Congress returns from a two-week break facing a long legislative agenda and a short calendar before the summer recess. Items at the top of the list include the Safeguard American Voter Eligibility (SAVE) legislation, supplemental defense appropriations, fiscal year (FY) 2027 appropriations bills, the Foreign Intelligence Surveillance Act (FISA), a highway bill, a farm bill, and the National Defense Authorization Act (NDAA). In addition to these priorities, either a partisan reconciliation bill or a bipartisan post-election lame duck bill could provide a vehicle for tax legislation, but both vehicles face significant and growing challenges.

Last week, President Trump demanded action on "Reconciliation 3.0," posting on social media: "[W]hen Congress returns, we must pass Reconciliation 3.0, with 350 Billion Dollars for Defense, plus THE SAVE AMERICA ACT! I am calling on House and Senate Leadership to make this their Number One Priority, and ensure that 350 Billion Dollars in Recon 3.0 moves out of the Budget Committee as soon as Congress is back in session." He has insisted on pulling out all the stops to get the SAVE Act to his desk, including refusing to sign the bipartisan 21st Century ROAD to Housing Act (H.R. 6644), which automatically became law over the weekend. 

However, House Republicans have struggled to find an acceptable path forward on Reconciliation 3.0 as they attempt to navigate the budget reconciliation rules, intraparty disputes, and the need to offset the cost. The role of a tax title in the bill is still unclear, although there may be more risk of tax increases to fund the legislation than opportunities for tax relief. Furthermore, Senate Republicans have expressed little interest in the legislation. Whether Reconciliation 3.0 moves forward isn't immediately clear, but the shrinking calendar means we will know soon. Counting today, the House has just eight legislative days to work its will before heading home for the summer recess. The Senate plans to recess on August 7, if not sooner. The ability to move a reconciliation bill in the fall will be complicated by the pending midterm elections, and a post-election reconciliation bill will also face challenges – particularly attendance issues where Republicans will need every vote.

There has also been hope that after the midterm elections, a lame duck bill could emerge that could address a number of shared bipartisan priorities including tax administration reform, tax extenders, the U.S.-Taiwan "treaty" relief legislation, retirement savings, digital asset taxation, technical corrections, and perhaps some legacy items given the large number of taxwriting committee members that are retiring. 

While a lame duck bill has always faced known challenges – fallout from the midterms, the need to find revenue offsets palatable to both parties, and anticipated controversy over extension of the expired Affordable Care Act (ACA) enhanced premium tax credit – the president's refusal to sign the bipartisan housing legislation is yet another potential barrier for Democrats to engage on a year-end bill.

The legislative process is fluid, particularly this year. We could see Republicans find a path forward on Reconciliation 3.0 or a post-election environment conducive to a bipartisan bill. But, as of today, both legislative vehicles face challenges that may ultimately prove to be insurmountable. #TaxTake

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.