Here is a look at recent tax-related happenings on the Hill, including the Trump administration possibly changing tax rules so homeowners can claim a depreciation deduction for their primary residences.
Lately on the Hill
House Passes All Appropriations Measures for Fiscal Year 2026
On January 22, 2026, the House passed the Consolidated Appropriations Act, 2026, by a vote of 341 to 88, which covered three of the 12 regular appropriation bills for fiscal year (FY) 2026. The three-bill $1.2 trillion spending package would rescind roughly $11.7 billion of the $80 billion operations support funds the IRS previously received in the 2022 tax-and-spending law. This vote comes after the House passed a separate appropriations package that would cut annual funding to the IRS for the current fiscal year, as detailed in last week’s From the Hill.1
This package would also provide $838.7 billion in discretionary funding for the U.S. Department of Defense and related accounts. Total funds, when including mandatory funds, would be $2.9 billion less than comparable fiscal 2025 amounts but $8.4 billion more than requested. The Labor, Health and Human Services, and Education departments would receive $221 billion in discretionary funds for fiscal 2026 and the Transportation and Housing and Urban Development departments and other agencies would receive $102.9 billion in discretionary funding.2
Also on January 22, 2026, the House passed H.R. 7147 by a vote of 220 to 207, which provides FY 2026 appropriations for the U.S. Department of Homeland Security. The U.S. Department of Homeland Security would receive $64.4 billion in baseline discretional funding for FY 2026, 1% less than comparable 2025 levels.
With the passage of these final packages, the House has completed its constitutional duty and passed all 12 appropriations measures for FY 2026.3
Federal departments and programs in six fiscal 2026 appropriations bills have been combined into a single package under H.R. 7148 to expedite passage in the Senate ahead of the January 30 deadline to fund the government. The Senate is slated to take up the appropriations package this week; however, the combined package mechanism may not pass as several senators have said they won’t vote for U.S. Department of Homeland Security funding.4
The bill could be split so that funding for the U.S. Department of Homeland Security could be addressed separately; however, this would require Senate and House approval. Since the House is out of town until after the shutdown, it is possible that funding of much of the government would lapse on January 31.5
President Trump’s Plans for Homeowners
This week, President Donald Trump attended the World Economic Forum in Davos, Switzerland. In his speech on January 21, 2026, Trump showcased the economic achievements of his first year back in office and outlined innovative initiatives to lower costs for everyday Americans.
During his speech at the forum, the president discussed the executive order he signed the day before to protect the American Dream by making sure that large institutional investors do not buy single-family homes that could otherwise be purchased by families. Trump said his administration may consider changing tax rules so homeowners can claim a depreciation deduction for their primary residences.6 Under current law, the tax break is permitted for certain business property, but generally not for personal residences.
Push to Roll Back Gambling Deduction Cap Fails
On January 22, the House Rules Committee rejected the request from committee members to add H.R. 6985 to an appropriations package. The taxwriters’ bill would reverse the 90% cap on the deduction for gambling losses created by the One Big Beautiful Bill Act (OB3) and restore the 100% deduction.
The 90% cap on the deduction took effect January 1, meaning taxpayers won’t feel the effect until the 2027 filing season. If kept in place, the cap is expected to raise $1.1 billion in tax revenue over the next decade, according to an estimate by the Joint Committee on Taxation.7
Trump Freezes New Tariffs Following Greenland Agreement
In a social media post on January 21, 2026, Trump stated he would not implement tariffs on goods from European nations that opposed his initiative to acquire Greenland. He referenced a “framework of a future deal,” which he claimed had been established concerning the island.8 This decision follows a meeting with North Atlantic Treaty Organization Secretary General Mark Rutte at the World Economic Forum. According to Trump, further information will be made available as discussions progress.9
Since the president has walked back his threat to impose tariffs on European nations, European Union (EU) lawmakers are now expected to vote on ratifying the bloc’s trade deal with the United States. This ratification process was originally postponed due to the threats by Trump, and according to the chair of Parliament’s trade committee, Bernd Lange, the EU Parliament would not proceed with the trade deal until the U.S. decides to reengage on a path of cooperation rather than confrontation.10
From Treasury & the IRS
IRS Open to Address Spinoff Questions Through Letter Rulings
According to Jonathan Neuville of the IRS Office of Associate Chief Counsel (Corporate), the IRS is willing to field questions on a variety of issues concerning spinoff transactions through its letter ruling program following the withdrawal of its 2024 guidance.11
In May 2024, the government issued Revenue Procedure (Rev. Proc.) 2024-24, and Notice 2024-38, which drew substantial criticism by tax professionals. In response, in September 2025, the Trump administration withdrew those changes and issued new Rev. Proc. 2025-30. The rescission in 2025 was intended to reinstitute Rev. Proc. 2018-53, and restore the letter ruling program and let the IRS handle any spinoff-type things on a case-by-case basis.
IRS Leadership Reorganization
In a letter to roughly 74,000 employees, IRS Chief Executive Officer Frank Bisignano outlined a reorganization of executive leadership and set priorities to enhance customer service, improve collections, and protect privacy.
Guy Ficco, chief of the IRS criminal investigation unit, retired from the agency after he took over as head of the enforcement arm in April 2024. He will be replaced by Jarod Koopman, who is also the co-chief tax compliance officer.12
White House Review of Clean Fuel Tax Credit Rules
The White House has completed its regulatory review of IRS and U.S. Department of the Treasury proposed rules for the 45Z clean fuel production credit. The rules are expected to provide guidance on the calculation of emissions factors for transportation fuel, the determination of clean fuel production credits, and registration as a producer of clean fuel.13
Released Guidance
Deduction for Qualified Overtime Compensation: The IRS and Treasury have issued frequently asked questions in Fact Sheet 2026-01 related to the new deduction for qualified overtime compensation under the OB3.
For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the amount that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation) and is reported on a Form W-2 or Form 1099 among other rules and limitations.
These FAQs contain additional information about the deduction, provide resources for employees (including federal employees) to assist them in determining whether they received qualified overtime compensation under the Fair Labor Standards Act, and contain useful information regarding the differences in reporting requirements for tax year 2025 and 2026 through 2028.
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“House Passes Bill to Rescind IRS Operations Funds: BGOV Tax,” bloomberglaw.com, January 23, 2026.
- 2“BGOV Bill Analysis: H.R. 7148, Latest FY 2026 Funding Package,” bloomberglaw.com, January 21, 2026.
- 3“House Passes H.R. 7148 and H.R. 7147, Completing FY26 Appropriations – America First, Fully Funded,” appropriations.house.gov, January 22, 2026.
- 4“IRS Funding in Peril as Shutdown Looms: BGOV Tax,” bloomberglaw.com, January 26, 2026.
- 5“Shutdown Risk Rises as GOP Dismisses Threat to Block DHS Funds,” bloomberglaw.com, January 25, 2026.
- 6“Trump Floats Idea to Allow Depreciation for Homeowners,” taxnotes,com, January 22, 2026.
- 7“Latest Bipartisan Push to Roll Back Gambling Deduction Cap Fails,” taxnotes.com, January 23, 2026.
- 8Donald J. Trump, truthsocial.com, January 21, 2026.
- 9“Trump Drops Tariff Threat After ‘Framework’ Greenland Deal,” bloomberglaw.com, January 22, 2026.
- 10“EU Plans to Unfreeze Trade Deal With US and Vote on Ratification,” bloomberglaw.com, January 22, 2026.
- 11“IRS Open to Addressing Spinoff Questions Through Letter Rulings,” taxnotes.com, January 21, 2026.
- 12“IRS Shakes Up Leadership With Filing Season Looming,” taxnotes.com, January 21, 2026.
- 13“White House Concludes Review of Clean Fuel Tax Credit Rules,” bloomberglaw.com, January 26, 2026.