Congress is in recess this week for the Memorial Day holiday. Lawmakers are scheduled to return to Washington on June 2, 2026, with several pressing priorities, chief among them being reconciliation 2.0 for Republican leadership.
Republicans continue to work toward passing a partisan, “skinny” reconciliation bill, which would provide multi-year funding for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP). Accompanying tax provisions are not expected. President Trump had said he wants the reconciliation 2.0 bill on his desk by June 1, 2026. However, the bill ran into “Byrd rule” troubles with the Senate Parliamentarian, and now Republicans are working to rewrite portions of the bill and resolve intraparty discord surrounding the president’s related funding priorities.
Reconciliation 3.0
Republican lawmakers continue conversations on a broader reconciliation 3.0 bill, which would likely include targeted tax provisions, such as priorities that members were promised in 2025 would have their day in the next go-round, as well as housing and healthcare provisions. Another sweeping tax reform package in round three is not expected, however.
Currently, House Republicans are aiming to pass a reconciliation 3.0 bill before the August recess. But the longer reconciliation 2.0 drags on amongst competing legislative priorities and deadlines, a limited legislative calendar, and slim vote margins, the challenges of passing partisan legislation during an election year only grow more difficult.
Bipartisan legislative tax agenda
Although not at center stage, Congress continues to explore various bipartisan tax-related priorities, including digital asset taxation and the potential for a federal gas tax holiday. Currently, there are several Senate and House proposals introduced by Republican and Democratic lawmakers that generally vary in scope but would temporarily suspend the federal excise tax on gasoline and diesel fuel. The president has also voiced his support for the initiative. This situation is developing as various stakeholders continue to weigh in, and cost concerns mount.
Digital assets. On May 14, 2026, House Ways and Means Committee members held a bipartisan, closed-door meeting to gauge support for reforms to digital asset taxation. Namely, the discussions reportedly centered on the bipartisan Digital Asset PARITY Act, a discussion draft that has broad backing from the crypto industry. At this time, meaningful movement of legislation on the taxation of digital assets is not expected until after the November midterm elections.
Meanwhile, on the other side of the Capitol, the Senate Banking Committee on May 14, 2026, advanced on a bipartisan basis the Digital Asset Market Clarity Act (H.R. 3633), a comprehensive market structure bill that aims to provide clear rules of the road for digital assets. The amended bill now heads to the Senate floor and will need to return to the House before reaching the president’s desk. The White House has been active in the bill’s negotiations and is aiming for a July 4, 2026, enactment, according to Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets.
Taxpayer due process. On May 19, 2026, the House passed by unanimous consent the bipartisan Taxpayer Due Process Enhancement Act (H.R. 6506), which aims to strengthen taxpayer rights in IRS collection proceedings. The bill is the latest addition to the long list of other House-approved bipartisan tax administration bills awaiting Senate action.
Generally, the measure would:
- Suspend the limitations period for claiming a tax refund during Collection Due Process (CDP) proceedings (with exceptions);
- Prohibit the IRS from applying tax overpayments to a properly disputed tax liability during CDP proceedings (unless waived or an exception applies);
- Expand the Tax Court's jurisdiction in CDP cases to include jurisdiction over the underlying tax liability amount (if properly disputed); and
- Provide that the Tax Court retain its jurisdiction if the IRS abandons collection actions.
Housing affordability. On May 20, 2026, the House passed the bipartisan 21st Century ROAD to Housing Act, effectively amending the Senate-approved version. While this is not a tax-focused measure, there are related provisions that could indirectly impact current incentives and strategy.
It remains to be seen how the Senate will handle the House-amended, White House-endorsed bill. At this time, it appears that bicameral alignment has not yet been secured. “There’s still work to be done, and we are committed to continuing to work with the White House and our colleagues in the House on a housing bill that can pass the Senate and get to the president’s desk,” Senate Banking Committee Chair Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA) said in a joint statement.
Highway funding. On May 22, 2026, the House Transportation and Infrastructure Committee held a 14-hour markup and ultimately voted to favorably report the bipartisan BUILD America 250 Act (H.R. 8870), a five-year surface transportation reauthorization bill that invests in America’s infrastructure and would reauthorize for five years the Highway Trust Fund, currently set to expire on Sept. 30, 2026. Notably, the House Ways and Means Committee and the Senate Finance Committee historically add funding and tax-related provisions to highway funding legislation.
Treasury, IRS guidance
Looking ahead, Treasury is reportedly planning to issue guidance related to the treatment of executive compensation at tax-exempt organizations, business meals and entertainment, and the section 199A qualified business income deduction, among other items, according to Kevin Salinger, deputy assistant secretary for tax policy at Treasury. Additionally, Evan Adams, attorney-adviser at Treasury, who spoke at a tax conference in Washington, D.C. this month attended by Baker Tilly National Tax professionals, noted that section 1202 regulatory guidance is forthcoming, which will likely address both pre- and post-OBBBA gray areas.
See below for a list of noteworthy guidance released in May:
Partnership reporting obligations. Treasury and the IRS issued final regulations, T.D. 10048, modifying information reporting obligations with respect to sales or exchanges of certain interests in partnerships owning inventory or unrealized receivables. The final rule aims to address a burdensome compliance issue by delaying the date by which partnerships must furnish the information reported in Part IV of Form 8308 to the transferor and transferee. No changes were made to the proposed regs released last August.
Private letter ruling (PLR) “significant issues.” The IRS issued Rev. Proc. 2026-21 to allow taxpayers to request PLRs on one or more specific issues, rather than on an entire transaction, that are under the jurisdiction of the Associate Chief Counsel (Corporate), are significant in nature, and involve the tax consequences or characterization of a transaction (or part of a transaction) as described in IRC sections 332, 351, 355, 368, or 1036. These transactions typically involve corporate reorganizations or spinoffs.
Gambling deduction. Treasury and the IRS issued proposed regs, REG-113229-25, reflecting changes to the statutory law under P.L. 119-21. The proposed amendments include changes relating to the dollar thresholds in regulations governing information reporting for payments made in the course of a trade or business and the corresponding backup withholding regulations, as well as changes to the regulations governing wagering losses.
Conservation easements. The IRS announced in IR-2026-65 the terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS. Eligible partnerships will receive individualized correspondence, to be issued on a rolling basis, from the IRS setting forth their specific settlement terms. Additionally, the IRS has updated its website to better address issues related to such transactions.
Today, there are over 1,100 conservation easement cases (around 740 docketed cases in Tax Court and 400 cases in Exam). Under this new offer initiative, nearly 450 cases will no longer be required to make an upfront payment of the settlement amount, and instead the liability will be subject to post-settlement collection. Separately, as many as 500 cases where prior settlement offers expired or were rejected by the taxpayer will have the renewed ability to settle their cases. The offer will also be extended to as many as 175 cases that did not previously have the opportunity to participate in an IRS settlement initiative.
Joint Committee on Taxation
On May 28, 2026, the nonpartisan Joint Committee on Taxation (JCT) released its so-called “blue book,” JCS-1-26, providing an explanation of the tax provisions enacted under the OBBBA. The analysis, completed in consultation with the staffs of the House Ways and Means Committee, the Senate Finance Committee, and the Treasury Department’s Office of Tax Policy, also suggests certain technical corrections of varying degrees could be necessary for several provisions, including the increased tax deduction for seniors, state and local tax deductions, certain international tax provisions, charitable contribution deductions, the Trump account provisions, residential energy credits, and refunds for nontaxable use of dyed fuel.
If you have questions on the information outlined above, please contact your Baker Tilly advisor.
Related sections
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