Legislative Lowdown
Shutdown Outlook Week 2: Since Oct. 1, the federal government has been partially shutdown after Congress failed to pass a continuing resolution (CR) to fund the operations of government due to disagreements over the extension of enhanced Affordable Care Act subsidies. The Senate has been attempting to pass a continuing resolution every day since the beginning of the shutdown, with such attempts repeatedly failing and prolonging the shutdown with no clear resolution in sight.
While no formal negotiations are occurring at the leadership level, a small, bipartisan group of senators are reported to be discussing options to extend the expiring ACA subsidies. Sen. Dan Sullivan (R-AK) stated that he has been in discussions with other Senate Republicans to consider reforms aimed at reducing costs and preventing fraud, including new income eligibility caps, minimum out-of-pocket premiums and restrictions on subsidies for plans covering abortion services. Both parties remain at an impasse, with Democrats demanding an extension of continued health care subsidies and Republicans insisting these issues be addressed separately from government funding legislation.
Speaker Mike Johnson (R-LA) and the House Republican leadership have stated they intend to keep the House in recess until the Senate passes the House-passed continuing resolution, which would temporarily fund the government until Nov. 21, 2025.
On the agency side, a draft memo from the Office of Management and Budget (OMB) contends that furloughed federal workers are not automatically entitled to back pay under the 2019 Government Employee Fair Treatment Act. This memo contradicts previous guidance from the Council of Economic Advisers (CEA)and the Office of Personnel Management (OPM), which have guaranteed compensation after shutdowns. As of Sept. 30, the Congressional Budget Office (CBO) estimated that a government shutdown could lead to 750,000 furloughed employees each day.
SFC Holds Meeting to Report Nominations, Including IRS Chief Counsel: The Senate Finance Committee held a committee meeting and favorably reported the nominations of Jonathan Greenstein to be a deputy undersecretary of the Treasury Department, Donald Korb to be chief counsel for the Internal Revenue Service (IRS) and Derek Theurer to be a deputy undersecretary of the Treasury Department. Theurer and Greenstein were reported favorably on party line votes, and Korb received a vote from Sen. Sheldon Whitehouse (D-RI) in addition to the Republican members of the committee. The nominations are expected to be sent to the full Senate for a final confirmation vote in the coming weeks.
SFC Holds Hearing on Digital Asset Taxation: Last week, the Senate Finance Committee convened a hearing examining the taxation of digital assets. Lawmakers broadly agreed on the need to modernize the tax code but diverged on how to proceed. Industry representatives urged the committee to consider exemptions for small transactions and options to defer certain gains. Sen. Steve Daines (R-MT) noted that he is developing a framework aimed at clarifying tax rules for digital assets and is incorporating parts of the broad-based crypto discussion draft previously offered by Sen. Cynthia Lummis (R-WY).
Democratic Lawmakers Introduced Proposals to Expand OBBBA Provisions: After the One, Big, Beautiful Bill Act (OBBBA) was signed into law, some congressional Democrats introduced bills to expand certain provisions, including tax relief measures for tips, overtime pay and seniors. The new proposals would broaden eligibility for these deductions, such as covering automatic gratuities, extending overtime relief to more workers and removing taxes on Social Security benefits, while pairing them with measures such as expanding payroll taxes on higher earners to support program solvency. Reps. Angie Craig (D-MN), Emilia Sykes (D-OH) and Tom Suozzi (D-NY), along with Sen. Ruben Gallego (D-AZ) emphasized that their proposals aim to demonstrate fiscal responsibility and offer alternatives for middle-income households.
Analysis Finds Moreno’s HIRE Act Likely to Discourage American Business: An analysis by the Tax Foundation found that the Halting International Relocation of Employment (HIRE) Act, previously proposed by Sen. Bernie Moreno (R-OH), could significantly increase costs for companies outsourcing work overseas and add compliance complexities, especially for firms serving both U.S. and foreign markets.
The HIRE Act would impose a 25% excise tax on wages paid to foreign employees whose services benefit U.S. consumers and disallow tax deductions on those payments. The revenue raised from this tax would fund a new Domestic Workforce Fund aimed at supporting apprenticeships and workforce development to strengthen American employment.
The Tax Foundation report contends that the HIRE Act would amount to a triple taxation on legitimate business functions, discourage U.S. corporate residence and prove nearly impossible to implement. The report also warns that the proposal could undermine U.S. competitiveness and credibility abroad, while punishing standard global operations that often benefit American consumers.
Energy-Tax Mainlines
Barrasso, Moreno Ask IRS and Treasury Department to End EV Credit ‘Loophole’: Sens. John Barrasso (R-WY) and Bernie Moreno (R-OH) wrote to Treasury Secretary and Acting IRS Commissioner Scott Bessent requesting action to address what they view as a conflict with congressional intent under the One, Big, Beautiful Bill Act (OBBBA) to terminate the electric vehicle credits enacted as part of the Inflation Reduction Act (IRA) in 2022. They noted that the law ended federal tax credits for clean vehicle purchases under Sections 25E, 30D and 45W after Sept. 30, 2025, but expressed concern that some automakers may be using IRS guidance (IR-2025-86) in ways that allow continued eligibility through binding contracts between finance divisions and dealers. The senators asked the Treasury Department and the Internal Revenue Service (IRS) to clarify the guidance so that only contracts identifying the end user as lessee and involving a deposit from that individual qualify in order to align implementation with the law.
1111 Constitution Avenue
Bisignano, Koopman Join IRS Leadership: The Internal Revenue Service (IRS) has announced significant leadership changes amid ongoing agency restructurings. Secretary Bessent will remain as acting IRS commissioner, although Sen. Chuck Grassley (R-IA) said that he had been given assurances that President Trump would nominate a permanent IRS commissioner at some point in the near term. While Bisignano will continue to head the Social Security Administration, he will also now be responsible for managing the IRS and overseeing all day-to-day operations of the agency, reporting directly to Acting Commissioner Bessent. His main focus will be on improving collections, privacy and customer service at the IRS in order to steer the agency through key operational and modernization efforts.
Separately, Jarod Koopman has been named acting chief tax compliance officer, now leading all major enforcement functions, including Large Business & International, Small Business/Self-Employed, Tax-Exempt entities, Criminal Investigation and related offices. Edward Killen, who previously led IRS compliance functions efforts in an acting capacity, is reported to be returning to his leadership role in the tax-exempt and government entities division.
Theurer to Perform Duties of Treasury Deputy Secretary: On Tuesday, Treasury Secretary Bessent announced that Derek Theurer, current counselor to the secretary, will perform the duties of deputy secretary of the Treasury Department. In March, Theurer was nominated to be deputy undersecretary for legislative affairs and had his confirmation hearing in late July. His nomination will be considered in a Senate Finance Committee business meeting on Oct. 8.
TIGTA Releases Report on 2025 Filing Season, Effects of Staff Cuts on 2026: On Sept. 29, the Treasury Inspector General for Tax Administration (TIGTA) released a review of the IRS’ 2025 filing season, noting that the agency successfully processed more tax returns than in 2024, exceeded its 85% level of service goal and expanded in-person taxpayer assistance. Over 95% of returns were electronically filed, and the IRS enhanced volunteer-prepared returns and Taxpayer Assistance Center hours, leading to improved taxpayer service. TIGTA warned of significant risks to the 2026 filing season, including the delayed Zero Paper Initiative, which has caused processing backlogs with some contractors returning large volumes of unprocessed paper submissions, and an accounts management inventory that could approach nearly 6 million cases. Shortfalls in IT staffing coincide with new system updates required by the One, Big, Beautiful Bill Act (OBBBA), presenting operational challenges. TIGTA made no formal recommendations in its report.
IRS Begins Shutdown Furloughs: In a statement from the agency, the Internal Revenue Service (IRS) announced that it has begun the furlough process for employees on Oct. 8, 2025. The agency furloughed half of its workforce but kept close to 39,900 employees who are working on One, Big, Beautiful Bill Act (OBBBA) implementation, the upcoming filing season, critical agency operations and IT. All employees who are not exempt or excepted have been placed in non-pay, non-duty status until further notice. The IRS had used Inflation Reduction Act (IRA) funds to maintain its full workforce for the first five business days of the shutdown, but that temporary funding has now lapsed. Tax professional groups and organizations, including the American Institute of CPAs, have urged the IRS to keep all employees on duty to avoid disruptions, especially with the Oct. 15 tax-filing extension deadline approaching. Earlier workforce reductions and the complexity of OBBBA implementation have already raised concerns about service challenges in the upcoming 2026 filing season. For more details about the agency’s contingency plan, please see here.
IRS Launches Pilot Program for Appeals Mediation: The Internal Revenue Service (IRS) Independent Office of Appeals is launching a two-year pilot program starting Oct. 1, 2025, to make Post Appeals Mediation (PAM) more attractive and impartial for taxpayers. Under the pilot program, once a request for mediation is accepted following an unsuccessful appeals process, cases will be reassigned to an appeals team not previously involved, who will represent the IRS in the one-day mediation session. The pilot is designed to increase accessibility and taxpayer confidence in mediation as an alternative to litigation, while maintaining voluntary participation and control over outcomes for both parties.
OMB Defunds Council of the Inspectors General on Integrity and Efficiency: The Office of Management and Budget (OMB) has moved to defund the Council of the Inspectors General on Integrity and Efficiency (CIGIE), the oversight body for 72 federal inspector general (IG) offices, including the Treasury Inspector General for Tax Administration (TIGTA). This action will force IG offices to cease operations and furlough employees effective Oct. 1, despite having funds available in its revolving account. OMB justified the decision by alleging inspector general offices have become partisan, citing the recent matter involving the Department of War’s IG Office. Senate Appropriations Committee Chairwoman Susan Collins (R-ME) and Senate Judiciary Committee Chairman Chuck Grassley (R-IA) joined other lawmakers in urging OMB to release the funds, arguing the action undercuts congressional intent and endangers accountability mechanisms like Oversight.gov.
At A Glance
McGuire Introduces the REMIT Act: Last week, Rep. John McGuire (R-VA) introduced H.R.5595, the Requiring Excise for Migrant Income Transfers (REMIT) Act, which would raise the federal tax on remittance transfers from 1% to 15% for undocumented immigrants. It would exempt transfers sent by verified U.S. citizens or nationals through qualified providers and allowing those individuals to claim a refundable income tax credit for any such tax paid. It also establishes new reporting requirements for remittance transfer providers to verify sender status and track tax payments. Sen. Eric Schmitt (R-MO) is sponsoring companion legislation in the Senate.
Hearings and Events
House Ways and Means Committee
The House is out of session this week.
Senate Finance Committee
The Senate Finance Committee held a business meeting on Oct. 8 to vote on the nomination of Donald Korb to be the chief counsel of the Internal Revenue Service (IRS), Jonathan Greenstein to be a deputy undersecretary of the Treasury Department for international finance and Derek Theurer to be a deputy undersecretary of the Treasury Department for legislative affairs.
