Here’s a look at recent tax-related happenings on the Hill, including the White House issuing executive orders regarding tariffs and digital assets following President Donald Trump’s address to Congress.
Lately on the Hill
The President Visits Congress & Signs More Executive Orders
Trump was on the Hill last week in his first official address to Congress since taking office in January.
The president largely reiterated his campaign proposals for tax reform, calling on no tax on tips, overtime pay, and Social Security benefits for seniors. He also reiterated his support to incentivize American manufacturing by allowing deductions for interest paid on loans for American-made cars as well as tax cuts on domestic production and manufacturing—a reference to his campaign proposal to drop the corporate tax rate to 15% for domestic manufacturers. Bonus depreciation of 100% also would return, retroactive to Inauguration Day, January 20, 2025.
Trump spoke about tariffs, particularly the impending April 2 implementation of reciprocal tariffs. The president touted tariffs as a means to encourage businesses to build their products in America, juxtaposing them with the Biden administration’s CHIPS and Science Act, asserting that the billions of dollars the act allocates to bring semiconductor supply chains to the U.S. could be done away with to help reduce debt.
Two days after Trump’s speech to Congress, the White House issued executive orders exempting goods imported under the U.S.-Mexico-Canada Agreement from tariffs in an effort to “minimize disruption to the automotive industry.” The exemption is intended to offer a partial one-month reprieve from tariffs imposed on Canada and Mexico just days earlier.
Tariffs against Chinese goods were expanded on March 3, rising from 10% to 20%.
In addition to the tariff executive orders, Trump also issued another regarding bitcoin and other digital assets. The executive order establishes a “Strategic Bitcoin Reserve” and a “United States Digital Asset Stockpile” for the country’s digital asset holdings. The accounts will be funded by the government’s existing digital assets and those obtained through criminal or civil asset forfeiture proceedings.
Current Policy Approach to Make Tax Cuts Permanent
The proposal to employ a “current policy” baseline in calculating the cost of legislative tax cuts appears to be gaining more traction. Current policy assumes extending tax cuts would be cost neutral, since it is the continuation of the existing tax policy, as opposed to the “current law” baseline that considers the expiring tax laws and the costs to re-enact them. The House’s budget resolution provides $4.5 trillion in funding for an extension of the 2017 tax cuts on a current law basis, enough to extend the tax provisions through the next decade. However, if the goal is to make the tax cuts permanent, as supported by the president and other powerful members of Congress, a current policy baseline would pave the way by effectively scoring the permanent extension costs at zero.
Treasury Secretary Scott Bessent spoke to the Economic Club of New York on March 6 and expressed his support for the current policy baseline.1 Michael Faulkender, nominee for deputy Treasury secretary, called for tax reform permanence during his confirmation hearing on the same day. “Making pro-growth tax reform permanent,” Faulkender stated, “we will realize the golden age the President has promised.”
Tax Bill Gets an Ambitious Deadline, Focus Shifts to Government Funding
House Ways and Means Chair Jason Smith (R-MO) is on board for using the current policy approach. However, he has expressed doubts that members of his party more concerned with deficits over tax cuts will support it. Smith also plans to have a tax bill ready for the president’s signature by Memorial Day.2
There is still quite a bit of work to be done if Congress is to have a tax bill negotiated by Memorial Day. Both chambers still must pass identical budget resolutions; however, that is not expected to happen in March given the current focus on the pending government shutdown, a weeklong recess, and the upcoming special election in Florida on April 1. The two Floridian seats are expected to be filled by Republicans, helping boost the party’s already slim majority in the House and providing some buffer to pass a concurrent budget resolution with their Senate counterparts.
Continuing Resolution
Despite Smith’s aggressive deadline for a tax bill, Congress’ attention is turning to a more pressing matter as it debates another continuing resolution to keep the government funded through September 30, 2025. The current resolution expires on March 14, which—if not extended—would result in a government shutdown.
Over the weekend, the House unveiled the text of the spending bill. The bill freezes spending with nominal measures to increase defense spending while cutting non-defense spending. The bill also rescinds more than $20 billion of IRS funding as originally provided by the Inflation Reduction Act of 2022. A vote could be held as early as Tuesday of this week.
The Judicial Report
Small Business Assoc. of Michigan v. Yellen, No. 1:24-cv-314
The U.S. District Court for the Western District of Michigan granted summary judgment to the Small Business Association of Michigan in its argument against the Corporate Transparency Act (CTA). Based on the Fourth Amendment—which provides protections against unreasonable searches and seizures by the government—the ruling is unique from other courts that have likewise enjoined the act’s beneficial ownership reporting requirements on small businesses.
Disagreeing with the government’s argument that the CTA is not subject to warrant requirements under the “special needs” exception, Judge Robert J. Jonker stated, “This exception focuses on giving the government special latitude in certain exigent circumstances … Far from ‘imminent,’ the financial terrorism and money laundering the CTA targets is prospective, unidentified, and amorphous.” Unlike other recent injunctions against the CTA applicable nationally, this ruling is only applicable to the stated plaintiffs.
The court acknowledged the recent Treasury announcements postponing reporting deadlines and foregoing enforcement against U.S. citizens, domestic reporting companies, or their beneficial owners after forthcoming rules are released. The court’s ruling provides an important point, “These actions are not a matter of record, do not carry the force of law, and do not moot this case.”
From the Treasury & IRS
Released Guidance
Notice 2025-16 provides adjustments to the limitation on housing expenses under Internal Revenue Code Section 911. This code section applies to citizens or residents of the U.S. living abroad and allows housing costs and foreign gross income to be excluded from the qualified individual’s gross income. The notice is effective for taxable years beginning on or after January 1, 2025. Taxpayers also may apply the 2025 adjusted housing limitations to the 2024 taxable year.
Revenue Procedure 2025-17 provides information for individuals failing to meet the requirements of a “qualified individual” under §911 as a result of leaving the country due to war, civil unrest, or similar adverse conditions. For 2024, Treasury has determined that the following foreign countries met such conditions and individuals will still be considered “qualified individuals” if they otherwise would have met other requirements. The foreign countries are Bangladesh, Haiti, Iraq, and Ukraine.
Revenue Ruling 2025-7 provides the 2025 second quarter interest rates for overpayments and underpayments of tax. The rates are 7% for noncorporate payments, 6% corporate payments, 9% for large corporate underpayments, and 4.5% for corporate overpayments exceeding $10,000.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.