Lawmakers return to Washington this week after over a month-long recess, and funding the government is expected to be first on their agenda. However, there’s still much to watch for in the tax space – from filling vacant IRS positions to a year-end tax package.
“I think there’s at least the possibility of some tax stuff coming back into the equation once they get past government funding,” PwC’s Rohit Kumar told Checkpoint. While Kumar is “deeply skeptical” about a second reconciliation bill this year, he feels a year-end bipartisan package is “more likely.”
Appropriations Front and Center
But first, with a September 30 deadline for funding the government, Congress is expected to quickly turn back to fiscal year 2026 appropriations. There are 12 total budgets working their way through Congress, which were at varying stages as lawmakers headed home mid-summer.
The House Appropriations Committee has scheduled a September 3 full committee markup of the fiscal year 2026 Financial Services and General Government bill, which provides funding for Treasury and the IRS, among other things.
But Kumar isn’t holding his breath on an appropriations package passing Congress. “There’s no world where all the appropriations bills are done by the end of the fiscal year,” he said. “The only options right now are a continuing resolution (CR) or a shutdown.”
EY’s Ryan Abraham is also skeptical of Congress passing an appropriations package by the end of September. The odds of a shutdown are “maybe a little more likely right now, coming on the heels of the partisan reconciliation bill … and the lack of agreement currently on a path forward on a on a funding package,” said Abraham.
But it’s not just bipartisan agreement that Abraham is worried about. The president and House Freedom Caucus’ goals of further cutting spending may be “at odds” with “others in the party that would like to either protect health care spending or some of the other spending programs,” Abraham explained on an August 20 EY webinar.
Kumar is betting on a CR through at least the Friday before Thanksgiving. House Republicans can still pass a CR without Democrat support, he explained. And Senate Minority Leader Chuck Schumer (D-NY) will face a tough choice between voting for a CR with Republicans or triggering a shutdown.
“Nobody wins in a government shutdown. Typically, the party that triggers it takes the lion’s share of the blame,” Kumar explained.
On August 28, Schumer and House Minority Leader Hakeem Jeffries (D-NY) called on their Republican counterparts to begin bipartisan government funding discussions to avoid a shutdown.
Bipartisan Action on Health Policy?
A second reconciliation bill might be a long shot, Kumar said, because he’s “not yet been able to discern … the unifying theory behind that bill” that would bring “virtually every House Republican and all but a handful of Senate Republicans all on the same page.”
But Kumar does expect to see bipartisan momentum on a few tax issues before year-end – and at the top of that list for him is the soon-to-expire enhanced premium tax credit. The premium tax credit is available to certain Affordable Care Act marketplace enrollees and helps lower their payments for qualified health plans.
In the wake of the pandemic, Congress enacted temporary changes that made the credit more generous and extended it to taxpayers with household incomes above 400% of the federal poverty level. Those temporary changes are set to expire at year-end, and the IRS has already issued a revenue procedure reflecting the expirations.
Under current law, “there will be a cohort of taxpayers who are currently benefiting from the enhanced premium tax credits will no longer have them next year, and their health insurance premiums will go up,” Kumar explained.
Meanwhile, in the One Big Beautiful Bill Act (OBBB, P.L. 119-21), Kumar noted that “the administration took great pains to make sure that none of the Medicaid changes will kick in before the midterm elections.” He said that if that “sensitivity” to pre-midterm health policy changes remains, we may see the enhanced premium tax credit extended through the end of 2027.
If the premium tax credit is the driver of a bipartisan bill, it could end up being more of a health policy bill than a tax policy one. But Kumar said that “once you’re playing in the Tax Code,” that opens the door for “other consensus items” finding their way into the bill.
Among the options are a Taiwan double tax relief measure. Kumar also suspects there could be bipartisan agreement to tweak the OBBB’s research and development provision. That’s needed, he explained, to address the provision’s interaction with other parts of the Tax Code, subjecting taxpayers to the corporate alternative minimum tax or the base erosion and anti-abuse tax (BEAT).
Abraham would add to the list of potential issues the Work Opportunity Tax Credit; IRC § 181 expensing for certain film, television, and live theatrical productions; and Empowerment Zone incentives.
Nominations
One other tax-relevant area to watch is Senate confirmations of Trump’s leadership picks.
Right before recess, there was “a bit of a kerfuffle over nominations, with some discussion about reducing the amount of time post-cloture before you can get to a final vote,” Kumar explained. He expects the Senate to take that back up, along with appropriations, now that lawmakers are back.
And beyond the procedural debate, there are two tax policy leadership slots newly open since the Senate left town. Those are the IRS commissioner position, vacated by Billy Long, and the deputy Treasury secretary position, vacated by Michael Faulkender.
While there are not yet nominees for those positions, “that’s something that the Senate is invariably going to have to wrestle with when nominees have been picked,” said Kumar.
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