Coast in Democratic-led states, but the $10.8 billion Coastal Virginia Offshore Wind project has so far been spared, largely due to support from Gov. Glenn Youngkin (R-VA). Gov. Youngkin has privately advocated for the project and asked the administration not to target the Virginia project, which is about 60% complete. The project is expected to generate 2.6 gigawatts, enough to power roughly 660,000 homes, once it is finished next year. He joins a list of other governors from Maryland, Connecticut, Rhode Island and Massachusetts pushing back against the Trump administration’s actions that threaten regional offshore wind development and jobs in their states. Speaker Mike Johnson (R-LA) reportedly also backed the project and advocated for it with administration officials.
Previously, Gov. Kathy Hochul (D-NY) negotiated with the Trump administration to allow Empire Wind to proceed with construction, based on a reported agreement that New York would expand its natural gas distribution pipeline. Gov. Ned Lamont (D-CT) expressed frustration at the lack of clarity from the Trump administration after the Department of the Interior’s Bureau of Ocean Energy Management (BOEM) issued a stop-work order that halted construction of the Revolution Wind project, citing vague national security concerns. Gov. Lamont said he had conversations with Interior Secretary Doug Burgum and Energy Secretary Chris Wright, who initially offered assurances that projects already under construction would be allowed to finish, but he has received no firm commitments since the stop-work order.
1111 Constitution Avenue
The Corporate Alternative Minimum Tax Returns: Sens. Angus King (I-ME), Elizabeth Warren (D-MA), John Hickenlooper (D-CO), Ed Markey (D-MA) and Sheldon Whitehouse (D-RI), along with Rep. Don Beyer (D-VA), have raised concerns that new Treasury Department and Internal Revenue Service (IRS) guidance has weakened the corporate alternative minimum tax (CAMT). The guidance increased the income threshold from $500 million to $800 million and provided partnerships with more flexibility in calculating income, which they argue allows corporations to avoid paying their fair share of taxes.
In a twist, some companies are finding that taxpayer-favorable provisions enacted in the One Big Beautiful Bill Act (OBBBA) are expanding the company’s exposure to the CAMT, with provisions like bonus depreciation and immediate expensing of research and development costs driving their effective tax rates below 15%, which is then clawed back by the CAMT’s 15% top-up tax.
Tax Worldview
Moreno Introduces Bill Targeting Outsourcing: Sen. Bernie Moreno (R-OH) introduced the Halting International Relocation of Employment (HIRE) Act, which would impose a 25% excise tax on wages made to foreign employees for services that benefit Americans. It also prohibits companies from deducting those payments. The collected revenue would be directed to create a new “Domestic Workforce Fund,” which would finance apprenticeships and other workforce development initiatives designed to strengthen U.S. employment and reduce incentives for offshoring.
French Constitutional Council Upholds Digital Service Tax: On Sept. 12, the French Constitutional Council upheld the country’s digital services tax (DST), rejecting a challenge from Digital Classifieds France. The court said that the rules of the DST, including how it applies to different company groups, how it is based on a company’s presence in France and the fact that some digital services are not taxed, do not contravene France’s equality laws. The decision confirms that companies must continue complying with the French DST and provides legal certainty for the regime. The ruling also strengthens the case for other European Union (EU) countries considering similar unilateral digital taxes, signaling that such measures can be implemented within their legal frameworks.
At a Glance
IRS Collects $4.5 billion in Stock Buyback Revenue: In fiscal year 2024, the Internal Revenue Service (IRS) said it collected over $4.5 billion from the stock repurchase excise tax, falling short of the Joint Committee on Taxation’s (JCT) initial $7.9 billion estimate. The tax, which imposes a 1% excise tax on stock buybacks of publicly traded corporations, allows share buybacks to be offset under certain statutory exceptions. Some tax experts view the revenue shortfall as a sign that the JCT’s assumptions about corporate behavior were too optimistic, while others contend that the estimate indicates that sophisticated corporate planning is likely behind much of the discrepancy.
Cortez Masto, Hyde-Smith Introduce Bill on Sports Betting Exemption: Sens. Catherine Cortez Masto (D-NV) and Cindy Hyde-Smith (R-MS) introduced the Withdrawing Arduous Gaming Excise Rates (WAGER) Act, which would exempt sports betting from the excise tax on authorized wagers. The current tax imposes a 0.25% levy on all legal sports wagers and a $50 annual fee per employee.
Bipartisan Lawmakers Lead Bills to Expand the Educator Expense Deduction: Rep. Jimmy Panetta (D-CA) and Sen. Michael Bennet (D-CO) introduced companion bills to expand the educator expense deduction to include early childhood educators for their classroom-related out-of-pocket expenses. The current educator expense deduction allows K-12 teachers and school staff to deduct up to $300 of unreimbursed classroom expenses per year (or $600 for married couples filing jointly if both are educators), but it does not include early childhood educators like preschool teachers.
On the House side, Reps. Brian Fitzpatrick (R-PA), Maggie Goodlander (D-NH), David Valadao (R-CA), Danny Davis (D-IL), Kevin Mullin (D-CA), Chellie Pingree (D-ME), Troy Carter (D-LA), Angie Craig (D-MN), Chris Pappas (D-NH) and Joe Neguse (D-CO) are currently listed as cosponsors. On the Senate side, Sen. Susan Collins (R-ME) is a cosponsor.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Subcommittee on Oversight held a hearing titled “Virtue Signaling vs. Vital Services: Where Tax-Exempt Hospitals are Spending Your Tax Dollars” on Sept. 16.
The committee also had a markup scheduled on Sept. 17 to debate and vote on the following bills: Tax Court Improvement Act, Fair and Accountable IRS Reviews Act, Claiming Age Clarity Act, Improving Social Security’s Service to Victims of Identity Theft Act, Social Security Child Protection Act of 2025 and more. They will also review the Views and Estimates letter.
Senate Finance Committee
The Senate Finance Committee does not have any hearings scheduled this week.