The likelihood of further Republican-backed tax law changes is in flux as GOP leaders pursue a second reconciliation bill — however, the primary aim of that bill is funding the Department of Homeland Security (DHS).
The possibility of passing further tax legislation as a follow-up to last year’s One Big Beautiful Bill Act (OBBB) has gone from nearly zero to being “in the equation,” PwC’s Rohit Kumar said during an April 8 briefing. He explained that a dispute over Department of Homeland Security funding has prompted Republican leadership to pursue a budget reconciliation bill, but “there’s a real question mark about whether or not tax is going to be a component.”
Just a few weeks ago, the consensus view was that 2026 would be a “pretty slow year for tax,” said Kumar. Following a major tax bill in 2025, many assumed the Tax Code was likely to remain stable for the foreseeable future, he explained.
Now, said Kumar, “Congress is having an honest-to-goodness conversation about another reconciliation, which seems extremely likely to happen in one form or another.” But whether tax will find its way into the effort — and if so, what specific tax issues will be addressed — remains unclear.
Homeland Security Funding Focus
On April 10, Senate Budget Chair Lindsey Graham (R-SC) and Majority Whip John Barrasso (R-WY) met with President Trump about more narrowly tailored reconciliation efforts. “We’re going to have a very specific bill coming out before June 1 that will fund the Border Patrol and ICE for the entire presidency,” Graham told Fox News later that day. “As Budget chairman, I can do this through reconciliation without one Democratic vote,” Graham stressed.
And Trump is pushing for this year’s reconciliation bill to be completed on an even more accelerated timeline than the OBBB. “I am calling for the Bill to be done no later than June 1st, and on my desk,” Trump posted on April 10 after meeting with Barrasso and Graham. “The Department cannot wait any longer for full funding,” he added.
“The protracted dispute over funding the Department of Homeland Security has caused House and Senate Republicans as recently as, like in the last 10 days, to sort of formally commit to what has been, frankly, sort of just chatter amongst rank-and-file,” Kumar explained. He added that providing the funding via reconciliation “hadn’t really fully been embraced in a bicameral way” until very recently.
However, ending the DHS funding dispute via reconciliation — a special legislative process that allows certain budget-related bills to pass the Senate with a simple majority — has now been endorsed by Senate leaders and Trump.
Tax Provision Potential
Even though DHS funding is the “origination story” of the potential second reconciliation bill, said Kumar, tax writers have already signaled their intent to be involved. Kumar noted that House Ways and Means Committee Chair Jason Smith (R-MO) has indicated he’d like tax policy to “have a seat at the table” in a reconciliation effort.
The key indicator of whether tax will appear in a reconciliation is the budget resolution, the blueprint document required before a reconciliation bill can proceed. If the taxwriting committees receive an instruction in that resolution, then tax legislation is in play, Kumar explained. If they do not, tax is “out of the equation” due to procedural rules.
Deloitte Tax’s Mark Roman, who until recently was Ways and Means staff director and oversaw the development and negotiation of the OBBB, seemed hesitant about what tax provisions could make it into Reconciliation 2.0. Roman, speaking during an April 9 Deloitte briefing, noted the OBBB is called “big” for a reason. “I personally don’t see a long list of things that got left behind,” he said.
Roman did highlight a few topics that dropped out of OBBB that some Republicans may want to pursue. Those include a more generous IRC § 199A qualified business income deduction, Earned Income Tax Credit reforms, and further university endowment tax reforms. But none of those are “drivers” of a reconciliation bill, in Roman’s view.
EY’s Courtney Connell, who until recently served as Senate Finance Committee chief tax counsel, added to that list items that “fell out” due to the Byrd rule – which prohibits using reconciliation to enact provisions that do not have a revenue impact. Other possible changes include OBBB provisions that require a “tweak” due to the limited drafting time last year, said Connell, speaking at the Deloitte briefing.
Bipartisan Tax Reform Efforts
Even if tax makes it into Reconciliation 2.0, Kumar said that’s unlikely to derail ongoing bipartisan tax reform efforts. While partisan exercises can create “poison in the water” for bipartisan talks, Kumar contends this year’s reconciliation effort will have a much smaller impact than the 2025 tax bill.
Ongoing bipartisan efforts include the Taxpayer Assistance and Service Act, a large tax administration package forwarded by Senate Finance Committee leaders. Connell also identified crypto and Taiwan tax relief as other bipartisan targets.
Kumar added that any bipartisan proposals were always more likely to be considered toward the end of the year, during the “lame duck” session after the November elections — months after Trump’s June 1 reconciliation target date. Kumar believes this year’s reconciliation effort is “unlikely to significantly disrupt those bipartisan conversations.”
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