Lately on the Hill
Congress Takes Early Recess, Pre-Election Tax Legislation Doubtful
Speaker Mike Johnson (R-LA) sent his chamber into an early recess last week after failing to muster enough votes to advance the National Defense Authorization Act.1 Both the Senate and the House will return on July 13, leaving just eight days the House will be in session before the monthlong August recess and midterm election campaigning begins in earnest. Republican leadership in the House has expressed a desire to introduce another reconciliation bill that would include tax provisions among a host of other legislative priorities. However, there is little time to do so among rank-and-file members so close to the election. Senate leadership has not shown interest in the idea.
Ways & Means Committee Approves Seven Tax Bills
Chairman Jason Smith (R-MO) kicked off a Ways and Means Committee hearing last week stating, “The Ways and Means Committee is dedicated to improving the IRS for the benefit of taxpayers. To that end, we will consider seven bills that strengthen taxpayer protections, improve customer service at the IRS, and provide transparency regarding the questionable activities of certain tax-exempt organizations.”
Five of the seven tax administrative bills passed unanimously, providing relief to Americans detained abroad, fraud victims, and an IRS pilot program for artificial intelligence use. The remaining two bills passed along party lines would establish an IRS fellowship to improve tax administration and enforcement and make significant changes to reporting requirements for nonprofit hospitals.
USMCA Review Officially Begins
The formal review of the U.S.-Mexico-Canada Agreement (USMCA) began July 1, launching a process that will determine the future of the trilateral trade pact in North America.2 Canada and Mexico have signaled support for renewing the agreement largely in its current form. President Donald Trump has expressed skepticism and may seek significant changes or allow it to lapse. Key issues expected to surface during the review include automotive content rules, tariffs, and concerns over energy and labor policies. Unless renewed or revised, the agreement will expire in 2036.
From Treasury & the IRS
2026 Regulatory Agenda Prioritizes Tax Law Implementation
The 2026 regulatory agenda for the U.S. Department of the Treasury and the IRS was released prioritizing the implementation of the One Big Beautiful Bill Act (OB3) and deregulation. Planned guidance includes projects addressing research and development expensing, bonus depreciation, and business interest deduction changes as the agencies work through key provisions enacted last year.3
Electronic Filing Now Available for Certain Pandemic-Related Refunds
The IRS has launched an online option for taxpayers to electronically file certain refund claims tied to the Kwong v. United States decision, which held that COVID-19 emergency relief extended some tax filing and payment deadlines to July 10, 2023. Taxpayers who may have paid penalties or interest during the pandemic period have until July 10, 2026 to preserve potential refund rights, even as the government continues to appeal the underlying court decision.4 For additional information, read our FORsights™ article, “Act Now: Deadline Fast Approaching for Potential IRS Refunds.”
Automatic Taxpayer Penalty Relief Launching Soon
The IRS is expected to launch a new automatic penalty relief process in early July that will identify and remove certain penalties for taxpayers with a history of compliance, eliminating the need for eligible taxpayers to request relief themselves. Taxpayer Advocate Erin Collins also noted that taxpayers assessed penalties before the new system takes effect may still need to contact the IRS to obtain first-time penalty abatement.5
Treasury Legislative Affairs Official to Depart Agency
Derek Theurer, Treasury Secretary Scott Bessent’s representative on Capitol Hill and deputy undersecretary for legislative affairs, left the Treasury Department last week after helping coordinate the administration’s tax agenda and other key policy initiatives.6
New Opportunity Zone Designation Process Begins
Treasury has opened a 90-day window for governors to nominate eligible census tracts for qualified Opportunity Zone designation under the changes enacted by the OB3, with new designations set to take effect beginning in tax year 2027. The revised program makes Opportunity Zones permanent, adds enhanced incentives for certain rural investments, and expands reporting requirements while continuing to encourage investment in low-income communities.7 Please read our FORsights, “Opportunity Zone Changes in the New 2025 Tax Act,” to learn more about this investment opportunity.
Released Guidance
Trump Accounts: Revenue Procedure 2026-25 establishes a transfer tax safe harbor for certain contributions to Trump Accounts, treating qualifying contributions as completed gifts that are eligible for the annual gift tax exclusion and generally do not require the filing of a gift tax return. Taxpayers can rely on the safe harbor if they meet specific requirements, including keeping total gifts to an account beneficiary within the annual exclusion amount ($19,000 in 2026) and not being required to file a gift tax return.
As of July 4, 2026, contributions may now be made to these tax-advantaged investment accounts. Last week, Treasury announced that the State Street SPDR Portfolio S&P 500 ETF (SPYM) will be the default investment and will eventually offer four additional low-cost index fund options that parents and guardians can elect for their children’s accounts. The agency also announced it will accept large philanthropic contributions of publicly traded stock for the accounts, allowing donated shares to be transferred to eligible children’s accounts in accordance with donor instructions and Treasury guidance.
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“The House GOP majority is getting worse,” punchbowl.news, July 1, 2026.
- 2“Trump Souring on USMCA Sets Up Rethink of $2 Trillion Trade Deal,” news.bloombergtax.com, July 1, 2026.
- 3“Trump Administration Issues 2026 Treasury, IRS Regulatory Agenda,” news.bloombergtax.com, July 3, 2026.
- 4“IRS Launches Online Tool for Filing Kwong-Related Refund Claims,” taxnotes.com, July 6, 2026.
- 5“IRS to Announce New Automatic Penalty Relief Starting in July,” news.bloombergtax.com, June 26, 2026.
- 6“Treasury’s Top Capitol Hill Liaison is Departing This Week,” go.bloombergtax.com, June 29, 2026.
- 7“Treasury Opens Designation Cycle for OBBBA-Era Opportunity Zones,” taxnotes.com, July 2, 2026.