April 2026 Policy Pulse

Congress enters the final days of April with tax policy largely in a monitoring posture while appropriations and reconciliation 2.0 dominate the legislative agenda. Meanwhile, the IRS has wrapped up the 2026 tax filing season without any major disruptions and continues to issue important guidance.

Capitol Hill

Today, the House passed a bipartisan, Senate-approved and president-backed Department of Homeland Security (DHS) funding bill, effectively ending the longest partial government shutdown in U.S. history. It does not include funding for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP).

Currently, Republicans with the support of the president are working toward passing a partisan, “skinny” reconciliation bill, which centers on multi-year funding for ICE and CBP. Republicans’ narrow reconciliation 2.0 effort is the result of a standoff with Democratic lawmakers on including funding for these agencies in DHS fiscal year (FY) 2026 appropriations.

To that end, on April 23, 2026, Senate Republicans voted to unlock the reconciliation process by approving a budget resolution that, notably, does not include a tax title. The House held a procedural rule vote on April 29, 2026, to advance the budget blueprint and ultimately adopted it late that evening.

President Trump has said he wants the reconciliation 2.0 bill on his desk by June 1, 2026. Tax policy is not expected to be included in the measure, despite a number of Republican lawmakers wanting to use this legislative vehicle to drive various priorities ahead of the midterms. Republican leadership, however, has stated that keeping the bill narrower provides a better chance of passage.

Republicans are also considering provisions for a third party-line reconciliation bill in the new fiscal year being dubbed “reconciliation 3.0,” which is expected to include tax provisions if manifested. It remains to be seen if these efforts amongst slim vote margins and various intraparty demands prove successful.

FY 2027 appropriations

With the release of President Trump’s FY 2027 budget request this month, the FY 2027 congressional budget process has officially kicked off on Capitol Hill. Notably, the Trump administration is proposing a $1.4 billion cut in IRS funding. The president’s budget request outlines the administration’s policy priorities and only provides a set of recommendations that Congress may consider – but is not required – to adopt.

“Although the request for IRS represents a modest decrease, we are still able to maintain current services and implement new initiatives aimed at improving customer experience and making tax compliance easier,” Treasury Secretary Scott Bessent testified on April 22, 2026, before the Senate Appropriations Financial Services and General Government Subcommittee. “This budget request continues to streamline and modernize IRS operations funding to encourage automation and technology investment, while also ensuring taxpayers are met where they want to be by offering multiple service options.”

Generally, Treasury releases a “Green Book” as an explanation of revenue proposals to accompany the administration's budget proposal. Treasury has signaled, however, that it will not release a Green Book for FY 2027.

Meanwhile, across the Capitol, the House Appropriations Committee on April 22, 2026, advanced its FY 2027 Financial Services and General Government Appropriations bill, which proposes a $1 billion cut in IRS funding for FY 2027.

Democratic lawmakers continue to voice criticism of steady IRS funding cuts. “We are creating an IRS unable to conduct the duties that it must perform," Rep. Steny S. Hoyer, D-MD, ranking member of the House Appropriations Financial Services and General Government Subcommittee, said.

Tax-related legislation

On April 27, 2026, the House passed nine bipartisan tax-related bills, some of which include the latest congressional efforts toward improving tax administration.

• The Taxpayer Experience Improvement Act (H.R. 7971) would require the IRS to provide on its website certain information related to call volume and wait times. The bill would also require the IRS to expand online taxpayer accounts and electronic access to federal tax return and refund information.
• The Taxpayer Notification and Privacy Act (H.R. 6495) would expand IRS notice requirements for contacting a third party (e.g., employer or bank) for information related to a taxpayer’s federal tax liability and the rights of the taxpayer.
• The Barcode Automation for Revenue Collection to Organize Disbursement and Enhance Efficiency Act (H.R. 6956) would require the IRS to use barcodes, barcode scanning technology, and technology similar to optical character recognition to digitize certain federal tax return information and correspondence.
• The Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366) would extend the federal tax deduction for qualified disaster-related personal casualty losses and the exclusion from gross income of qualified wildfire relief payments.
• The Survivor Justice Tax Prevention Act (H.R. 2347), would exclude from gross income certain damages received by an individual due to any sexual act or sexual contact and establishes the applicable burden of proof in court proceedings regarding the characterization of such damages for federal tax purposes.
• The New Opportunities for Business Ownership and Self-Sufficiency Act (H.R. 6431) would increase the percentage of individuals who may participate in a Self-Employment Assistance (SEA) program, generally expands eligibility for such programs, and modifies certain SEA program requirements.
• The Supporting Early-childhood Educators' Deductions Act (SEED) Act (H.R. 5334) would expand eligibility for the above-the-line federal tax deduction for certain eligible educator expenses to include early childhood educators.
• The Clergy Act (H.R. 227) would establish a two-year window for certain members of the clergy and Christian Science practitioners to revoke their exemption from Social Security and Medicare taxes on ministerial earnings.
• The IRS Whistleblower Program Improvement Act (H.R. 7959) would modify several provisions of the Internal Revenue Code relating to whistleblower awards and protections.

The tax-related measures now head to the Senate, where the upper chamber is aiming to move many of the same tax administration policies through a different and consolidated approach. Senate Finance Committee Chair Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) recently introduced a broader taxpayer services and administration package, as discussed in our March 2026 Policy Pulse. A markup of the proposed Senate bill is not yet planned at this time, according to Crapo’s Communication Director Amanda Critchfield.

2026 tax filing season

On April 15, 2026, IRS CEO Frank J. Bisignano testified before the Senate Finance Committee, reporting that the IRS delivered a “smooth filing season” this year, despite having lost 25% of its workforce while simultaneously implementing tax reform. Specifically, Bisignano touted how smoothly the filing season ran in terms of return processing and IT systems performance. “To give you an idea of how well our systems have performed: at the peak on that first day, our systems enabled us to successfully receive 1,200 submissions per second and send 600 acknowledgements per second,” Bisignano said.

As of April 10, 2026, the IRS had received approximately 120 million individual federal income tax returns and issued approximately 80 million refunds totaling approximately $274 billion, Bisignano testified. Those numbers have since gone up to over 140 million individual returns and approximately $297 billion in refunds, according to the IRS’s updated filing season statistics as of April 17, 2026.

While industry concerns remain surrounding service time and various communication delays, the 2026 tax filing season reportedly came and went without any major issues.

Treasury, IRS guidance

Several noteworthy April guidance drops and developments from Treasury and the IRS are listed below:

Employee Retention Credit. On April 27, 2026, the IRS issued IR-2026-58 announcing a streamlined process for taxpayers who had Employee Retention Credit (ERC) claims disallowed to extend the period of time for the IRS or the IRS Independent Office of Appeals to review their response to the disallowance to avoid refund litigation.

Form 990. On April 23, 2026, Treasury announced that the IRS plans to revise the Form 990, Return of Organization Exempt From Income Tax, to improve transparency, strengthen tax administration, and provide clearer reporting on certain activities of tax-exempt organizations described in section 501(c)(3) of the Internal Revenue Code, including government contracts, government grants, and fiscal sponsorship arrangement. Treasury and the IRS plan to issue proposed regulations before any reporting changes are finalized, as well as consider administrative feasibility, proportionality, and reporting burden as the proposal is developed. 

IRS Business Tax Account. On April 6, 2026, the IRS announced an expansion of the types of entities eligible for a Business Tax Account (BTA), meaning the online self-service platform is now available to partnerships, federal, state, and local governments, Indian tribal governments, and tax-exempt organizations. These newly eligible entities join sole proprietors, S corporations, and C corporations that are already able to access the platform.

No Tax on Tips. On April 10, 2026, Treasury and the IRS issued final regulations (TD 10044) on the “No Tax on Tips” provision enacted under the OBBBA to provide a list of occupations eligible to claim the up to $25,000 individual tax deduction for qualified tips and further clarify what constitutes such a tip. The rules list more than 70 occupations eligible for the deduction, classified under the Treasury Tipped Occupation Code system, which comprises a three-digit code and corresponding description of the occupation and organizes them into one of eight categories.

OBBBA remittance tax. On April 10, 2026, Treasury and the IRS issued proposed regulations (REG-114499-25) to implement the 1% excise tax on remittances from the U.S. to recipients in foreign countries, as established under the OBBBA. The tax is imposed when the sender provides cash, money orders, cashier’s checks, or other similar physical instruments to a remittance transfer provider. Although the sender is liable for the tax, it must be collected by the transfer provider, who must make semimonthly deposits and file quarterly returns with the IRS. The proposed regulations clarify the application of the tax by specifying the amount on which the tax is imposed, showing how to determine the full scope of physical instruments that trigger the tax, and providing examples illustrating the application of proposed definitions and rules.

District Court partially strikes down micro-captive insurance transaction disclosure regulations

On April 15, 2026, in Drake Plastics Ltd. Co. v. IRS (S.D. TX, Case No. 4:25-cv-02570), Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas partially struck down the IRS’s January 2025 final regulations (TD 10029), which identified certain micro-captive insurance transactions as reportable listed transactions or transactions of interest and required material advisors and participants to file disclosures with the IRS or face penalties for failing to do so. Judge Rosenthal ruled that the IRS had the authority to designate such transactions as transactions of interest but exceeded its authority in designating them as listed transactions. This decision diverges from a March 5, 2026, decision by the U.S. District Court for the Eastern District of Tennessee in CIC Services, LLC v. IRS (E.D. TN, Case No. 3:25-cv-146), upholding the regulations in their entirety.