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After canceling a planned markup last month over a threat of partisan amendments, Senate Finance Committee Chair Mike Crapo, R-Idaho, is returning this week to the bipartisan tax administration bill he crafted with the committee’s ranking Democrat, Sen. Ron Wyden, D-Ore.
The panel expects to mark up the Taxpayer Assistance and Service Act (S. 3931) on July 30.
The legislation, introduced in February, reflects bipartisan interest in improving IRS operations while strengthening taxpayer rights and increasing transparency and predictability in tax administration. If enacted, the provisions could also significantly alter refund claim strategy, forum selection, cash‑tax planning and controversy risk management for large partnerships and corporations. For details on the provisions, see our earlier article.
House Ways and Means Chairman Jason Smith, R-Mo., has taken the approach throughout this Congress of bringing up more narrow, individual bills on tax administration, many of which align with provisions of the Crapo-Wyden package and have passed the full House. These provisions could be the basis for a bipartisan tax package during the postelection lame-duck period. It would likely need to ride on a larger legislative vehicle, so much will depend on what Congress can accomplish later this year.
Crapo previously postponed the Finance Committee session to consider the bill when Democrats wanted an amendment that would undo the unusual audit immunity the IRS granted to President Donald Trump, his family and his businesses in a settlement deal. The deal precludes the agency from auditing past Trump tax returns. It also created a $1.8 billion “anti-weaponization” fund intended to compensate people deemed to have been unfairly targeted or prosecuted by the federal government, and this element drew objections from both Republicans and Democrats.
GOP Sens. John Cornyn, R-Texas, and Thom Tillis, R-N.C., who both serve on the Finance Committee, have said they will not support the confirmation of Trump’s nominee for attorney general, Acting Attorney General Todd Blanche, unless Blanche formally nullifies, in writing, the anti-weaponization fund in the settlement. The senators also have pressed for limitations on Trump’s audit protection.
Ways & Means GOP passes tax-exempt restrictions
The House Ways and Means Committee recently advanced three tax bills that would add new restrictions to the IRS’s treatment of non-profit entities and a fourth providing that certain religious beliefs would not jeopardize an organization’s non-profit status. All were passed on a party-line basis, with Democrats in full opposition.
In the case of the first three bills, the panel’s GOP members said the measures would prevent foreign entities from using tax-exempt organizations to influence U.S. elections. Democrats argued that the bills would impose overly burdensome new reporting requirements and could be used to unfairly target organizations that the administration opposes.
The bills passed on July 22 included:
- The Fiscal Sponsorship Transparency Act (H.R. 9721), sponsored by Rep. Lloyd Smucker, R-Pa., would impose additional reporting requirements on tax-exempt organizations that engage in fiscal sponsorship arrangements and impose an excise tax on any amount the organization transfers in an improper conduit arrangement.
- The Stopping Foreign Influence in Elections Act (H.R. 9771), sponsored by Rep. Nicole Malliotakis, R-N.Y., would impose tax penalties on tax-exempt organizations that make contributions to political entities if the organization receives any contributions from foreign nationals.
- The Foreign Funding Transparency Act (H.R. 9772), sponsored by Rep. David Schweikert, R-Ariz., would require specified tax-exempt organizations — those with gross receipts of $200,000 or more, or with assets of $500,000 or more — to disclose certain information about contributions they receive from foreign nationals in their annual tax return.
- The Fair Treatment of Religious Organizations Act (H.R. 9722), sponsored by Rep. Blake Moore, R-Utah, would provide that religious beliefs concerning marriage, sexuality or gender identity are not considered contrary to established public policy and do not disqualify an organization from tax-exempt status.
The committee’s Democrats argued that the Moore bill would create a “backdoor exemption” to nondiscrimination laws while allowing discriminatory organizations to maintain their tax-exempt status.
House Oversight moves to restrict D.C.’s ability to raise taxes
Taking aim at the District of Columbia’s unique local government, the House Oversight Committee last week voted to require congressional approval for any D.C. legislation imposing or increasing a tax or fee. Under current law, known as “Home Rule,” District residents can elect their own mayor and city council members and manage most day-to-day local affairs, but Congress remains the final authority because it is a federal district, not a state.
When the D.C. Council passes most local legislation, the bill is transmitted to Congress, which then has 30 legislative days to review it. During that period, Congress can pass a joint resolution of disapproval, which can block the D.C. measure from taking effect.
The D.C. Taxing Authority Review Act (H.R. 9720), sponsored by Oversight Chair Jim Comer, R-Ky., would reverse this dynamic, dictating that local legislation creating or raising taxes or fees would not take effect unless Congress passes a joint resolution of approval within 60 days after the legislation is transmitted to Congress.
D.C. Mayor Muriel Bowser released a statement opposing the bill, saying it would “render the District incapable of recovering” from the COVID-19 pandemic, federal remote work and recent reductions in the federal workforce locally.
“Reconciliation 3.0” moves forward in House, with no tax title
Before departing Washington, D.C. for their five-week summer recess, the House on July 22 passed a budget resolution that unlocks a third budget reconciliation package for Republicans.
While Ways and Means Chairman Jason Smith, R-Mo., earlier said any additional reconciliation bill would need to include tax provisions, House leaders kept the new measure narrowly focused on defense spending and assistance for farmers and did not include any spending offsets.
Deficit hawks in the GOP conference have been pushing for deep spending cuts since last summer’s first reconciliation measure, the One Big Beautiful Bill Act (OBBBA), and House leaders continue to promise cuts will be in “the next bill.” House Budget Committee Chair Jodey Arrington, R-Texas, also has continually advocated for provisions to combat fraud in government programs, including Medicaid and Medicare.
However, he conceded that such measures would not be included in this third party-line package and echoed comments from House Speaker Mike Johnson, R-La., that there could be a fourth reconciliation bill after this fall’s midterm elections.
“We have not tens, but hundreds of billions in savings on fraud prevention,” Arrington said. “This is not for this moment. We have to keep this [current bill] so clean.”
It remains to be seen whether or not the Senate will get on board with the House’s reconciliation 3.0 plans. Key Republican senators, including Majority Leader John Thune, R-S.D., and Finance Committee Chair Mike Crapo, R-Idaho, have long expressed deep skepticism about another reconciliation process, which would include two politically treacherous “vote-a-ramas” in the upper chamber, in which Democrats can force unlimited votes — and put vulnerable GOP senators in a hard position ahead of an election.
After House leaders muscled through their budget resolution last week, Thune said the Senate would not consider it until after Congress reaches resolution a spending bill beyond the end of the fiscal year on Sept. 30. House Republicans passed a continuing resolution last week that would keep the government operating through Dec. 4, but Thune said some changes were needed, and he is hoping to reach a bipartisan agreement.
“I can’t count to 50 right now on a budget resolution,” Thune told reporters July 23, referring to the necessary votes for Senate passage. “The priority is funding the government.”
With only a short period of time between Congress’ return from its recess and the beginning of October, when members are scheduled to leave for midterm electioneering, the signals point to a likely delay in another reconciliation bill until after the midterms — if it happens at all.
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