Capitol Hill Recap: Looking for Options on Healthcare Tax Credit

The Senate is set to vote next week on a Democratic proposal to extend the enhanced Affordable Care Act premium tax credits for three years—the hard-won prize for the party from a brutal six-week government shutdown that ended about a month ago.

As part of the deal to re-open the government, Senate Majority Leader John Thune promised to hold a vote on an ACA credit extension, with Democrats deciding the wording of the legislation. It’s expected to fail, but that’s not really the point. Whether it was worth it or not, the Democrats have succeeded in keeping the issue in the spotlight as this contentious year of legislating closes out.

Republicans have opposed the Affordable Care Act as a whole, and they aren’t eager to extend the subsidies. But they’re also not quite ready to oppose any sort of measure outright, as future premium hikes (and the overall cost of living) are angering voters across the spectrum. There is intense pressure on Congress to do something, whether it’s to increase tax support to buy insurance or some underlying fix to reduce costs overall.

Of course, if this was easy it would be done already.

Putting together a major health care overhaul in the remaining weeks of 2025 is a tall order. In fact, simply extending the ACA credit enhancement will be more complicated than it may sound, as open enrollment on the Obamacare exchanges has already begun and many have already bought insurance for the upcoming year. The closer it is to 2026—and Congressional negotiations tend to go until the 11th hour—the harder it will be to find a fix. And Republican hopes of enacting some type of overhaul of the system will also face perhaps insurmountable challenges if they hope to do so before the 2026 premium hikes take effect.

President Trump, meanwhile, has been puzzling his own party with proclamations against any extension, as well as hints that he might consider one. The mixed messages likely aren’t helping matters.

Moderates in both parties are searching for areas of common ground. For instance, Maine Republican Sen. Susan Collins has floated the idea of a new income limit of $200,000 per year, as well as a prohibition of no-cost premium plans. (Before the enhancement, the credits were limited to those earning under 400% of the poverty level, or about $130,000 for a family of four. With the enhancement, there is no income limit, but the amount of the premium is capped for wealthier enrollees.)

But those efforts are running into a basic conundrum–some members of the Republican caucus won’t accept anything with an Obamacare extension, and Democrats won’t accept anything without it. And deeper healthcare changes would likely take longer than the month left before the premium hikes are final.

Recent Tax Pieces:

‘Trump Accounts’ Still Seen as Risky Business for Employers – Trevor Sikes, Tax Notes ($):

“Employers have time to decide whether to contribute to Trump accounts as no contributions can be made until July 4, 2026,” Anne M. Meyer of Snell & Wilmer LLP told Tax Notes.

However, Meyer warned that “employers need to be aware of the administrative complexity” associated with the accounts, adding that they “will need a separate written plan document and must satisfy certain nondiscrimination requirements.”

The statute and Notice 2025-68 both say that the Trump accounts are subject to nondiscrimination rules similar to those under section 129, which is a limiting factor for employer participation, Chittenden said.

Warren Warns Treasury Against Minimum Tax Carveout for Research – Zach C. Cohen, Bloomberg Tax:

“Corporate lobbyists are shamelessly trying to create yet another loophole and undermine this law so that profitable billionaire corporations pay little to no taxes,” nine Democrats led by Warren and Beyer wrote in a Dec. 3 letter to Bessent and Kies.

A coalition of major companies including American Express Co., Google Inc., Exxon Mobil Corp., and Walmart Inc. urged the Trump administration to adjust CAMT further for R&D costs so that they can take full and immediate advantage of Republicans’ tax law, among other changes.

Trump’s Influence Poisons Senate Work on Even Routine Bills – Lillianna Byington, Bloomberg Tax ($):

Congress is seeking bipartisan agreement on spending before the next shutdown cliff Jan. 30, on expiring health care tax credits, and on a must-pass defense bill. Next year will further test Congress with more policy deadlines, including a major highway bill where lawmakers are already expressing doubt.

The elusive common ground is leading more Republicans to call for going it alone. As Senate Republicans dodge Trump’s request to blow up the filibuster, some are pushing for another reconciliation bill to allow passage of legislation with a simple majority rather than 60 votes.

“The president has been pounding us. He has been criticizing us like we stole Christmas—like we stole Thanksgiving—for not getting rid of the filibuster,” Sen. John Kennedy (R-La.) said. “Why would we not do a second reconciliation bill? Think of what we could do.”

Johnson Recycles GOP Health Ideas Amid Gridlock Over Obamacare – Erik Wasson, Bloomberg News:

The GOP plan is likely to include ideas the party has floated in the past to create less comprehensive plans to compete with Obamacare and to divert premium tax credits for the insurance policies toward tax-sheltered savings accounts individuals can use to cover non-premium out-of-pocket costs.

House Democratic leader Hakeem Jeffries blasted Republicans for refusing to negotiate on an extension of the subsidies and accused them of working to undermine the Affordable Care Act’s insurance exchanges.

“They have zero interest in sitting down and finding a path forward,” Jeffries said on Bloomberg Television Friday. “This is the same group of people who have tried to repeal the Affordable Care Act 70 times.”

What Are Treasury’s Deregulation and Burden Reduction Plans for BBA? – Marie Sapirie, Tax Notes ($):

After years of work by the IRS and Treasury, the BBA’s audit regime has in place most, if not all, of the regulations it needs to function efficiently. Even so, it has been in the priority guidance plan’s tax administration section for almost five years running, having fallen off the plan only once, in the 2021-2022 plan. The last time the IRS specified what it was working on regarding the BBA was in the 2020-2021 plan. Reading the tea leaves suggests that — between the nearly consistent appearance of BBA guidance in recent guidance plans, the “skinny” nature of the 2025-2026 plan, and the designation under the new deregulation and burden reduction category — the guidance has probably been underway for a while. The influence of the One Big Beautiful Bill Act (P.L. 119-21) on the guidance plan coupled with the intentional reduction in the number of projects in the plan seems to have knocked projects of lower priority or those further from completion off the list. That the BBA survived is a sign that it’s likely a high priority for the IRS.

Capitol Hill Recap: Looking for Options on Healthcare Tax Credits

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Alex Parker