Here is a look at recent tax-related happenings on the Hill, including President Donald Trump floating the idea of a $2,000 tariff “dividend.”
Lately on the Hill
Government Funding Fight Puts Healthcare Costs Front & Center
Democrats may not have achieved their objectives to make permanent expiring healthcare tax credits and restore Medicaid funding stripped by the One Big Beautiful Bill Act (OB3), but the exercise did do one thing; it put a spotlight on healthcare costs.
The tax credits are set to expire by the end of the year, which may result in increased insurance premiums from what those on the health insurance marketplace have been accustomed to paying since the credits were enacted during the COVID-19 era.
Senate Finance Committee Chair Mike Crapo (R-ID) announced a hearing to be held on November 19 entitled, “The Rising Cost of Health Care: Considering Meaningful Solutions for all Americans.” As part of the funding compromise reached last week, Senate Majority Leader John Thune (R-SD) promised a vote on the credits by mid-December, although House Speaker Mike Johnson (R-LA) hasn’t said whether the House will also hold a vote.1
Ideas have been floated ranging from a one- to two-year temporary extension of the credit with reduced income threshold phaseouts, altering the credit to be paid to individuals rather than insurance companies, or doing away with the credit and replacing it with government-funded flexible savings accounts.2
Trump Talks Tariff “Dividend” & More Framework Agreements Made
Trump floated the idea of a $2,000 tariff “dividend” given to “everybody but the rich” next year. Estimates place a potential $600 billion price tag on the proposal, assuming guidelines similar to stimulus payments made during the COVID-19 pandemic. Tariffs brought in about $195 billion last fiscal year and are expected to reach around $300 billion by the end of the calendar year.3
Treasury Secretary Scott Bessent reframed the president’s proposition, saying that tariffs would help fund tax savings already implemented by the OB3 such as the “no tax on tips,” “no tax on overtime,” and “no tax on Social Security” provisions.
Bessent said, “I would expect in the first two quarters we are going to see the inflation curve bend down and the real income curve substantially accelerate.”4
In a new executive order from the president, effective November 13, 2025, reciprocal tariffs have been modified to exclude certain agricultural products such as coffee and tea, tropical fruits and fruit juices, cocoa and spices, bananas, oranges, tomatoes, and beef.
Switzerland and Liechtenstein have entered into trade deal framework agreements with the United States. The agreement provides greater U.S. exporter access to Swiss markets and secures at least $200 billion of investment into the U.S., including $67 billion in 2026. The trading partners will be subject to a cumulative reciprocal tariff rate of no higher than 15%.
The administration also announced four trade deal frameworks with Central and South American countries Argentina, Ecuador, El Salvador, and Guatemala. The frameworks retain commitments to address non-tariff barriers and streamline regulatory requirements for U.S. exports, refrain from imposing digital service taxes, and institute labor and environmental protections.
From the Courts
Economic Substance Doctrine Includes “Relevancy” Hurdle, Patel v. Commissioner, 165 T.C. No. 10 (2025)
The U.S. Tax Court for the first time weighed in on the economic substance doctrine found under Section 7701(o). This section applies a two-part test5 to determine if a transaction has economic substance; however, before the test is applied, there must be first a determination that the doctrine is “relevant” to the transaction, a key detail of the statute the court homed in on.
The court determined that the economic substance doctrine was relevant to this case involving the petitioner’s microcaptive insurance arrangement based on prior decisions applying the doctrine to insurance transactions. After applying the two-part test, the petitioners were found liable for penalties for these transactions lacking economic substance.6
The Tax Court ruling also puts taxpayers engaged in captive insurance arrangements on notice knowing that the economic substance doctrine is relevant to related transactions.
The ruling is significant as it is contrary to a 2023 decision in the U.S. District Court for the District of Colorado in Liberty Global Inc. v. United States currently on appeal to the Tenth Circuit. The court had determined that a relevancy test is not required before applying the two-part test.
Precedent Set by Tax Court for NOL Treatment, Apache Corp. v. Commissioner, T.C. 25984-22 (2025)
The U.S. Tax Court set precedent allowing different elections for varying types of net operating losses (NOLs) under §172 by unanimous decision. The petitioner in 2016 and 2017 carried forward billions of dollars in standard NOLs while simultaneously carrying back specified liability losses (SLLs) under §172(f) of tens of millions of dollars to offset prior years’ gains. The IRS had disallowed the carrybacks, determining that the SLLs had to be carried forward along with the standard NOLs the company had elected to carry forward.7
The ruling is taxpayer friendly, allowing businesses the flexibility to apply different types of NOLs to different years in an effort to reduce taxable income. Section 172(f) was repealed by the Tax Cuts and Jobs Act of 2017 but was relevant during the period in question.
Judge Emin Toro wrote in the opinion that the ruling is supported by the “text of section 172, its structure, the context in which it developed, judicial precedent interpreting it, and even the Government’s past interpretation of the statute as expressed in regulations.”
From Treasury & the IRS
Korb Nomination for IRS Chief Counsel Withdrawn
Trump has rescinded his nomination of Donald Korb for IRS chief counsel and Treasury assistant general counsel without explanation. Korb’s nomination was approved by the Senate Finance Committee in October.8
IRS to Back Pay Shutdown Wages This Week
On November 19, the IRS will reportedly back pay furloughed workers and employees who worked without pay during the government shutdown. About half of IRS employees were furloughed during the shutdown while the other half continued working to perform critical functions during tax filing season and the implementation of the OB3.9
Released Guidance
Revenue Procedure 2025-31 establishes a safe harbor allowing certain investment trusts that qualify as grantor trusts to stake digital assets without losing their tax classification, provided they meet specific requirements. Existing trusts may amend their agreements to adopt these provisions without jeopardizing their status.
Revenue Ruling 2025-22 provides the 2026 first quarter interest rates for overpayments and underpayments of tax. The rates are 7% for noncorporate payments, 6% for corporate payments, 9% for large corporate underpayments, and 4.5% for corporate overpayments exceeding $10,000.
Notice 2025-67 provides cost-of-living adjustments for retirement plan and individual retirement account (IRA) limits effective January 1, 2026. Key changes include increasing the defined benefit plan limit to $290,000, the defined contribution plan limit to $72,000, and elective deferral limits for 401(k) and 457 plans to $24,500, along with higher catch-up contribution limits and updated income thresholds for IRA deductions and Roth contributions. Numerous other thresholds are also adjusted for inflation.
From the States
Delaware’s House recently passed H.B. 255, which would decouple the state from certain provisions of the OB3. The bill prohibits companies from immediately writing off the full cost of research and experimental (R&E) costs and property investments eligible for 100% bonus depreciation, or qualified production property under §168(n). The bill would require amortization of R&E expenditures over five years while property investment of the types referenced above would still be depreciated over a period of years depending on the type of property.
Pennsylvania recently enacted a new budget for fiscal year 2026 in which it decoupled from the OB3’s provisions regarding the deductions for R&E expenditures under §174A, as well as qualified production facility expenses under §168(n). The legislation also terminated Pennsylvania’s participation in the Regional Greenhouse Gas Initiative. Finally, the legislation also created a refundable credit equal to 10% of the federal earned income tax credit and expanded the state’s opportunity zone program.
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“Shutdown Deal Punts Fate of ACA Tax Credit to December,” taxnotes.com, November 13, 2025.
- 2“Race Is On to Find Healthcare Tax Credit Compromise,” taxnotes.com, November 14, 2025.
- 3“Trump’s $2,000 Tariff ‘Dividend’ Marks Throwback to Covid Checks,” bloomberglaw.com, November 10, 2025.
- 4“Bessent Says Trump’s $2,000 Checks Would Need Congressional Vote,” bloomberglaw.com, November 16, 2025.
- 5Internal Revenue Code §7701(o)(1)(A) and (B).
- 6“Tax Court Breaks New Ground on Economic Substance Doctrine,” taxnotes.com, November 13, 2025.
- 7“Apache Corp. Could Split NOL Treatment for $24 Million Refunds,” bloomberglaw.com, November 13, 2025.
- 8“Trump Withdraws Nominee for IRS Chief Counsel,” taxnotes.com, November 17, 2025.
- 9“IRS Tells Workers to Anticipate Shutdown Back Pay Nov. 19,” bloomberg.com, November 14, 2025.