Voters get the final say tomorrow in contentious midterm elections with the balance of power in both chambers of Congress at stake. The big picture is the long-term impact on these next two years leading up to the 2028 presidential election, but there's also an immediate impact on the lame duck session set to begin November 9. This week, we'll look at how the election results could affect the potential for tax legislation in the lame duck.

Congress returns next week to tackle a significant agenda of must-pass legislation and other priorities, with only two weeks in November and two weeks in December to close out the year. This narrow window could shrink further if control of the House or even the Senate hangs open, pending the results of recounts, litigation, or certification disputes.

Although the focus will be on items such as fiscal year (FY) 2027 government funding and the National Defense Authorization Act (NDAA), tax legislation could be considered as part of either a partisan Republican Reconciliation 3.0 effort or as part of a traditional bipartisan year-end bill. If Democrats take control of one or both chambers, the administration is likely to pressure congressional Republicans to pursue Reconciliation 3.0 to secure defense spending, voting legislation, and potentially a debt limit increase. To date, discussions on reconciliation have not included a tax title, although that could change, particularly if the cost of the package increases significantly.

The limited time frame, potential attendance issue, and intraparty debates over the size and content of the reconciliation bill may make it particularly challenging for Republicans to advance one. And the very consideration of such a bill may immediately wall-off any Democrats from engaging on a year-end bipartisan tax bill. Democrats will also factor in the attributes of a functioning and effective majority in one or both chambers and the risk of a potential presidential veto in deciding whether and how they would exercise their leverage in any bipartisan negotiations. For example, a narrow House Democratic majority with a significant number of Democratic Socialist members may require a different leadership strategy than a "blue wave" majority of 20 to 30 seats.

If negotiations on a year-end bipartisan tax bill proceed, there are plenty of candidates for inclusion, including extenders, tax administration, digital asset taxation, and U.S.-Taiwan tax relief. While there is broad bipartisan support for these and other tax relief items, negotiations could potentially stall if there is a push to offset the cost of the bill with revenue raisers or to resurrect an extension of the expired Affordable Care Act (ACA) enhanced premium tax credit.

The midterms will have a large impact on the lame duck tax legislative agenda. Although there are two potential vehicles for tax legislation – Reconciliation 3.0 and a bipartisan bill – the politics and logistics associated with a change in control may effectively cancel each other out. Lame duck sessions usually live up to their name. #TaxTake

Upcoming Speaking Engagements

Today, Mike will give the keynote address at the TEI-SJSU High Tech Tax Institute. Tax Member Rob Kovacev will discuss economic substance at the event tomorrow.

Marc and Tax Members Maria O'Toole Jones and Lisandra Ortiz and Counsel Jaclyn Roeing will speak at the 51st Annual Insurance Tax Conference on November 5-6.

Mike will speak at the University of Chicago Federal Tax Institute on November 6. He will also present at the PLI Tax Strategies for Corporate Acquisitions, Dispositions, Spin-Offs, Joint Ventures, Financings, Reorganizations & Restructurings 2026 conference on November 10.

Miller & Chevalier is proud to sponsor the 2026 Georgetown-IRS Institute on Current Issues in International Taxation on December 15-16. Layla is co-chairing the event. Mike and Tax Member Jeff Tebbs will speak at the conference.

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