Fiscal Planning and Legislative Actions Impacting Tax Policy

As the legislative session reconvenes, fiscal planning takes center stage. President Trump's State of the Union Address heightened anticipation for the Executive Branch's forthcoming fiscal budget. It remains uncertain if this budget will include the "Green Book" legislative tax proposal.

The partial government shutdown due to incomplete Department of Homeland Security funding highlights ongoing fiscal challenges. Discussions also focus on the lapse of enhanced tax credits for Affordable Care Act premiums, despite efforts from key Republican figures like House Budget Chairman Arrington and Senate Budget Committee Chairman Graham to advance a budget reconciliation bill.

A Supreme Court decision reversing tariffs initiated under former President Trump has sparked legislative interest in codifying these tariffs. However, with narrow Republican margins in the House, passing new reconciliation measures may be improbable. Key figures such as Ways and Means Chairman Smith and Senate Majority Leader Thune express doubt about these measures advancing.

In response to the tariff ruling, Rep. Schweikert proposed a border-adjusted tax, signaling renewed dialogue on tax reform beyond the 2017 Tax Cuts and Jobs Act. An upcoming hearing will scrutinize this proposal.

New York City's preliminary budget includes significant property tax hikes for fiscal strategy, while Mayor Mamdani proposes alternates like increasing state income tax rates for corporations and high earners. Concurrently, President Trump signed resolutions challenging D.C. legislation on city tax laws, potentially complicating statutory compliance.

The Treasury and IRS issued Notice 2026-7, offering interim guidance on corporate book income taxation adjustments under the 2022 Inflation Reduction Act, including changes to the corporate alternative minimum tax. Additionally, Notice 2026-16 details a new depreciation allowance for "qualified production property," aligning with Tax Code § 168(n).

IRS guidance invites comments on asset base allocations between eligible and ineligible uses, impacting insurance and financial sectors. U.S. Treasury officials highlight stalled OECD Pillar 1 negotiations while emphasizing potential headway on digital economy taxation aligned with U.S. positions.