Key Takeaways
- Republicans hope to use reconciliation to pass funding for some agencies in Homeland Security.
- The leadership hopes it won’t become a larger bill with other issues.
- Lawmakers may look at it as an opportunity to enact tax-related provisions.
- Dems push to bring back energy credits nixed by OBBBA.
- Trump IRS suit flummoxes Justice Department.
After weeks of wrangling, the Republicans announced a plan Wednesday to fund all of the Department of Homeland Security despite Democratic opposition. And the plan will require using the reconciliation process, which lawmakers could use to pass other tax-related items, to include funding for Immigrations and Customs Enforcement and Customs and Border Protection without Democratic votes.
Senate Majority Leader John Thune said the reconciliation package would be kept “as narrow as possible,” to ensure passage by the June 1 deadline set by President Trump.
That’s the plan—but as the phrase goes, man plans, God laughs.
It makes sense that the leadership would want to keep the package as small as possible, especially when they’re hoping to fund ICE and CPB for three years at a cost of possibly as much as $75 billion. Adding anything more could complicate matters and make passage trickier, given the Republicans’ slim majority.
But the low margin for error could also be a reason why keeping it narrow will be difficult. Individual lawmakers will have strong leverage to push for their own items, whether they’re related to tax or other issues. (Under the reconciliation rules, only items that affect revenue and meet other requirements can be included.)
Rep. Jason Smith, R-Mo., the chairman of the House Ways and Means Committee, said before Wednesday’s announcement that should reconciliation occur, his committee would consider whether tax-related items should be included. And some lawmakers may also push for provisions to raise revenue and offset some of the cost of the new funding—which isn’t required by the reconciliation rules, but may be a political necessity to win over fiscal conservatives.
Tax items that could get pulled into reconciliation include nixing the One Big Beautiful Bill Act’s limitation on using gambling losses to offset gambling winnings, new tax rules for cryptocurrencies, restoring the Work Opportunity Tax Credit and other expired tax provisions, or a tax cut for pass-through entities using the Sec. 199A deduction. There could be further tweaks to the OBBBA rules, now that they’ve been in the tax code for nearly a year. (The options for revenue-raisers are less clear, as many were included in the OBBBA to help pay for the bill’s cost.)
The Republican leadership may succeed in passing a bill that is narrowly focused on DHS funding—but they’ll need to withstand three months of jockeying to add further items.
Recent Tax Pieces:
Dems Lay Groundwork to Restore Clean Energy Credits Post-Midterms – Cady Staton, Tax Notes ($):
But Democrats have said that restoring those credits — while maintaining a few adjustments to them — would be part of early legislative action in 2027 should the midterms go their way.
There’s “no question about it” that restoring the credits would be a priority under that scenario, Senate Finance Committee ranking member Ron Wyden, D-Ore., told Tax Notes, adding, “I think we’re very well positioned. . . . We’re really upbeat about our prospects.”
Justice Dept. Struggles to Respond to Trump’s Suit Against I.R.S. – Andrew Duehren and Alan Feuer, The New York Times:
Inside the Justice Department and the White House, senior officials are in the middle of a messy and complicated debate over their next steps, according to the people familiar with the deliberations, who spoke on the condition of anonymity to describe internal discussions.
While former Justice Department officials see clear flaws in the president’s case, some Trump administration officials worry that assigning a lawyer to contest it would pose an unworkable conflict, given that such a person ultimately works for the president, according to the two people. Defending the case could also contradict a White House executive order that binds all government lawyers to the president’s interpretation of the law.
115 Lawmakers Join Fight Against Sharing Tax Info With ICE – Trevor Sikes, Tax Notes ($):
The brief was filed by 115 Democratic lawmakers, including three taxwriters among the five "leading amici": Sen. Catherine Cortez Masto of Nevada and Reps. Linda T. Sánchez and Jimmy Gomez of California.
The actions by the IRS and ICE have cut into Congress’s powers and undermined its long-standing goal of prioritizing federal tax revenue collection by protecting the confidentiality of taxpayers’ return information, the brief asserted.
Church Political Speech Leeway Shifts to IRS After Court Ruling – James Matheson and Erin Slowery, Bloomberg Tax ($):
A Texas judge on March 31 rejected a proposed pact between the IRS and National Religious Broadcasters to allow religious leaders to endorse candidates, saying the court lacked the authority. The July 2025 consent decree sought to allow two churches to engage freely in political discussion without losing their tax-exempt status—sending a strong message encouraging other religious institutions to do the same and aligning with the IRS’s loose enforcement posture.
In 1954, Congress passed the Johnson Amendment, which prohibits nonprofits from opposing or endorsing political candidates, and can be used to strip an organization of its tax-exempt 501(c)(3) status. While the rejected pact said political speech doesn’t run afoul of the amendment, the court’s dismissal only heightens churches’ desire for permanent IRS guidance.
The Tax Angle: Justices' Birthright Case Has Revenue Stakes – Stephen K. Cooper, Law360 Tax Authority ($):
Phillip Connor, a research fellow at Princeton University's Center for Migration and Development, said birthright citizenship has been central to allowing the children of immigrants to participate fully in the U.S. economy and move into higher-skilled work.
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