Key Takeaways
- Government reopens after 43 day shutdown.
- IRS slowly coming back to life.
- Avoiding another January shutdown.
- Supreme Court hears tariff arguments.
- Tariff rebate checks?
- Clean energy race and the OBBBA.
- National Loosen Up & Lighten Up Day!
Government Reopens This Week
Federal Government Reopens After Record Shutdown - Renu Zaretsky, Tax Policy Center:
After 43 days, the federal government is funded again. The spending package, signed into law by President Trump last night following approval from both the House and Senate, provides government funding through Jan. 30. The legislation includes three appropriations bills, reverses over 4,000 federal layoffs, and prevents additional layoffs until the end of January. It allocates funding for the Supplemental Nutrition Assistance Program (SNAP) through September 2026.
Practitioners Prepare for Delays as IRS Comes Back to Life - Benjamin Valdez, Tax Notes ($):
But if the 2019 shutdown is any guide, Slonina said it may take a while “for people to get their schedules back on track” and for IRS service centers to work through their backlogs.
IRS employees were expected to return to work on November 13 following the passage and signing of a government funding package that will fund the agency through January 30, 2026.
The IRS furloughed about half its workforce — about 34,000 employees — on October 8, when the shutdown exceeded five business days. For the first week, the agency retained all employees using Inflation Reduction Act funding.
IRS employees were expected to return to work on November 13 following the passage and signing of a government funding package that will fund the agency through January 30, 2026.
The IRS furloughed about half its workforce — about 34,000 employees — on October 8, when the shutdown exceeded five business days. For the first week, the agency retained all employees using Inflation Reduction Act funding.
Avoiding Another Shutdown & ACA Tax Credits
Another shutdown in January? Some lawmakers are already bracing for it - Mike Lillis, The Hill:
Now, with funding for large parts of the government set to expire on Jan. 30, a growing chorus of liberals in the Capitol is already urging fellow Democrats to use that looming deadline to pressure Republicans to extend the Affordable Care Act (ACA) tax credits — even if it creates another impasse that leads to another shutdown.
...
Any congressional action on the subsidies would run into a calendar problem. The open enrollment period for the ACA marketplace began on Nov. 1, and closes on Dec. 15 for coverage beginning on Jan. 1. (For coverage beginning on Feb. 1, the enrollment window extends to Jan. 15). That means those who opt out of coverage because of the higher costs risk going uninsured for the entirety of 2026.
...
Any congressional action on the subsidies would run into a calendar problem. The open enrollment period for the ACA marketplace began on Nov. 1, and closes on Dec. 15 for coverage beginning on Jan. 1. (For coverage beginning on Feb. 1, the enrollment window extends to Jan. 15). That means those who opt out of coverage because of the higher costs risk going uninsured for the entirety of 2026.
Senate GOP deeply divided over next steps on rising health care costs - Alexander Bolton, The Hill:
Senate Republicans are deeply divided over how to handle rising health insurance premiums now that the longest government shutdown in American history is over.
...
“I actually feel forward momentum today around this,” a Democratic aide told The Hill. “A lot of the Republicans are actually worried now. Their constituents are beginning to talk to them about this.”
Democrats control 47 seats and would need the votes of at least 13 Republicans to overcome a filibuster and pass legislation to keep the insurance subsidies from expiring.
...
“I actually feel forward momentum today around this,” a Democratic aide told The Hill. “A lot of the Republicans are actually worried now. Their constituents are beginning to talk to them about this.”
Democrats control 47 seats and would need the votes of at least 13 Republicans to overcome a filibuster and pass legislation to keep the insurance subsidies from expiring.
Race Is On to Find Healthcare Tax Credit Compromise - Katie Lobosco, Tax Notes ($):
There is no hard income cutoff for the enhanced premium tax credit; it phases out as income rises and eventually disappears based on income and family size. ACA enrollees who earn more than four times the poverty level are expected to contribute 8.5 percent of their income to the premium cost. Once the expected contribution is equal to the full premium amount, the subsidy no longer exists.
Three recent proposals from lawmakers would both temporarily extend the tax credit and create a new income limit on eligibility.
Three recent proposals from lawmakers would both temporarily extend the tax credit and create a new income limit on eligibility.
Tariffs: Rebates & Supreme Court
High Court's Tariff Ruling May Trigger Refunds, Reimposition - Dylan Moroses, Law 360 Tax Authority ($):
The high court will decide whether Trump's tariffs under the International Emergency Economic Powers Act are lawful after hearing oral arguments last week during which several justices appeared skeptical of the government's arguments against the constitutional questions at issue in the matter.
If the justices rule the IEEPA doesn't allow tariffs, the judgment could trigger refund processes for importers that have paid those duties, and a separate effort by the government to reimpose similar measures under different statutes.
If the justices rule the IEEPA doesn't allow tariffs, the judgment could trigger refund processes for importers that have paid those duties, and a separate effort by the government to reimpose similar measures under different statutes.
Republicans in Congress lukewarm on Trump idea of tariff rebate checks - Daniel Desrochers, Politico:
Chief among the president’s pitches has been sending a $2,000 rebate check to working Americans, pulled from the hundreds of billions of tariff revenue the country has brought in under his century-high duties.
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Any action on tariff checks is unlikely before the Supreme Court determines whether Trump had the authority to impose tariffs on nearly every country in the world using a 1977 emergency law — a vehicle he’s used to collect at least $88 billion in revenue so far.
...
Any action on tariff checks is unlikely before the Supreme Court determines whether Trump had the authority to impose tariffs on nearly every country in the world using a 1977 emergency law — a vehicle he’s used to collect at least $88 billion in revenue so far.
U.S. to Cut Tariffs on Bananas, Coffee and Other Goods From Four Countries - Gavin Bade, Wall Street Journal:
The U.S. plans to eliminate tariffs on bananas, coffee, beef and certain apparel and textile products under framework agreements with four Latin American nations, a senior administration official told reporters Thursday.
The expected move—which would apply to some goods from Ecuador, Argentina, El Salvador and Guatemala—is part of a shift from the Trump administration to water down some of its so-called reciprocal tariffs in the midst of rising prices for consumers, as well as legal uncertainty after a Supreme Court hearing this month.
The expected move—which would apply to some goods from Ecuador, Argentina, El Salvador and Guatemala—is part of a shift from the Trump administration to water down some of its so-called reciprocal tariffs in the midst of rising prices for consumers, as well as legal uncertainty after a Supreme Court hearing this month.
Clean Energy and the OBBBA
Clean Energy Cos. Tap Private Cash To Beat Tax Credit Clock - Keith Goldberg, Law 360 Tax Authority ($):
Clean energy developers are increasingly looking to privately held investors to ensure they can do enough work to keep their projects fully eligible for tax credits that start phasing out next year, energy development attorneys told Law360.
A race to beat a July 2026 cutoff to maintain eligibility for clean electricity investment and production tax credits and, more immediately, a January 2026 deadline for avoiding stricter foreign supply chain and business ownership rules is causing equipment supply chains to tighten and project costs to increase.
A race to beat a July 2026 cutoff to maintain eligibility for clean electricity investment and production tax credits and, more immediately, a January 2026 deadline for avoiding stricter foreign supply chain and business ownership rules is causing equipment supply chains to tighten and project costs to increase.
Blogs & Bits
IRS announces underpayment, overpayment rates for 2026 First Quarter - Bailey Finney, Eide Bailly:
• 7% for overpayments [6% in the case of a corporation];
• 4.5% for the portion of a corporate overpayment exceeding $10,000;
• 7% for underpayments; and
• 9% for large corporate underpayments.
• 4.5% for the portion of a corporate overpayment exceeding $10,000;
• 7% for underpayments; and
• 9% for large corporate underpayments.
IRS Increases 401(k) Limit to $24,500 for 2026 - Bailey Finney, Eide Bailly:
The maximum amount individuals will be able to contribute to their IRAs increased to $7,500. The catch up contribution limit increased to $1,100 for individuals over 50 years old.
Defining the Scope of I.R.C. § 172(b)(3) Carryback Waivers: Analysis of Separate Carryback Periods for Specified Liability Losses - Ed Zollars, Current Federal Tax Developments:
Consider a taxpayer’s annual NOL as a multi-lane highway leading backward in time. The default carryback is the two-year express lane, which most of the traffic (the general NOL) must take. However, the SLL portion is granted access to a special, separate ten-year lane. The dispute centered on the general waiver election (I.R.C. § 172(b)(3)). The IRS argued that electing to close the entire highway (the NOL carryback) meant closing both lanes simultaneously. The Tax Court held that because the SLL portion occupies a distinct, specially designated lane (a separate "carryback period" under I.R.C. § 172(b)(1)), the taxpayer could elect to close only the two-year general lane while keeping the SLL ten-year lane open, especially since the statute treats the SLL component as a separate loss for carryback sequencing.
Tax Trouble
Doctor Owes Penalties Over Microcaptives, Tax Court Affirms - Asha Glover, Law 360 Tax Authority (Taxpayer name omitted) ($):
The couple had contested the IRS' decision to hit them with penalties for claiming a $4.5 million deduction on their eye clinic's microcaptive insurance, which the agency said lacked economic substance. In a review of their penalties, the Taxpayers had argued that Internal Revenue Code Section 7701(o) — which says the doctrine is applied "in the case of any transaction to which the economic substance doctrine is relevant" — is ambiguous.
After the Taxpayers lost their captive insurance tax deduction under IRC Section 831 in Tax Court, among the remaining issues in their suit were the penalties, including those the IRS wanted to impose on the insurance program for lacking economic substance. But the couple said in filings that the Tax Court needed to first conduct Section 7701(o)'s threshold analysis to determine whether the agency's application of the doctrine was even relevant.
After the Taxpayers lost their captive insurance tax deduction under IRC Section 831 in Tax Court, among the remaining issues in their suit were the penalties, including those the IRS wanted to impose on the insurance program for lacking economic substance. But the couple said in filings that the Tax Court needed to first conduct Section 7701(o)'s threshold analysis to determine whether the agency's application of the doctrine was even relevant.
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