Legislative Lowdown
Reconciliation Update – Senate Tees Up Budget Resolution Markup While House Remains Deadlocked: On Feb. 7, Senate Budget Committee Chairman Lindsey Graham (R-SC) released an initial Fiscal Year (FY) 2025 Budget Resolution, as well as summary tables, as the committee prepares to craft a blueprint that will enable Republicans to later advance a second reconciliation bill. Senate Republicans have been moving ahead with a two-bill reconciliation approach, which will prioritize border security, defense spending and energy independence in the first bill while taking up tax issues, including extending the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) and addressing other tax proposals, in a subsequent reconciliation bill under a FY 2026 budget resolution. The Senate Budget Committee is scheduled to mark up the FY 2025 Budget Resolution on Feb. 12 and 13.
House Republicans remain deadlocked due to ongoing disagreements between House Speaker Mike Johnson (R-LA) and members of the House Republican Conference over the sufficiency of spending cuts. In addition, House Ways and Means Committee Chairman Jason Smith (R-MO) has not appeared to embrace the proposed constraints for advancing the TCJA and other tax provisions. House leadership continues to be in disagreement with Senate leadership over process, with Speaker Johnson continuing to urge the consideration of one reconciliation bill, rather than two, and indicating on Feb. 11 that he would not bring the Senate Budget Committee’s budget resolution to the House floor even if it passes the Senate. Despite these ongoing disagreements, House Budget Committee Chairman Jodey Arrington (R-TX) announced on Feb. 11 that the committee would mark up its FY 2025 Budget Resolution on Feb. 13, but it is unclear whether the committee will finish its markup before the House begins its recess on Feb. 14. If the chamber continues into recess next week as originally planned, then the House will have to balance processing a budget resolution with resolving the soon-to-expire continuing resolution to prevent a government shutdown by March 14.
Trump Considering Proposals to End Carried Interest and Tax Sports Team Owners: In a meeting with Republican lawmakers on Feb. 6, President Trump added two new proposals to his list of tax policy priorities. The first, ending the tax special treatment of carried interest, is a reprise of a proposal from his first administration that would tax gains from certain partnership arrangements common in private equity and hedge funds, as well as some venture capital firms, as ordinary income rather than capital gains. President Trump previously called for ending carried interest during his first administration, and the Tax Cuts and Jobs Act (Pub. L. 115-97) included an extension of the capital-asset holding period from one year to three years to address the issue. The president did not provide details on how his current proposal would further modify the treatment of carried interest.
President Trump has also called for modifications to preferential tax treatment received by owners of professional sports franchises, with White House Press Secretary Karoline Leavitt saying on Feb. 6 that the president wants to end “special tax breaks for billionaire sports team owners.” The extent to which tax policies would be targeted remains unclear, although the proposal could be aimed at the use of tax-exempt bond financing of professional sports stadiums or the write-off of franchise and other sports contracts. During the meeting, President Trump also continued to advocate for policies such as ending federal taxation of tip income and expanding the state and local tax (SALT) deduction.
Finance Committee Holds Nomination Hearing for Jamieson Greer: On Feb. 6, the Senate Finance Committee held a hearing to consider the nomination of Jamieson Greer to be the United States trade representative. Greer noted in his opening statement that, if confirmed, he would focus on combating unfair trade practices and expanding market access. He also said that he would develop and implement trade policies that incentivize good-paying jobs for American workers. Much of the discussion during the hearing centered on trade policies with China, Canada and Mexico, all of which have been at the forefront of President Trump’s tariff agenda since the beginning of his new administration. Greer formerly served as chief of staff to U.S. Trade Representative Robert Lighthizer during the first Trump administration. On Feb. 12, the Senate Finance Committee voted to advance Greer’s nomination by a vote of 15-12, with Sen. Sheldon Whitehouse (D-RI) joining with all Republicans to vote in favor of Greer’s nomination.
Senate Confirms Russell Vought as OMB Director: On Feb. 6, the Senate voted to confirm Russell Vought to lead the White House Office of Management and Budget (OMB) by a party-line vote of 53 to 47. The OMB is responsible for the oversight of the performance of federal agencies and administers the federal budget. The office has also created significant controversy while Vought’s nomination was pending with an aborted administration-wide memorandum aimed at freezing federal spending.
Tax Worldview
Trump Imposes Tariffs on China: On Feb. 5, President Trump issued an executive order (EO) amending the previously imposed 10% tariffs on China, to allow goods to enter the United States under existing de minimis provisions, permitting goods valued below $800 to enter the United States duty free. Under the EO, de minimis treatment will be available for imports of goods from China until the secretary of commerce notifies the president that “adequate systems are in place to fully and expediently process and collect tariff revenue” from such goods. The new EO does not revoke the Feb. 4 10% tariff on Chinese goods that are not eligible for de minimis treatment.
The new EO also does not affect goods produced in Mexico and Canada, which remain eligible for de minimis treatment as part of the 30-day pause in the tariffs that President Trump has threatened to impose on those countries.
Trump Announces Intention to Issue ‘Reciprocal’ Tariffs: On Feb. 7, President Trump previewed additional “reciprocal” tariffs he intends to impose on countries that have duties imposed on U.S. imports. Speaking alongside Japanese Prime Minister Shigeru Ishiba, the president emphasized that the trade deficit with Japan must be eliminated but did not specify whether Japan or other nations would be subject to the reciprocal tariffs. President Trump has previously raised concern with trade and tariff imbalances between the United States and the European Union, as well as other countries.
1111 Constitution Avenue
Ways and Means Committee Conducts Oversight Hearing on IRS Modernization and Taxpayer Information Security: On Feb. 11, the House Ways and Means Subcommittee on Oversight held a hearing titled “IRS Return on Investment and the Need for Modernization.” The hearing focused on the modernization initiatives of the Internal Revenue Service (IRS) and the use of Inflation Reduction Act (IRA, Pub. L. 117-169) funding to improve taxpayer service. Republicans on the subcommittee expressed skepticism over the efficient use of IRS funds, including for purposes such as the Direct File program, and questioned the scoring of bills by entities such as the Congressional Budget Office (CBO). Many Democrats on the subcommittee were concerned with access to the Treasury Department’s payment systems and sensitive taxpayer information by the Department of Government Efficiency (DOGE).
‘Critical’ IRS Workers May Not Exit with Deferred Resignation Program until May: According to an email sent out by the Internal Revenue Service (IRS) Human Capital Office on Feb. 5, IRS employees deemed “critical” to the 2025 tax-filing season are prohibited from exiting the agency until May 15, even if they had accepted the Office of Personnel Management’s deferred resignation offer issued Jan. 28 to all federal employees. IRS employees in Taxpayer Services, Informational Technology and the Taxpayer Advocate Service, about half of the IRS workforce, would be deemed critical and thus could not leave the agency immediately under the deferred resignation offer. IRS and other federal employees have until Feb. 10 to accept the deferred resignation offer; however, a judge temporarily blocked the offer in a ruling on Feb. 6 and may issue a temporary restraining order pausing the offer and potentially kickstarting the litigation process.
At a Glance
CTA Reporting Requirements Remain in Flux While House Passes Bill Delaying Reporting Requirements: Following the United States Supreme Court’s decision to stay a nationwide injunction blocking the implementation of the Corporate Transparency Act’s (CTA) requirement to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), the Trump administration must decide whether to follow through with the CTA enforcement plans. It has signaled that they would continue with enforcement, filing an appeal to the injunction in Smith vs. United States Department of the Treasury, but backlash by Republican attorneys general and members of Congress may influence the Trump administration’s decision-making process. In addition, on Feb. 10, the House passed the Protect Small Businesses from Excessive Paperwork Act of 2025 (H.R. 736), which would delay BOI filing requirements to FinCEN by one year, with a bipartisan vote of 408-0.
119th Congress Filing Tax Legislation at Triple the Pace of the 118th Congress: At the end of January, members of the House had filed 165 bills referred to the House Ways and Means Committee—more than triple the 55 bills that were referred to the committee by the end of January 2023. Of the 165 bills introduced, 62 were introduced by members of the Ways and Means Committee and 51 of those 62 were introduced by Republican members. Introducing tax legislation gives lawmakers an opportunity to advocate for their top tax priorities, and to influence congressional leadership to include their bill in reconciliation legislation, against the backdrop of the expiration of many Tax Cuts and Jobs Act (Pub. L. 115-97) provisions.
Brownstein Bookshelf
TPC Analysis Finds That Economic Growth of TCJA Extension Would Not Offset Cost: On Feb. 6, the Tax Policy Center (TPC) published an analysis finding that extending the expiring provisions of the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) would increase gross domestic product (GDP) by an average of 0.4% over the next 10 years, with these benefits decreasing over time because of an increase in the federal deficit and the reduction of business investment in the long term. This growth would be expected to offset about 6% of the roughly $4 trillion cost of extending the TCJA.
Hearings and Events
House Ways and Means Committee
On Feb. 11, the House Ways and Means Subcommittee on Oversight held a hearing titled “IRS Return on Investment and the Need for Modernization.”
On Feb. 12, the House Ways and Means Committee held a markup of the Recovery of Stolen Checks Act (H.R. 1155), the National Taxpayer Advocate Enhancement Act of 2025 (H.R. 997), the Internal Revenue Service Math and Taxpayer Help Act (H.R. 998), the Electronic Filing and Payment Fairness Act (H.R. 1152) and the Pandemic unemployment Fraud Enforcement Act (H.R. 1156).
Senate Finance Committee
On Feb. 11 and 12, the Senate Finance Committee held an open executive session to consider favorably reporting the nomination of Jamieson Greer to be the United States trade representative.
Other
On Feb. 12 and Feb. 13, the Senate Budget Committee will hold a markup of the Fiscal Year 2025 Budget Resolution.
On Feb. 13, the House Budget Committee will hold a markup of the Fiscal Year 2025 Budget Resolution.