Here is a look at recent tax-related happenings on the Hill, including President Donald Trump securing more trade deals before a possible meeting with Chinese leader Xi Jinping.
Lately on the Hill
Shutdown Continues As Its Effects Escalate
Painful effects of the government shutdown are being laid bare as many federal employees missed their first full paycheck last week and Supplemental Nutrition Assistance Program (SNAP) funds are expected to evaporate by the end of this week, according to Agriculture Secretary Brooke Rollins. Open enrollment on the health insurance marketplace begins November 1, when applicants will see increasing costs compared to last year.1
House Republicans have been told to stay in their districts again this week; they haven’t been on the Hill for over a month now. The message to Democrats is to pass the November 21 continuing resolution (CR) already passed in the lower chamber.2
The pre-Thanksgiving extension date is quickly coming though, diminishing the negotiation space it was supposed to provide to Congress to pass appropriation bills and address expiring healthcare tax credits. Passage of the short-term CR would still be welcome, however, to free the flow of funds and provide back pay to federal workers.
A Senate Republican-backed measure to pay employees required to work without pay since the shutdown began failed to advance, falling short of the 60 votes needed. Democrats felt the bill gave Trump too much power in deeming essential employees.3
“We oppose this Johnson bill, because it doesn’t end the pain of the shutdown, it extends it,” said Senate Minority Leader Chuck Schumer (D-NY). “The only way, the only way to pay every federal worker is for Republicans to get serious, sit down with Democrats, avert their health care crisis and reopen the government.”
Senate Majority Leader John Thune (R-SD) reiterated his party’s position: “Republicans have been perfectly clear that we’re willing to have a discussion about healthcare—just not while government funding is being held hostage.”4
Trump Lands More Trade Deals in Lead-Up to Meeting With Xi
Trump is traveling in Asia and has secured trade agreements with Cambodia and Malaysia and framework agreements with Thailand and Vietnam.
Cambodia has agreed to eliminate tariffs on U.S. industrial goods, food, and agricultural products. The U.S. will maintain a 19% reciprocal tariff on Cambodian exports with certain exempt products as set forth under Annex III to Executive Order (EO) 14346. The agreement also mentions a “forthcoming commercial deal between U.S. and Cambodian companies” and a commitment by Air Cambodia to work with Boeing “in support of Cambodia’s aviation ecosystem development and … growth.” Additional terms of the agreement can be found in this statement.
Malaysia will provide preferential market access for U.S. industrial goods, chemicals, machinery and electric equipment, agricultural products, and more. The U.S. will retain the 19% reciprocal tariff currently in place with certain exceptions under Annex III to EO 14346. The two countries also agreed to work together to develop Malaysia’s critical mineral and rare earth sectors. Malaysia will procure from the U.S. 30 aircraft with an option to purchase 30 more; $150 billion in semiconductors, aerospace components, and data center equipment; $3.4 billion in liquified natural gas; $201.1 million in coal and telecommunication products and services; and make $70 billion in capital fund investments. Additional information can be found in this memorandum and this agreement.
Thailand and the U.S. have agreed to a framework including Thailand’s elimination of tariff barriers on 99% of goods; the U.S. will continue to impose a 19% tariff with certain exceptions under Annex III to EO 14346. Thailand has also agreed to forthcoming commercial deals with the U.S. valued at $2.6 billion per year for the purchase of agricultural products, $5.4 billion per year for energy products, and $18.8 billion to procure 80 aircraft.
Vietnam’s framework agreement provides preferential industrial and agricultural market access for U.S. exports; a 20% reciprocal tariff imposed by the U.S., with certain exceptions under Annex III to EO 14346; and addresses non-tariff barriers affecting trade. Vietnam will also purchase 50 aircraft valued at more than $8 billion and has “signed twenty memorandums of understanding with U.S. companies” to purchase $2.9 billion of agricultural commodities.
The apex of Trump’s eastern tour will be a possible meeting with Xi later this week in South Korea. Trade negotiators for both countries said that several terms of a potential agreement have been ironed out in recent talks, paving the way for Trump and Xi to make a deal.5
According to Treasury Secretary Scott Bessent, the threat of a 100% U.S. tariff has diminished as China is expected to make “substantial” purchases of soybeans and relax restrictions on rare-earth commodities. The two sides have also reportedly made headway on the fentanyl issue the administration cited in imposing a 20% tariff last spring and U.S. actions imposing port service fees on Chinese vessels.
France’s Proposed DST Draws U.S. Chamber’s Ire
The U.S. Chamber of Commerce has pegged France’s proposed increase to its digital service tax (DST) as a “[drag] on the country’s job creation and technological progress.” The French National Assembly’s finance committee passed the proposal on October 22. The full Assembly vote will occur on November 4.6
The senior vice president and head of international at the organization also said of the proposal: “[it] appears to exclusively target U.S. companies, which will likely spur retaliation impacting the broader French economy. Cooler heads must prevail.”
From the Courts
Federal Judge Expands Restraining Order to Include Treasury Employees
The temporary restraining order against the administration’s federal workforce reductions has been expanded to include about 1,000 IRS and U.S. Department of the Treasury workers represented by the National Treasury Employees Union. 7 Judge Susan Illston accepted the amended injunction request filed on October 21.8
Prior to the expansion, Treasury asserted that the ruling could not apply to it as its affected employees were not represented by the unions suing the administration.
From Treasury & the IRS
IRS Reminds Taxpayers That “Tax Obligations” Must Be Met During Shutdown
The IRS is warning taxpayers that due to the government shutdown, tax refunds may not be paid except for Form 1040 filers that electronically filed error-free returns and opted for direct deposit.
The IRS is also notifying taxpayers that Taxpayer Assistance Centers will be closed, and IRS telephone assistance will be limited. Even so, “the underlying tax law remains in effect, and all taxpayers must continue to meet their tax obligations as normal,” according to the IRS.
OB3 Guidance Still in the Works During Shutdown
Ken Kies, Treasury assistant secretary for tax policy, promised guidance implementing the One Big Beautiful Bill Act (OB3) will still be coming despite the shutdown. Of priority is guidance for tax relief on tips and overtime wages, in addition to deductions for car loan interest payments and seniors. Guidance on depreciation changes is expected to be released in November and Trump-saving accounts within the next few months.9
Released Guidance
FS-2025-07 clarifies how the OB3 affects Employee Retention Credit (ERC) claims for the third and fourth quarters of 2021. Under Section 70605(d) of the OB3, ERC claims filed after January 31, 2024 will not be allowed or refunded after July 4, 2025, though taxpayers who reasonably relied on the FAQs in good faith may be protected from penalties. The IRS provides guidance on appeal rights, processing of other return items, and how filing dates are determined for ERC claims.
FS-2025-08 updates FAQs on Form 1099-K to reflect changes from the OB3, reinstating the prior reporting threshold of more than $20,000 and more than 200 transactions for third-party settlement organizations. The FAQs clarify that Form 1099-K is used to report payments received via payment cards or online platforms for goods or services, and that taxpayers must report all income regardless of whether they receive the form. In addition, the IRS outlines procedures for correcting erroneous forms, explains backup withholding, and provides guidance for various scenarios, including personal item sales, crowdfunding, and payments between friends and family.
Notice 2025-57 provides transitional guidance regarding new reporting requirements for interest received on specified passenger vehicle loans in a trade or business, as mandated by §6050AA. For calendar year 2025, recipients may fulfill their reporting obligations by providing individuals with a statement showing the total interest received, using accessible formats like online portals or annual statements. The IRS will not impose penalties under §§6721 and 6722 for recipients who comply with this transitional reporting method.
Notice 2025-63 announces the IRS and Treasury’s intention to issue proposed regulations clarifying that borrow fees from securities lending and sale-repurchase transactions are sourced based on the recipient’s residence. These transactions typically involve standardized agreements and may include explicit fees or negative rebates depending on collateral type and market conditions. Taxpayers may rely on the guidance in this notice for transactions entered into before the regulations are finalized and published.
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“Lawmakers See Pressure to End Shutdown Building Around Nov. 1,” bloomberglaw.com, October 22, 2025.
- 2“House Votes Scrapped Next Week as GOP Digs in Through Shutdown,” bloomberglaw.com, October 24, 2025.
- 3“Democrats Block Senate Bill to Pay Some Workers During Shutdown,” bloomberglaw.com, October 23, 2025.
- 4“Shutdown Drags Into Fourth Week Without Deal on ACA Tax Credit,” taxnotes.com, October 24, 2025.
- 5“US, China Tee Up Sweeping Trade Deal For Trump, Xi to Finish,” bloomberglaw.com, October 26, 2025.
- 6“US Business Rebukes French for 15% Digital Services Tax Proposal,” bloombergtax.com, October 24, 2025.
- 7AFGE v. OMB, N.D. Cal., No. 3:25-cv-08302.
- 8“Treasury Union Joins Battle Over Layoffs During Shutdown,” taxnotes.com, October 23, 2025.
- 9“Treasury Official Promises GOP Tax Law Guidance Amid Shutdown,” bloomberglaw.com, October 22, 2025.