Here’s a look at recent tax-related happenings on the Hill, including senators publicly reacting to the House version of the budget resolution.
Lately on the Hill
The Next Step for Tax Reform: A Concurrent Budget Resolution
Returning this week after a weeklong recess, Congress has fewer than nine weeks to meet Republican leadership's desire to have a tax bill done by Memorial Day. This deadline is a seemingly aggressive target considering the Senate has yet to formalize its position on a budget resolution that includes provisions for tax reform. Ultimately, both chambers will have to pass identical (concurrent) budget resolutions to advance the budget reconciliation process.
While we await the details of the Senate’s proposals, there have been public reactions by senators expressing their preferences to what the House passed in its version of the budget resolution. Here is a side-by-side glance.
| House Budget Resolution | Senate Preferences |
|---|---|
| Temporary extension of the Tax Cuts and Jobs Act of 2017 (TCJA). | Permanent extension of the TCJA. |
| Current Law Baseline – estimates consider the TCJA to expire at the end of 2025 and would have a cost to re-enact the tax provisions. | Current Policy Baseline – treats the extension of the TCJA as a continuation of existing tax policy, effectively estimating the cost to be zero. Note that this approach still requires every impacted code section to be amended. |
| $4.5 trillion allocated to the Committee on Ways & Means for tax extenders (approximately equal to the Congressional Budget Office’s estimated cost of extending the TCJA). | By employing the current policy baseline, extension of the TCJA would be scored at zero cost—freeing up budget to include President Donald Trump’s priorities such as no tax on tips, overtime, or Social Security, and restoring other business-friendly changes including bonus depreciation, immediate deductions for research and development expenses, and a more beneficial calculation for deducting business interest expense. |
| $2 trillion in spending cuts; anything below this figure will reduce the Committee on Ways and Means’ $4.5 trillion allocation. | The Senate may not agree to the cuts as a significant portion has been allocated to committees that oversee social programs. |
Some Republicans in the House have expressed their support for a permanent extension of the TCJA and the use of the current policy baseline, provided the steep cuts in spending are retained in the Senate’s forthcoming revamped budget resolution.
If a concurrent budget resolution is passed by both branches of the legislature, the various committees—particularly the premier tax writing body, the Committee on Ways & Means—will be able to unveil their proposals on how and where to spend the allocated funds.
The Judicial Report
Actavis Laboratories FL, Inc. v. United States, No. 1:19-cv-00798-RTH
The U.S. Court of Appeals for the Federal Circuit affirmed a decision by the Court of Federal Claims allowing immediate deductions for legal defense fees. The fees qualify as ordinary and necessary under Section 162 and do not need to be capitalized under §263 as argued by the IRS.
The court determined the legal fees were not in pursuit of the creation or acquisition of intangible property by drugmaker Actavis, rather arising from patent infringement litigation.
Maryland v. USDA, et al., No. 1:25-cv-00748-JKB
Following the U.S. District Court for the District of Maryland’s opinion and temporary restraining order requiring 18 federal agencies, including the U.S. Department of the Treasury, to reinstate probationary employees, the IRS has reinstated approximately 7,400 employees. According to the declaration filed by Trevor Norris, Treasury deputy assistant secretary for human resources, with the court, the affected employees will be on administrative leave.
Tax Notes is reporting that a memo was sent out to reinstated employees that they “will be paid while on leave and will receive back pay from the date of their termination.”1
The government’s emergency motion to stay the court’s action was denied by the Fourth Circuit, citing the pending district court’s hearing on March 26, 2025 to grant or deny preliminary injunction relief.
From the Treasury & IRS
Additional Changes to IRS’ Leadership
According to Bloomberg Tax, Melanie Krause, who has been serving as the acting IRS commissioner since Doug O’Donnell’s retirement in late February, will serve as the IRS’ deputy commissioner2pending former Congressman Billy Long’s confirmation as IRS commissioner. Prior to Krause’s stint as the acting IRS commissioner, she was the IRS’ chief operating officer.
Gary Shapley is taking over as deputy chief for IRS Criminal Investigation. Shapley has been serving as a senior advisor to Treasury Secretary Scott Bessent. Previously, he had been a supervisory special agent for the division’s International Tax and Financial Crime group.
Heather Maloy is stepping down as the IRS’ chief taxpayer compliance officer, a position she has held since 2023, according to reports from Bloomberg Tax.3 Edward Killen will take her place as the acting officer. Killen has been serving as the IRS’ commissioner of the tax-exempt and government entities division.4
Released Guidance
Revenue Ruling 2025-8 provides the April 2025 applicable federal rates (AFR), adjusted AFR, adjusted federal long-term rate and long-term exempt rate, percentages for determining the low-income housing credit, and the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest.
Announcement 2025-8 provides the Competent Authority Arrangement between the U.S. and the Swiss Confederation regarding pension or other retirement arrangements, including individual retirement savings plans.
The Financial Crimes Enforcement Network (FinCEN) has issued interim final rules (RIN 1506-AB49) requiring beneficial ownership information (BOI) under the Corporate Transparency Act for foreign reporting companies only. Domestic reporting companies and U.S. persons who are beneficial owners of foreign reporting companies are exempt from the BOI requirements. Foreign reporting companies have been given an additional 30 days to file, update, or correct BOI reports from the date the interim rules are published in the Federal Register. The interim rules state that FinCEN intends to issue a final rule this year.
The IRS has updated its webpage “Frequently asked questions about the Employee Retention Credit.” Notably, the IRS is now allowing taxpayers who did not reduce their wage expense related to a claim of the ERC to include the overstated wages in gross income in the tax year the ERC was received rather than filing an amended return or administrative adjustment request (AAR) for the year the ERC was claimed. For taxpayers who did reduce their wage expense for the tax year the ERC was claimed but whose ERC claim was later denied, they may increase wage expense in the year the claim was disallowed. However, such taxpayers may still file an amended return, AAR, or protective claim for refund for the year the ERC was claimed and deduct wage expenses related to a disallowed ERC claim.
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.
- 1“IRS Updates Court on Steps to Reinstate Fired Employees,” taxnotes.com, March 19, 2025.
- 2“Acting IRS Chief Takes Deputy Role in Latest Agency Shakeup,” bloomberglaw.com, March 18, 2025.
- 3“IRS Chief of Tax Compliance to Leave in Latest Senior Departure,” bloomberglaw.com, March 19, 2025.
- 4“IRS Head of Tax Exempt Division to Be Acting Compliance Chief,” bloomberglaw.com, March 20, 2025.