Tax Hot Topics
The House of Representatives returned to Washington from its long summer recess on Aug. 31, and the Senate will return on Sept. 14, but House Republican leadership announced on Sept. 3 that it has canceled the final two weeks of legislative session it had planned before November’s midterm elections, to give members more time to hit the campaign trail. The chamber will now recess no later than Sept. 17 and will not return until Nov. 9.
While tax policy this year has so far been heavily focused on implementation of the One Big Beautiful Bill Act (OBBBA) passed into law last year, meaningful tax legislation could still happen in the few remaining months of this congressional year.
Here are the tax items worth keeping an eye on this fall:
Tax administration changes
The Senate Finance Committee advanced the Taxpayer Assistance and Service (TAS) Act (S.3931) by a 26-1 vote on July 30, giving significant momentum to the bill, co-authored by Chair Mike Crapo, R-Idaho, and Sen. Ron Wyden, D-Ore., the panel’s top Democrat.
While the Senate is unlikely to pass the TAS Act before the November midterm elections, its broad support — as well as numerous narrower bills with similar provisions advanced by the House Ways and Means Committee — means that there’s a strong chance tax administrative reform legislation becomes law before the end of this year if there is a consensus legislative path.
Some significant provisions in the legislation would allow the Tax Court to hear refund and credit disputes, mandate that the IRS create a dashboard allowing taxpayers to track their refunds, allow Tax Court judges to reopen cases in certain instances, accelerate filing deadlines for certain information returns, and mandate a number of IRS operational changes, including electronic dashboards for service wait times and estimated time to refund.
Government funding
President Donald Trump signed a short-term government funding package to maintain operations until Dec. 11, after both chambers of Congress passed the measure known as a continuing resolution (CR) by large majorities (370-48 in the House, 90-6 in the Senate), avoiding a possible government shutdown at the end of the federal fiscal year (Sept. 30). The CR continues IRS funding at the current level of $11.2 billion and included language drafted in the Senate preventing a second rescission of $11.7 billion in agency operational funding provided by the Inflation Reduction Act.
Congress and the White House will need to hash out a longer-term funding plan for the rest of fiscal year 2027 — through either the traditional appropriations process, which could make broader changes to government programs, or another CR, which would more closely track current funding levels — before that Dec. 11 deadline in order to avoid a shutdown. The White House previously proposed cutting the IRS’s funding level to $9.8 billion for FY27, while the House Appropriations Committee passed a bill with $10.2 billion. The Senate has not yet moved an appropriations bill for the agency.
A separate, narrower funding effort using the fast-track mechanism known as budget reconciliation could see a vote in the Senate in September, but this currently appears quite unlikely. Senate Republican leadership has shown far less enthusiasm for a third reconciliation package, and the process would allow Democrats to expose GOP senators to tough votes ahead of the election. The House-passed version of the budget resolution does not include tax policy changes or cuts to IRS funding.
Crypto tax reform
The House Ways and Means Committee is expected to hold a session to debate and advance several changes to the tax treatment of cryptocurrency and digital assets, including changes related to wash trading and mark-to-market accounting for digital assets. That session was anticipated to occur this month, but the decision to recess two weeks early may alter the planned schedule. The committee initially held a hearing on the topic in June. (Read our previous coverage, including descriptions of the bills.)
Regardless of whether the committee moves these tax bills forward, the legislation is highly unlikely to see a House floor vote before the midterm elections after House leadership canceled the final two weeks of the September legislative session. Further action is possible during a post-election lame-duck session, but political headwinds have grown around a separate but related overhaul of cryptocurrency financial regulation. A Senate procedural vote scheduled for Sept. 15 could provide an indication of whether there is a path forward for either financial regulation or tax legislation around digital assets in what remains of this Congress.
Tariff legislation
Before leaving for their August recess, the Senate passed legislation now known as the Lindsey O. Graham Sanctioning Russia and Iran Act (H.R. 5334), after its architect, the late Sen. Lindsey Graham, R-S.C. If signed into law, the bill would grant new unilateral tariff authority to the president, allowing for so-called secondary tariffs of up to 100% on imports from countries that are among the top importers of oil or natural gas from Russia.
In a quirk of the legislative process, the bill also would expand tax deduction eligibility for early childhood educator classroom expenses.
While there is broad support for increased sanctions on Russia (and continuing sanctions on Iran, also a function of the bill), as well as allowing educators to deduct classroom expenses, providing the administration with additional tariff authority is unpopular with most members of both parties. The late cancelation of the final two weeks of the House’s planned legislative session prior to midterms also shrank the window for passage of the amended bill through the House.
“We’ll see and evaluate if it comes to the floor,” House Minority Whip Katherine Clark, D-Mass., told Politico. “But there's a great deal of concern about giving this president, who continues to drive up costs with tariffs for working Americans, even more authority to do that.”
Grant Thornton insight:
Though the tariff and sanctions package enjoyed a broad bipartisan vote out of the Senate, shortly after Graham’s death, its future is now in doubt. House Democrats (as well as some business associations) oppose the tariff language in the bill. If a handful of Republicans also vote against it on those grounds, the legislation could stall and fail to become law. Tariffs levied by the Trump administration remain highly unpopular and are a major topic in this year’s midterm campaigns.
In a similar vein, Senate Majority Leader Chuck Schumer, D-N.Y., introduced legislation, the End Trump’s Tariffs Act (PDF - 36.83KB), to repeal several of the tariffs imposed by the Trump administration and refund the revenue collected. These include Section 301 country-specific tariffs under a forced labor investigation, Section 122 balance-of-payments tariffs that expired July 24 and Section 338 retaliatory tariffs on Canadian products. The bill also would permanently repeal Section 122 of the Trade Act of 1974 and Section 338 of the Tariff Act of 1930, eliminating those discretionary tariff authorities that had never been used before this year.
Grant Thornton insight:
The bill, introduced on Sept. 1, is more of a Democratic messaging tool for midterm campaigning than legislation likely to become law at this point. However, it represents a significant policy marker for Senate Democrats, effectively promising to attempt to repeal and refund of a large chunk of the current tariff regime if they win a majority in the chamber next Congress.
The Trump administration’s tariff actions flipped traditional U.S. politics around trade, as Democrats have been the more protectionist party for decades, while Republicans are navigating the political unpopularity of the Trump tariff regime and their long history as the party of free trade.
Notably, Schumer’s bill would not touch any of Trump’s product-specific tariffs on aluminum, steel, lumber, copper, auto parts, and other raw materials and listed derivative products, nor limit presidential authority to impose those. Those tariffs are seen as more industry-specific and, in some cases, enjoy support from labor unions.
Even if they win majorities in both the House and Senate for the next Congress, Democrats cannot repeal tariffs on their own. Trump will likely veto such legislation, necessitating Republican support if any bill is to achieve a two-thirds majority in both chambers that would enable a presidential veto override.
Still, the legislation is a significant signal for where a Democratic trade agenda could go if they gain control of one or both chambers of Congress — or win both chambers of Congress and the White House in 2028.
Federal film tax credit
Trump lent his social media microphone last week to a burgeoning bipartisan effort to create a federal tax credit for film production. The bill has yet to be introduced, but Trump dubbed it the “Motion Picture, Television, and Entertainment Revitalization Act” in a Sept. 1 social media post that also promised to “bring this once great industry BACK TO AMERICA.”
Trump provided no details about the proposal, but one private sector proponent of it suggested it would include a 20% tax credit for labor costs (including actors) and, according to a Politico report, may include requirements that the majority of production work be done by Americans.
In addition to lawmakers from California, some Republicans from Georgia and Florida, including retiring senior Ways and Means Committee member Rep. Vern Buchanan, R-Fla., are reportedly working on the draft bill, increasing its chances of introduction and becoming law.
Section 181, a tax credit for costs incurred in the production of film, TV and live theater, expired at the end of 2025. Rep. Judy Chu, D-Calif., a member of the Ways and Means Committee, introduced legislation (H.R. 4840) earlier this session to reinstate the credit for five years and increase the dollar limitation.
Contacts:
Content disclaimer
This content provides information and comments on current issues and developments from Grant Thornton Advisors LLC and Grant Thornton LLP. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC and Grant Thornton LLP. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
For additional information on topics covered in this content, contact a Grant Thornton professional.
Grant Thornton LLP and Grant Thornton Advisors LLC (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and Grant Thornton Advisors LLC and its subsidiary entities provide tax and business consulting services to their clients. Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Tax professional standards statement
This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information.
Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Trending topics
Share with your network
Share