Key Takeaways
- Congress failed to extend or change the expiration of enhanced Affordable Care Act tax credits at year-end, setting insurance premiums to rise in 2026.
- The parties are divided on whether to extend the enhancement or replace the credits with cash payments.
- Congress could still act in early January on the issue.
- Wealthy donors speeding up charity payments as new OBBBA deduction restriction approaches.
- Green groups sue Treasury over wind, solar tax credit regulations.
Both chambers of Congress today went into recess for the rest of the year, as lawmakers left DC despite failing to resolve the key outstanding issue of the past few months—the expiring enhanced tax credits for the Affordable Care Act exchanges.
The enhancement, which expands both the eligibility for the ACA credits and the amount of the premium subsidy, was initially passed in 2021 as part of the American Rescue Plan, and was extended through 2025 by the Inflation Reduction Act in 2022.
Impending deadlines can sometimes force a compromise in Washington. But in this case it wasn’t enough, despite a clear desire among lawmakers in both parties to find some way towards an extension. Four Republican House representatives took the striking step of signing onto a Democratic measure to force a vote on a three-year extension, despite opposition from the Republican leadership. Their efforts are largely symbolic, however, as the vote will not happen until 2026, and it’s unlikely the Republican-controlled Senate would approve the legislation.
President Trump is still pushing for direct cash payments as a replacement for the premium support, including during his Wednesday night address, when he blasted the ACA as the “Unaffordable Care Act.” Republicans included a similar idea, new funding for tax-favored health savings accounts, in legislation which passed the House on Wednesday in a mostly party-line vote. As with the Democrats’ three-year extension, it’s unlikely to pass in the Senate, where a super-majority of 60 votes is necessary to approve legislation. The Democratic and Republican solutions are nearly irreconcilable, but moderates are searching for some kind of common ground–such as an extension with some new limitations or reforms.
With the enhancements set to expire, many Obamacare enrollees face significantly larger premiums for insurance in 2026, even if they still qualify for the tax credits. That’s because, according to the Congressional Budget Office, as individuals leave the exchanges due to the new costs, the risk pool will become smaller and less healthy.
It may be too late to reverse the premium increases for 2026, but there’s still some hope that Congress could act to renew or increase the enhancements early next year and provide some relief. One future date to force action could be January 15, the last day that enrollees can purchase insurance for 2026 in most of the exchanges, for coverage that would begin on February 1. This likely wouldn’t reverse the overall increase in premiums, but it could give those enrollees some help in paying for them.
In theory, lawmakers could even act after January 15—but the longer they wait, the more complicated and difficult that would become in practice. Even as Congress stalls, time isn’t stopping.
Recent Tax Pieces:
Democrats’ 2026 Tax Agenda Takes On Housing, Energy, Care – Zach C. Cohen, Bloomberg Tax ($):
Democrats are looking for offsets and GOP support for the legislative agenda, Thompson told reporters Thursday.
“Affordability is not a hoax,” Thompson said in reference to recent comments by President Donald Trump dismissing Democrats’ critique of his agenda. “It’s very real, and it’s something that is troubling the people that we all represent.”
Wealthy Americans Speed Donations Ahead of GOP Tax Law Limits – Erin Schilling, Bloomberg Tax ($):
Taxpayers who itemize deductions will be ineligible to receive a deduction on donations that are 0.5% or less of their adjusted gross income under the law. It also created a similar floor for corporate donations of 1% of the company’s taxable income.
For people in the highest federal income tax bracket of 37%, the law limits the value of itemized deductions to 35%.
Coalition Sues Treasury Over Wind, Solar Tax Credit Limitations – Erin Schilling, Bloomberg Tax ($):
The lawsuit said is unlawful for the guidance to only apply to solar and wind, and it will likely result in increased power prices. The plaintiffs are seeking to have a judge reject the guidance as arbitrary and capricious.
See more about this issue.
Will ‘Trump Accounts’ Be Capitalism’s Santa Claus? – Marie Sapirie, Tax Notes ($):
IRS Provides Safe Harbor for Carbon Capture Credit – Mary Katherine Browne, Tax Notes ($):
Subpart RR is part of the EPA’s greenhouse gas reporting program, which the agency proposed in September to permanently end. Subpart RR required the reporting of greenhouse gases from facilities that inject carbon dioxide underground for geologic sequestration. Treasury and the IRS issued final regulations (T.D. 9944) in January 2021 that require taxpayers to comply with subpart RR reporting requirements to claim the section 45Q credit.
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