The current shutdown seems interminable, but before you know it, the shutdown will fade in the rearview mirror and the policy agenda in Congress will expand beyond the face-off over fiscal year (FY) 2026 appropriations. When that happens, will tax policy return to the fore? Here are five potential scenarios that could prompt action on taxes after the shutdown: 

• A Shutdown-Related Tax Bill. It is possible that the shutdown itself is resolved with action on a tax bill. Congressional Democrats continue to hold out for action to extend the expiring enhancements to the Affordable Care Act's (ACA) premium tax credit (PTC). Absent action, the PTC will reset to pre-COVID levels in 2026. It's possible the shutdown could end with an agreement to pare back but extend the PTC as part of a new continuing resolution or a different appropriations package. Another possibility is the promise of a later stand-alone Senate vote on extending the ACA credits to appease Democrats. Such a tax bill wouldn't be cheap – extending the current-law enhanced PTC has been estimated to reduce revenue by $350 billion over 10 years. If such a tax bill develops, it could be a vehicle for other pending tax legislation.
• Response to International Tax Discussions. As discussed earlier this month, a future tax bill could hinge on the timing and substance of ongoing international tax work to develop a side-by-side system exempting U.S.-parented groups from the burdensome and duplicative 15 percent global minimum tax. If it goes wrong or takes too long, Republicans in Congress have a ready-made response: section 899. This proposal – explicitly designed to strike back at foreign countries that impose discriminatory taxes on U.S. taxpayers – would start at five percent on top of current U.S. rates and increase annually to max out 20 percent. In June, the Group of Seven agreed to find a solution that treats U.S. parented groups fairly and Republican taxwriters agreed to holster section 899 during negotiations on the One Big Beautiful Bill Act (OBBBA). Policymakers aim to get it all down on paper by the end of the year. With just two months to go, some Republicans in Congress are getting anxious and intimating that section 899 could be brought back sooner rather later. As this is a partisan issue mostly driven by Republican concerns, the easiest path for enactment could be another reconciliation bill. And because section 899 would raise revenue north of $100 billion, it would inevitably spark discussions about how to use this extra revenue windfall.
• Supreme Court Ruling on Tariffs. The Supreme Court is now a factor in tax policy. On November 5, the Court will hear arguments on President Trump's unilateral ability to adjust tariffs under the International Emergency Economic Powers Act (IEEPA). If the Court rules against the president, it could throw open a legislative response from the Republican majorities in Congress to clarify the president's authority to adjust tariffs or perhaps replace tariffs with tax provisions similarly aimed at the president's trade and foreign policy goals.
• Midterm Election Fallout. The midterm elections are 12 months away. If Republicans were to lose control of one or both chambers of Congress, it could hasten action on a late-2026 reconciliation bill to cement Trump's tax legacy. That means making permanent the now temporary tax reductions on tips, overtime, seniors, car loan interest, and other OBBBA provisions likely to lapse without full Republican control of Congress. In 2018, Republicans lost the House and the ability to advance revenue and spending policy via reconciliation. If it happens again in 2026, a go-for-broke run for a sequel to the OBBBA could be in the cards.
• Tax Extenders. The enhanced PTC isn't the only tax provision set to go dark at the end of the year. The work opportunity tax credit (WOTC) and a number of other traditional "extender" provisions are set to lapse at midnight on New Year's Eve. Whether Congress has the time and bandwidth to address these needed extenders remains an open question. What's certain is that absent action in 2025, the call for retroactive extensions will begin in January.

Outside of these five potential decision points, there is the ever-present fact that the president can turn on a dime when it comes to policy. Whether it's canceling trade negotiations and hiking tariffs on Canada or opening up the possibility of raising the top individual tax rate, Trump's sometimes-mercurial approach to policy is at best a "known unknown," and tax policy is no exception. If the president engages and demands another tax bill – perhaps in an effort to maintain control of the House – we could see another reconciliation bill emerge early next year. #TaxTake

Upcoming Speaking Engagements and Events

Mike will speak at the Hawaii Tax Institute on November 4 and University of Chicago Law School Federal Tax Conference on November 7. Layla will speak at the Philadelphia Tax Conference on November 11, and both Layla and Mike will present at the UT Law Oil, Gas, and Energy Taxation Symposium on November 19.

In the News

Mike commented on the importance of the American College of Tax Counsel's recently filed amicus brief in the U.S. Court of Appeals for the Eleventh Circuit in the case of Scott L. Shleifer and Elena Shleifer v. United States: "The amicus brief provides essential perspective for the Court of Appeals on the importance of ensuring access to judicial review in tax disputes through proper framing of the substantial variance doctrine."

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