Capitol Hill Recap: Trade Votes on the Agenda

While Congress has a lot on its plate for the upcoming year—including keeping government departments like Homeland Security funded—it also may face a series of largely symbolic votes on President Trump expansive tariff regimes.

Republican leaders had successfully kept those bottled up until now. But following a change in rules for the House of Representatives this week, votes to approve or disapprove of some of Trump’s most far-reaching tariffs are unavoidable, and could put many Republican lawmakers on the spot.

Trump has used the International Emergency Economic Powers Act—which has traditionally been used in a much more limited way—to enact the “reciprocal tariffs” announced on “Liberation Day” last year. Through those measures, most imports to the United States face at least a 15% toll, while those from some countries such as China could be charged much more.

The IEEPA requires a declaration of national emergency, which the administration has said is warranted due to persistent trade deficits with countries around the world. According to the law, Congress can counter-act the declaration through a resolution of disapproval.

Such resolutions are normally privileged, meaning they are automatically set for a vote in both chambers, with or without support from the majority. But a rule enacted by House Republicans last year circumvented that requirement, blocking resolutions of disapproval from coming to the House floor.

The House failed to extend that rule, after 217 House members—including three Republicans, joining all of the Democrats—blocked a measure to renew the rule on Tuesday. That allowed Democrats to push for a vote Wednesday to disapprove of Trump’s tariffs against Canada, which passed with more Republicans crossing over. Should that measure pass the Senate, Trump would need to use his veto power to keep those tariffs in place.

While Trump has the ultimate say in whether these resolutions are enacted or not, a strong rebuke from Congress could degrade the legitimacy for his unprecedented tariff regime.

The Supreme Court could render this mostly moot, however. After hearing a constitutional challenge to the tariffs back in November, the court has yet to issue a ruling on whether, and how, the tariffs can stay in place. The decision could be a legal and political earthquake—especially if Trump responds by increasing tariffs through other trade acts.

Recent Tax Pieces:

IRS Guidance Offers Relief In Energy Credits' Sourcing Limits – Kat Lucero, Law360 Tax Authority ($):

The IRS issued interim guidance Thursday providing two safe harbor options for clean energy facilities or manufacturers of energy components to determine the extent to which they received material assistance from an entity tied to a foreign government that the U.S. deems adversarial.

Companies can choose the identification or cost percentage options or both to determine the ratio of "material assistance" they got from a foreign entity of concern, or FEOC, while the U.S. Treasury Department and Internal Revenue Service work on formal proposed rules, according to Notice 2026-15.

The Tax Angle: DC Home Rule Override, GOP Messaging – Stephen K. Cooper, Law360 Tax Authority ($):

The Senate is poised to overturn a recently enacted D.C. law that decouples the district's tax code from changes made by the 2025 GOP budget reconciliation law, sparking concerns by fiscal policy advocates that the federal action would undermine the city's budget authority and disrupt public services as tax season gets underway.

Senate lawmakers plan to consider H.J.R. 142, which passed the House by a 215-210 vote along party lines Feb. 4. The measure, sponsored by Rep. Brandon Gill, R-Texas, would overturn the D.C. tax law, enacted in late 2025. A companion resolution has been introduced in the Senate by Sen. Rick Scott, R-Fla.

IRS Closes Out $283 Billion in Employee Retention Credit Claims – Erin Schilling, Bloomberg Tax ($):

The payout of employee retention tax credits, intended to help businesses stay open during the pandemic, is more than triple the cost estimate of the program when Congress extended it in 2021. The refunds were also largely processed after the effects of the pandemic had largely subsided, according to the GAO report.

The employee retention credit became a massive headache for the IRS, which paused processing of new claims for about a year to deal with fraud issues and faces multiple lawsuits around the credits. The GOP tax law enacted in 2025 ended the program early.

Constraints on Executive Compensation: Practical or Political? – Carrie Brandon Elliot, Tax Notes ($):

The United States is not alone. Several countries limit deductions for executive compensation. For example, starting in 2014, Austrian firms cannot deduct any compensation exceeding €500,000 per employee per year, including fixed pay, bonuses, stock options, and pensions. In Japan, executive compensation is deductible only if it takes specific forms. Germany limits deductions for excessive compensation that may be reclassified as a nondeductible hidden profit distribution.

Several studies indicate that deduction limits like those in section 162(m) have no significant effect on reducing overall executive compensation levels, including one prepared by the Congressional Research Service for the Senate Budget Committee in December 2022.

A 2019 study analyzing the 2014 deduction limit in Austria showed that a majority of the analyzed Austrian companies did not react to the reform.

Tax Considerations for Data Center Projects – Marie Sapirie, Tax Notes ($):

As the “age of artificial intelligence” continues, the demand for data centers and related digital infrastructure is increasing. From the choice of entity to decisions on location and co-located energy, there are many tax questions that affect the burgeoning sector. Legislation, guidance, and executive initiatives will also likely continue to change the landscape as Congress and the White House show more interest in digital infrastructure.

For taxpayers, how to structure the development of a data center is the threshold question. Real estate investment trusts are becoming a common choice for data centers backed by private equity because of the tax advantages they confer, particularly when foreign investors are part of the equation, said Vinay Prabhakar of Vinson & Elkins LLP. In a REIT, corporate-level tax can be avoided with proper structuring, and foreign investors have no U.S. return filing obligation — characteristics that make data center investments more attractive for sovereign wealth funds and foreign pension funds, he said. And since data centers are real estate-intensive businesses, they fit fairly neatly into the REIT framework.

Capitol Hill Recap: Budgets, Trade Votes on the Agenda

Make a habit of sustained success.

Alex Parker