Here is a look at recent tax-related happenings on the Hill, including Democrats seeking a healthcare credit extension.
Lately on the Hill
Democrats Demand Healthcare Credit Extension in Funding Fight
The federal government is a little more than two weeks away from a shutdown and Congress doesn’t appear any closer to a funding agreement. Republicans are relying on Democrats to pass a temporary continuing resolution to achieve the 60-vote threshold required in the Senate. Democrats may also be needed in the House as several GOP members have historically refused to vote on short-term funding measures.
Democrats view this as an opportunity to draw concessions from their Republican counterparts after being left out of negotiations during passage of the reconciliation bill (One Big Beautiful Bill Act, or OB3). At a minimum, Democrats want to extend the enhanced premium tax credit that expires at the end of the year. Enhanced credits were enacted during the COVID-19 pandemic to help people afford health insurance purchased through the Health Insurance Marketplace.
Many Republicans have been critical of the enhanced credit, which the Congressional Budget Office has estimated would increase the budget deficit by $335 billion over 10 years if permanently enacted. Prior to the enhancement, the credit only benefits taxpayers with income between 100% and 400% of the federal poverty line. The enhancement temporarily allows taxpayers above that threshold to claim the credit.
House Minority Leader Hakeem Jeffries (D-NY) said, “We will not support a partisan Republican spending bill that continues to rip away healthcare from the American people.”1 Democrats have criticized Republican changes to healthcare provisions included in the OB3.
House Budget Chairman Jodey Arrington (R-TX) has been vocal in his opposition and doesn’t see an avenue to get fiscal Republicans onboard. “I doubt you could get a majority of House Republicans to vote for an extension.”2
Tariffs Impact U.S. Deficits as Negotiations With China & India Ramp Up
The nation’s budget deficit for August was $345 billion, a 9% decrease over last August, bringing the total deficit for the fiscal year to $1.973 trillion.3 August also delivered record tariff revenue for a single month, which totaled $30 billion. Total tariff revenue for the fiscal year has accumulated to $172 billion.4
The U.S.’ agricultural trade deficit further widened in July to almost $5 billion. The jump in imports for the month was attributed to importers stocking up before the August reciprocal tariffs took effect against countries around the world.5
Treasury Secretary Scott Bessent is currently meeting with Chinese Vice Premier He Lifeng to discuss tariff measures, export controls, and TikTok. The meeting is thought to be laying a groundwork for a meeting between President Donald Trump and President Xi Jinping in October, before the Trump-induced November deadline for a trade deal arrives.6
Just last week, Trump said he would follow the European Union’s lead in imposing additional tariffs on China and India for their support for Russia, in hopes to pressure Russian President Vladimir Putin to negotiate an end to the war in Ukraine. The U.S. already has punished India with an additional 25% tariff for importing Russian oil.7
Notwithstanding, Trump and Indian Prime Minister Narendra Modi have expressed a desire to renew trade conversations soon.
“I am pleased to announce that India, and the United States of America, are continuing negotiations to address the Trade Barriers between our two Nations,” Trump wrote on Truth Social. “I look forward to speaking with my very good friend, Prime Minister Modi, in the upcoming weeks.”
Modi concurred on X, “I am confident that our trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership. Our teams are working to conclude these discussions at the earliest.”8
From the Judiciary
Supreme Court Will Review Tariff Ruling. Trump v. V.O.S. Selections, 25-250 & Learning Resources v. Trump, 24-1287.
The U.S. Supreme Court has agreed to consider, on an expedited basis, the U.S. Court of Appeals for the Federal Circuit’s August ruling on the illegality of the Trump administration’s tariffs under the International Emergency Economic Powers Act (IEEPA).
According to the court’s order, oral arguments have been allotted one hour and will occur in the first week of November.
White House spokesperson Kush Desai commented, “The fact of the matter is that President Trump has acted lawfully by using the tariff powers granted to him by Congress in IEEPA to deal with national emergencies and to safeguard our national security and economy. We look forward to ultimate victory on this matter with the Supreme Court.”9
Jeffrey Schwab of the Liberty Justice Center, who represents V.O.S., lauded the Supreme Court’s decision to hear the case. “We are confident that the Supreme Court, like the [Court of International Trade] and the Federal Circuit, will recognize that the president does not have unilateral tariff power under IEEPA.”
Tax Court Defines “Placed Into Service” for Vehicle Tax Credit. Moon v. Commissioner, T.C., No. 21998-21.
Internal Revenue Code Section 30D provides a $7,500 tax credit for electric vehicles placed into service during the taxable year. The section of the code does not specifically define the term, which the taxpayer argued may allow a tax credit in 2019 for an otherwise qualifying vehicle purchased in 2013.
The U.S. Tax Court looked to §1.46-3(d)(1), which defines the term for §38 property as “placed in service the earlier of when ‘the period for depreciation with respect to such property begins’ or the property ‘is placed in a condition or state of readiness and availability for a specifically assigned function.’”
The court held that the taxpayer was not entitled to the tax credit and established precedent saying, “Upon purchase, petitioners’ vehicle was ready, available, and used consistently with its specifically assigned function. Accordingly, petitioners’ [vehicle] was placed in service in 2013.”
Digital Service Tax Ruled Legal by French Court
The French Constitutional Council ruled that France’s digital service tax is constitutional. The ruling may prove significant as the Trump administration has long railed against such taxes and has threatened retaliatory taxes against foreign tax regimes deemed discriminatory to U.S. companies.10
From Treasury & the IRS
IRS Employees Told to Disallow Tribal Credits
The IRS has published several employee guidance documents instructing them to disallow “Tribal Credits.”11 Promotors of such credits are currently under criminal investigation. According to the documents, “There is currently a potential scheme that has been identified with Tribal Credits being claimed. These credits are highly questionable and cannot be allowed, regardless of documentation provided.”12
OIRA Reviewing “No Tax on Tips” Occupations
The Office of Information and Regulatory Affairs (OIRA) is reviewing the U.S. Department of the Treasury’s recently released preliminary list of jobs eligible for the OB3’s “no tax on tips” deduction.
Released Guidance
Final Regulations (T.D. 10033) set forth guidance reflecting changes made by the SECURE 2.0 Act of 2022, including the requirement that catch-up contributions made by certain catch-up eligible participants must be designated Roth contributions.
IR-2025-90 alerts taxpayers to fraudulent tax schemes gaining traction on social media. The scams promote the misuse of credits, including the Fuel Tax Credit and the Sick and Family Leave Credit. The filing of inaccurate or frivolous returns may result in denial of refunds and penalties.
A draft of Schedule 1-A for 2025 individual tax returns has been released and includes deductions for certain OB3 provisions such as those for tip income, overtime, car loan interest, and the enhanced deduction for seniors.
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“GOP Taxwriters Mulling ACA Credit Tweaks to Avert Shutdown,” taxnotes.com, September 11, 2025.
- 2“Democrats Threaten US Shutdown as Obamacare Premium Fight Rages,” bloomberglaw.com, September 10, 2025.
- 3“US August deficit falls to $345 billion as tariff revenues rise,” reuters.com, September 11, 2025.
- 4“US Deficit Tracks Third-Highest Ever Even as Tariff Take Rises,” bloomberglaw.com, September 11, 2025.
- 5“US Farm Trade Deficit Widens to New Record as Imports Surge,” bloomberglaw.com, September 8, 2025.
- 6“Bessent to Talk Trade, TikTok With China Officials in Madrid,” bloomberglaw.com, September 12, 2025.
- 7“Trump Floats New Tariffs on China, India to Squeeze Russia,” bloomberglaw.com, September 10, 2025.
- 8“Trump, Modi Agree to Talk in Bid to Resolve Trade Impasse,” bloomberglaw.com, September 10, 2025.
- 9“Supreme Court Will Hear Trump’s Appeal of Tariff Rulings,” taxnotes.com, September 10, 2025.
- 10“French Constitutional Council Upholds Digital Services Tax,” taxnotes.com, September 15, 2025.
- 11“Justice Department Investigating Tribal Tax Credit Sales,” taxnotes.com, September 9, 2025.
- 12“IRS Tells Employees to Disallow ‘Non-Valid’ Tribal Credits,” bloomberglaw.com, September 12, 2025.