Here’s a look at recent tax-related happenings on the Hill, including new rounds of tariffs and a look into the impact of the budget reconciliation process. For more information on House Resolution 1 and its impact on taxpayers, tune in to our complimentary webinar on July 17. To learn more about the global impacts of the reconciliation package, listen to our podcast released on July 9.
Lately on the Hill
Executive Order Directs Treasury to Enforce Termination of Energy Credits
President Donald Trump issued an executive order directing the U.S. Department of the Treasury to introduce measures to terminate solar and wind clean energy credits. The order mandates that Treasury release guidance to enforce the wind down of the credits within 45 days of the enactment of the recently passed reconciliation package, House Resolution 1 (the Act). According to the order, the guidance should focus on ensuring that the “beginning of construction” guidelines in the Act are not circumvented and that foreign entities of concern (FEOCs) are restricted from claiming the credits.
Rescissions Package
The Senate looks to pass the Rescissions Act of 2025 before the July 18 deadline set by the White House. This package aims to claw back $9.4 billion in federal funding of programs dedicated to foreign aid and public broadcasting. As the government seeks to approve federal appropriations for fiscal year 2026, Democrats warn that the rescissions package will harm negotiations for federal funding. Minority Leader Chuck Schumer called the rescissions package a “poison pill” to the upcoming negotiations while Republicans laud the package as a necessary reduction of government spending.1
New Round of Tariffs Issued
The president delivered another round of tariff letters to countries to announce the tariff rates they will encounter if they do not make a trade deal with the U.S. ahead of an August 1 deadline imposed by Trump. The new letters threatened 30% tariffs on Libya, Iraq, and Algeria; 25% tariffs on Moldova and Brunei; and a 20% tariff on the Philippines.2 In addition to these tariffs, Trump threatened Brazil with a 50% tariff for its prosecution of former President Jair Bolsonaro.3 He also proposed a 35% tariff against Canada for failing to stop the flow of fentanyl into the United States.4 The White House will impose a 30% tariff on all goods from Mexico and the European Union.5 It is not clear whether these proposed tariffs will apply to goods that conform to the United States-Mexico-Canada Agreement (USMCA) as this trade agreement is still in place. Lastly, Trump threatened to levy 100% secondary tariffs on any country that trades with Russia if there is not a ceasefire in the conflict between Russia and Ukraine within the next 50 days.6 A suite of other letters went out and were detailed in this alert by Forvis Mazars.
Judicial Review
Supreme Court Rules on Government Staffing
The U.S. Supreme Court ruled that a lower court’s injunction against the government’s efforts to reorganize the federal government through mass layoffs is being lifted. The order temporarily lifts a lower court’s injunction halting the mass layoffs ordered by Trump while legal arguments concerning presidential authority to reshape the federal government continue. While the arguments continue, the Trump administration can continue to carry out its changes to government staffing.7
From the Treasury & IRS
IRS Expands Exemption for Pass-Through Foreign-Income Reports
The IRS will allow certain partnerships and S corporations to refrain from reporting foreign income through a “domestic filing exception” created by the agency. In practical terms, this announcement permits qualifying partnerships and S corps to file their tax returns without Schedules K-2 and K-3, which report foreign-sourced income. In addition, partnerships and
S corps below a certain gross receipts and asset threshold will not be required to file a K-2 and K-3. For tax years 2024 and after, these taxpayers will only be required to file a K-2 and K-3 if requested by a specific partner.8
IRS Allows Religious Groups to Talk Politics in Gatherings
In a motion filed in the U.S. District Court for the Eastern District of Texas, the IRS declared in a pending proposed consent decree that churches and other religious organizations can talk about political campaigns and candidates in their services without losing 501(c)(3) status.9 According to the IRS, the Johnson Amendment to Internal Revenue Code Section 501(c)(3) allows religious organizations to speak about candidates and political campaigns but prohibits them from taking part in the campaign on behalf of a candidate. Taking part in a campaign via activities such as distributing documents and endorsing candidates will cause the organization to lose its tax-exempt status. The Americans United for the Separation of Church and State (AU) filed a motion to intervene in the case after the National Religious Broadcasters and the IRS filed for consent judgment that would terminate the lawsuit. The AU asserts that allowing religious institutions to be exempt from the Johnson Amendment without extending this exemption to secular nonprofits affords religious institutions unfair treatment under the law.10
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“Schumer Warns Package to Claw Back Funding Would ‘Poison’ Annual Spending Talks,” thehill.com, July 8, 2025.
- 2“Trump Tariff Letters: Running List of Countries and Rates,” thehill.com, July 9, 2025.
- 3“Trump Hikes Brazil Tariff Rate to 50%, Sending Assets Plunging,” bloomberg.com, July 10, 2025.
- 4“Trump Threatens Higher Tariffs on Canada in the Middle of Trade Talks,” nytimes.com, July 11, 2025.
- 5“Trump Threatens 30% Tariffs on EU, Mexico,” wsj.com, June 12, 2025.
- 6“Trump Threatens 100 Percent Secondary Tariffs on Russia Trade,” thehill.com, July 14, 2025.
- 7“Supreme Court Clears Way for Mass Firings at Federal Agencies,” nytimes.com, July 8, 2025.
- 8“IRS Expands Exemption for Partnerships’ Foreign-Income Reports,” bloomberglaw.com, July 9, 2025.
- 9“IRS Says Religious Groups Can Discuss Politics During Services,” bloomberglaw.com, July 8, 2025.
- 10“Group Seeks to Block IRS Settlement on Johnson Amendment,” taxnotes.com, July 14, 2025.