Congress is approaching a two-week recess with pressing priorities that must be addressed, all of which are likely to pull attention far from tax for now. Although both Republican and Democratic lawmakers continue to introduce and markup tax-related proposals, any standalone, meaningful movement is not expected at this time.
Reconciliation round two
Republicans’ appetite for a second partisan reconciliation bill remains mixed. While a potential framework and related ideas have been floated, the common consensus on Capitol Hill as of late has been that tax would be an unlikely anchor for a second bite of the reconciliation apple.
However, if another reconciliation measure comes to be with other policy areas driving the legislative vehicle, such as election laws, healthcare or even supplemental funding for the Iran war, we could see tax provisions hitch a ride. But any potential bill’s projected cost, coupled with the growing federal deficit, will continue to be a hurdle for Republicans, in addition to the majority party’s slim vote margins.
House Speaker Mike Johnson (R-LA) recently renewed his call upon Republicans for their take on what a second reconciliation measure might look like. “As you know, I’m very insistent upon a reconciliation package, and we’re trying to find the final provisions of it everybody can agree to,” Johnson told reporters last week. “I think defense spending could be a part of that, but we have to wait…the details are coming together.”
Meanwhile, House Ways and Means Chair Jason Smith (R-MO) continues to pour cold water on the idea. “I’d love to do a second reconciliation bill, but I’d also love to be Brad Pitt,” Smith said recently. “It’s never going to happen.”
While it appears Republican leadership may be pressing ahead on another – though likely narrower – reconciliation bill, it is expected that the road ahead will be an uphill climb. This situation is fluid and subject to change. Baker Tilly National Tax professionals will continue to monitor the situation and provide timely updates.
Bipartisan legislation
Whether the 119th Congress will rally to enact bipartisan tax legislation remains a frequent question for those monitoring the legislative landscape on Capitol Hill. We’ve previously discussed bipartisan tax policy contenders in this
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policy pulse space
. Currently, although subject to change, the prospects for successful enactment of bipartisan tax extenders or other tax-related legislation appear more likely in the Lame Duck session, rather than before the 2026 midterm elections.
Taxpayer Assistance Service Act
On Feb. 26, 2026, top tax writers Senate Finance Committee Chair Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) introduced a sweeping, bipartisan proposal aimed at improving IRS administration, streamlining compliance and strengthening taxpayer rights. The 162-page Taxpayer Assistance Service (TAS) Act, has been in the works for years and bundles several other IRS and Tax Court procedure standalone bills previously introduced. Generally, the measure would upgrade and expand IRS tools and taxpayer services, as well as strengthen standards for paid tax preparers, among other things.
“The TAS Act is a meaningful step toward a tax system that better serves taxpayers and the advisers who assist them,” Melanie Lauridsen, AICPA’s vice president – Tax Policy & Advocacy, said of the bill. “By implementing modernized processes and addressing inefficiencies, this legislation would enhance taxpayer compliance, improve interactions with the IRS, and reduce unnecessary administrative burdens…,” Lauridsen noted, adding that, “[a]dditional measures in the bill will help ensure the profession is well positioned to meet taxpayers’ needs by establishing clear, minimum educational, ethical, and professional standards for paid tax preparers.”
No markup of the proposed legislation is planned at this time, according to Crapo’s Communication Director Amanda Critchfield.
Government funding
Negotiations continue between Democratic lawmakers and the White House, but there are still no signs of meaningful progress on lapsed Department of Homeland Security funding, which expired at midnight on Feb 13, 2026. The rest of the federal government remains funded through Sept. 30, 2026 – the end of the fiscal year.
2026 midterm elections
The campaign season for the 2026 midterm elections officially kicked off this month with primaries beginning on March 3, 2026. This year’s midterms will undoubtedly influence the political environment and overall tax policy landscape in Washington, D.C. – before and after Election Day. And the yet-unknown composition of the 120th Congress will define the legislative agenda moving forward.
The White House is expected to release the president’s FY 2027 Discretionary Budget Request the week of March 30, 2026. The request is not expected to be significantly tax-focused.
Notably, the president’s budget request is just that – a request. The proposal outlines the administration’s policy priorities and provides a set of recommendations that Congress may consider but is not required to adopt. The president’s budget proposal typically initiates the congressional budget process.
IRS updates
Leadership
Treasury Secretary Scott Bessent’s role as acting IRS commissioner came to an end on March 6, 2026, pursuant to the Federal Vacancies Reform Act, which generally prohibits officials from serving in vacant positions for longer than 210 days. The IRS issued a March 13 news release stating that he has not served in that capacity since that time.
Secretary Bessent continues to oversee the IRS, however, and “retains the authority and responsibility to perform the functions and duties of vacant Treasury offices that are not filled on an acting basis.” According to the news release, the IRS “continues to operate without interruption” while Chief Executive Officer Frank J. Bisignano leads day-to-day operations, reporting directly to Bessent.
The controversial new role of CEO within the IRS continues to evoke concern and criticism from Democratic lawmakers, primarily because of the lack of Senate confirmation. “Congress did not authorize the administration to bypass Senate confirmation by stretching acting service to its breaking point or by inventing new titles to perform statutory duties. Nor did Congress authorize indefinite vacancies in positions central to administering the tax laws,” three top Democratic senators wrote in a March 9 letter to Bessent led by Senate Finance Committee Ranking Member Ron Wyden (D-OR).
2026 tax filing season
As of March 13, 2026, the average tax refund was $3,623, up 10.8% compared to $3,271 as of March 14, 2025, according to IRS filing season statistics. Additionally, as of March 13, 2026, the IRS has refunded $182.6 billion to taxpayers this filing season, compared to $163 billion in 2025.
On March 4, 2026, Bisignano testified before the House Ways and Means Committee, telling lawmakers that the IRS is “on track to deliver a smooth filing season again this year.” Additionally, Bisignano testified that the IRS is providing “historically great service to taxpayers – in terms of tax return processing and the operation of our information technology (IT) system.”
Recent Treasury, IRS guidance
Treasury and the IRS continue to roll out regulatory and subregulatory guidance related to tax reform implementation and the administration’s deregulation agenda. Recent noteworthy guidance is listed below.
Modification of Business Interest Limitation and CFC Group Elections
The IRS has released Revenue Procedure 2026-17, which provides guidance on the withdrawal of elections by certain trades or businesses (real property trade or business, electing farming business, including specified agricultural or horticultural cooperatives, and excepted regulated utility trade or business) to be exempt from the business interest deduction limitation in section 163(j) and to make a late election under section 168(k)(7) to be exempt from bonus depreciation. Additionally, Rev. Proc. 2026-17 provides guidance permitting the early election or revocation of a CFC group election without regard to the 60-month limitation on entity classification changes for the first specified period of a specified group beginning after Dec. 31, 2024.
Trump Accounts
Treasury and the IRS issued two sets of proposed regulations to implement provisions related to the new Trump Accounts for eligible children enacted under the OBBBA and contained in IRC sections 530A, 128 and 6434. Trump Accounts are traditional IRAs with special rules that apply to contributions, investments, distributions and reporting during the growth period of the account (period from establishment of account to Dec. 31 of the calendar year when the beneficiary reaches 17 years of age). The proposed rules can be located below:
Proposed regulations on general requirements (REG-117270-25); and
Proposed regulations on pilot program contributions (REG-117002-25).
New guidance proposes removal of final regulations on certain partnership “basis-shifting” transactions
Treasury and the IRS issued proposed regulations (REG-108921-25) to remove previously finalized regulations identifying certain partnership-related-party basis adjustment transactions as transactions of interest (TOI), a type of reportable transaction. The final regulations (T.D. 10028) were issued in January 2025. In April 2025, IRS Notice 2025-23 was released announcing the eventual promulgation of regulations removing the final regulations and providing immediate relief from penalties for failure to comply with the reporting requirements by participants and their material advisors related to such transactions. The original final regulations will not be officially withdrawn until the proposed regulations are finalized with the removal of the original regulations to be considered as occurring on Jan. 14, 2025.
Corporate Alternative Minimum Tax
Treasury and the IRS released Notice 2026-07 to provide additional interim guidance to taxpayers on application of the corporate alternative minimum tax (CAMT), which imposes a 15% minimum tax on corporations with average adjusted financial statement income (AFSI) of $1 billion or more over a three-taxable-year period for taxable years starting after Dec. 31, 2022. The Notice provides several new or modified adjustments to AFSI, including for the following items:
Deductible tax repairs for section 168 property;
Section 197 amortization attributable to certain intangibles;
Amortization of domestic research and experimental expenditures;
Certain production costs attributable to film, television, live theatrical and sound recording productions; and
Low acquisition cost tangible property treated as materials and supplies, and transactions involving intangible property subject to section 367(d).
U.S. Supreme Court rules majority of President Trump’s tariffs unconstitutional
On Feb. 20, 2026, the U.S. Supreme Court held in Learning Resources Inc., et al. v. Trump, et. al. by a 6-3 margin that President Donald Trump did not have the legal authority to utilize the International Emergency Economic Powers Act (IEEPA) to impose tariffs to address the “influx of illegal drugs from Canada, Mexico, and China” and impose reciprocal tariffs of at least 10% (in many cases, at higher rates) on imports from all trading partners to deal with “’large and persistent’ trade deficits.” The Court held that the tariffs are illegal because Article I of the Constitution vests Congress with the power to impose tariffs and the text of IEEPA grants authority to the president to “regulate… importation,” which includes blocking and prohibiting trade, but does not mention tariffs or duties. However, the Court did not address whether importers are entitled to refunds on tariffs already paid, remanding – and ultimately returning – the issue to the U.S. Court of International Trade to resolve.
On March 18, 2026, the Federal Reserve decided to hold its federal funds rate steady. In a widely anticipated decision, the Federal Open Market Committee (FOMC) voted 11-to-1 to maintain the target range for the federal funds rate at 3.5%-3.75%.
The FOMC reiterated in its post-meeting statement that uncertainty about the economic outlook remains elevated, though noted available indicators suggest that economic activity has been expanding at a solid pace.
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