Congressional Republicans recently rejected a challenge to IRS guidance, preserving taxpayer-favorable new rules and endorsing the IRS’s move to act decisively in the regulatory space. Republicans are increasingly looking to tax administration to drive changes as prospects for another reconciliation bill dim.
CAMT Guidance Vote Previews Future Reg Challenges
The Senate voted 47-51 on February 10 to reject a resolution that would have rescinded taxpayer-favorable guidance on the corporate alternative minimum tax (CAMT). The vote is further evidence that congressional Republicans remain willing to provide cover for aggressive regulatory action by Treasury and the IRS.
The Congressional Review Act allows Congress to repeal regulations using privileged resolutions that require only majority votes. Democrats challenged Notice 2025-28, which changed the approach to accounting for partnership interests for CAMT purposes to “reduce burdens and costs.” (For prior coverage, see New IRS CAMT Guidance: Partnership Interest Updates). Sen. Susan Collins, R-Maine, was the only Republican to support the challenge.
Notice 2025-28 remains valid after the failed challenge, but Republican resolve will be tested again soon. Democrats announced a Congressional Review Act challenge to Notice 2025-42 on February 13. The guidance in Notice 2025-42 tightened requirements for establishing that construction has begun on wind and solar projects for purposes of phaseout deadlines (For prior coverage, see Treasury, IRS Release New Guidance for Determining Beginning of Construction).
BDO Insight
The survival of the guidance could embolden the Trump administration, which has been proactive in the tax regulatory space by introducing rollbacks of prior guidance on the stock buyback tax, partnership basis-shifting rules, built-in gain under Section 382, and disregarded payment loss rules under Section 1503. Several other significant regulatory projects remain in the works, and the IRS is close to releasing further CAMT guidance to provide relief for changes to research expensing under Section 174A made by the One Big Beautiful Bill Act.
Second Reconciliation Bill
President Donald Trump downplayed the need for a second reconciliation bill in an interview with Larry Kudlow on February 9.
“In theory, we've gotten everything passed that we need. Now we just have to manage it, but we've gotten everything passed that we need for four years.”
The comment echoes similar statements from President Trump over the past few months and will dampen hopes among congressional Republicans pushing to use reconciliation again. House Speaker Mike Johnson, R-La., said in January that he was “bullish” on the prospects of a second reconciliation bill, and the House Republican Study Committee released its own blueprint.
Senate Republicans have been less enthusiastic about the idea and House Ways and Means Chair Jason Smith, R-Mo., recently rejected it outright.
“I don't see a second reconciliation bill ever coming to reality,” Smith said while talking to reporters. He then doubled down in a response to a follow-up question: "There's not going to be a second reconciliation bill.”
BDO Insight
There may be few vehicles for tax legislation this year, pushing priorities to a potential year-end package. The Trump administration instead appears more focused on the regulatory space.
Trump IRS Lawsuit
President Trump’s $10 billion lawsuit against the IRS claiming the agency unlawfully allowed a contractor to leak his tax returns continues to get significant press attention and commentary. The suit could heighten visibility for taxpayer confidentiality issues but should otherwise have little other practical impact on taxpayers.