Here is a look at recent tax-related happenings on the Hill, including President Donald Trump nominating Kevin Warsh to lead the Federal Reserve.
Lately on the Hill
Final Appropriations Package Stalls in Congress
Portions of the federal government shut down last week as Congress failed to pass all appropriations bills before the January 30 deadline. The remaining six bills make up nearly 80% of the entire federal budget.1 As of our publication deadline, Congress was in the middle of negotiations to pass the remaining bills but had yet to do so.
Democrats have remained united in refusing to pass the last funding package that includes appropriations for the U.S. Department of Homeland Security (DHS), in light of current events in Minneapolis. The package also includes funding for the IRS at a critical time with tax filing season now in full swing.
On Friday, the parties in the Senate agreed to pass the appropriations package after separating out the DHS bill. The DHS bill was passed in the chamber with a two-week continuing resolution so that negotiations could continue. The newly deconstructed package, however, needs a revote in the House due to the change.2
House Minority Leader Hakeem Jeffries (D-NY) has reportedly refused the deal, leaving House Republicans the task of passing the Senate compromise with little to no Democrat support. That’s a monumental task considering the Republican majority has dwindled to just a few votes.3
Kevin Warsh Nominated to Serve as Next Fed Chair
Trump has nominated Kevin Warsh to lead the Federal Reserve. Warsh is not new to the system where he served as a member of the board from 2006 to 2011. Current Chair Jerome Powell will complete his tenure in May and Warsh’s nomination will still need to face confirmation in the Senate.4
The announcement states, “Mr. Warsh is exceptionally well-prepared to lead the world’s most influential central bank, with a distinguished background including degrees from Stanford University and Harvard Law School, prior roles as a Morgan Stanley executive and top economic advisor to the Bush Administration, and service as the youngest-ever Federal Reserve Governor—where he helped steer the institution through the 2008 financial crisis.”
Congressional Staffers Predict Possibility for Tax Measures This Year
Congressional staff of the House Ways and Means Committee (W&M) and the Senate Finance Committee (SFC), the two tax-writing bodies for each chamber, spoke on a number of tax proposals and the likelihood of passage this year.5
One bipartisan initiative that seems to be gaining momentum is the regulation of digital assets. The panelists referred to bipartisan legislation drafted by Reps. Max Miller (R-OH) and Steven Horsford (D-NV) late last year as a demonstration of current conversations.
“The Miller-Horsford document shows you what some members on our committee, what direction they’d like to go,” said Sean Clerget, chief tax counsel for Republicans on W&M. Clerget did, however, reject that proposal, providing that other policy options are being worked on. “We really see that as kind of a separate track,” Clerget added.
Trade Deal Struck With India
According to a Truth Social post by Trump, the U.S. and India have agreed to trade terms whereby India will cease purchases of Russian oil and eliminate tariffs and non-tariff barriers on the United States. The U.S. in turn will reduce the reciprocal tariffs from 25% to 18%.6
New Tariff Proposals Emerge
A new round of tariff proposals has come from Trump, as he continues to use the potential levies to further his policies.
On Truth Social last week, Trump asserted that South Korea’s legislature is falling short by not approving of the two countries’ deal struck last year and will increase tariffs on “Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%.”7 No official executive order on the increase has been released yet.
The president, however, did sign an executive order declaring the policies and actions of the Cuban government as a “unusual and extraordinary threat” and “hereby declare[s] a national emergency with respect to that threat.” As a result, tariffs will be imposed on countries that provide oil to Cuba. The order provides instructions that first the countries will be identified and then a rate will be determined and imposed.
Trump is also targeting Canada’s “refus[al] to certify the Gulfstream 500, 600, 700, and 800 Jets … effectively prohibiting the sale of Gulfstream products in Canada” by threatening to impose a 50% tariff on all aircraft sold into the U.S. if the situation is not corrected.8
From Treasury & the IRS
Tax Filing Season Opened Last Week
On January 26, the IRS officially opened the 2026 tax filing season. The agency is expecting around 164 million individual tax returns to be filed before the April 15 deadline.
Taxpayers are anxious to see how 2025 workforce cuts affect tax return processing and the timing of refunds. These refunds are generally expected to be higher as many tax-saving measures from the One Big Beautiful Bill Act are applicable to the 2025 tax year.
The IRS is exempting all workers from furlough through February 7 in response to the partial government shutdown. No additional information has been provided by the agency if the lapse in funding continues beyond this week.
IRS Faces 2026 Filing Season Concerns According to TIGTA Official
In a memo to the IRS commissioner, the Treasury Inspector General for Tax Administration (TIGTA) is questioning the agency’s readiness for the 2026 tax filing season considering recent workforce reductions and delays in modernization efforts.
Addressing staffing reductions and their effects on telephone service, the memo states that Account Management leadership has decided to “reduce the telephone level of service goal to 70 percent compared to the 85 percent goal during the 2025 Filing Season.”
According to the memo, the agency had been successful at continually reducing its backlog of unprocessed filings due to the pandemic; however, staff reductions and a record-long government shutdown in 2025 have brought the agency’s inventory to 129% of pre-pandemic levels.
TIGTA officials warn, “Inventory that is not worked during the current processing year will be carried into the 2026 Filing Season and may affect the IRS’s ability to timely process tax returns during the filing season, especially with reduced staff. This could result in delays in taxpayers receiving refunds and could result in the IRS paying interest.”
The 2025 Purple Book Details the IRS’ Most Serious Problems
The Taxpayer Advocate Service, an independent watchdog organization within the IRS, has released its annual Purple Book with 71 legislative recommendations for Congress to “strengthen taxpayer rights and improve tax administration.”
Among the most serious problems identified by the National Taxpayer Advocate Erin M. Collins include issues surrounding amended returns such as delayed refunds and confusing disallowance notices, outdated paper processes and procurement delays, quality of telephone service, and independence issues within the Office of Appeals.
OIRA Reviews Proposed Rules for Remittance Transfers
Drafted regulations related to the 1% excise tax on outbound remittance transfers under Section 4475 have reached the Office of Information and Regulatory Affairs (OIRA) for review before they are released to the public.
Released Guidance
Clean Fuel Production Credit: Proposed regulations REG-121244-23 implement the section 45Z clean fuel production credit by defining eligible transportation fuels, establishing rules for calculating emissions rates and credit amounts, and detailing requirements for producer registration, recordkeeping, and substantiation. The public hearing will be held on May 28, 2026.
SECURE 2.0 Extended Deadline: Notice 2026-9 announces Treasury and the IRS have extended the deadline for required amendments to individual retirement accounts (IRAs), simplified employee pension (SEP) arrangements, and savings incentive match plans for employees (SIMPLE) IRA plans—related to the SECURE 2.0 Act and other referenced acts—to December 31, 2027. This extension is needed because model amendment language is still being developed, and stakeholders have indicated that additional time is necessary for compliance.
FAQs on Electronic Payments: FS-2026-02 explains the implementation of Executive Order 14247, which transitions federal payments to and from the IRS to fully electronic methods to improve security, reduce fraud, and increase efficiency. It outlines how the IRS will phase out most paper refund checks and paper-based incoming payments; expand electronic payment options for individuals, businesses, international taxpayers, and third‑party stakeholders; and maintain limited exceptions for hardships or legal requirements.
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“BGOV OnPoint: Shutdown Threat Affects About 80% of Federal Funds,” bloomberglaw.com, January 28, 2026.
- 2“Lawmakers Reach Deal Hoping to Limit Government Shutdown Length,” taxnotes.com, January 30, 2026.
- 3“Today could be bumpy in the House,” punchbowl.news, February 2, 2026.
- 4“Trump nominates new fed chair. Who is Kevin Warsh?” usatoday.com, January 30, 2026.
- 5“Bipartisan Crypto Bill Downplayed by Senior House GOP Tax Aide,” bloomberglaw.com, January 28, 2026.
- 6“Donald J. Trump,” Truth Social, February 2, 2026.
- 7“Donald J. Trump,” Truth Social, January 26, 2026.
- 8“Donald J. Trump,” Truth Social, January 29, 2026.