The House and Senate returned to Washington today (3 January) to begin the 119th Session of Congress. The House has now voted to retain Speaker Mike Johnson (R-LA) as Speaker of the House and will swear in members of the new Congress shortly.

There is still no unanimity among congressional Republicans on whether to combine GOP priority issues on the border and extension of the Tax Cuts and Jobs Act, which expires at the end of 2025, into one budget reconciliation bill or two separate packages. Republicans have the option of passing two reconciliation bills in 2025 under the FY2025 and FY2026 budgets, which would only require a simple majority vote in the Senate.

Late on 2 January, President-elect Trump made additional Treasury personnel announcements on social media, including Ken Kies to be Assistant Secretary for Tax Policy.

Treasury and the IRS released several important guidance packages during the holiday period.

The government on 23 December 2024 issued technical corrections to proposed corporate alternative minimum tax regulations that address errors in examples as well as the intent of various rules. Officials over recent months had noted various mistakes in the original 600+ page proposed CAMT package that was released in September 2024. The IRS noted that the original comment period deadline for the proposed CAMT regulations remains 16 January 2025.

The IRS on 27 December 2024 released final consolidated return regulations (T.D. 10018) along with revised proposed regulations (REG 134420-10) that update the US consolidated return regulations. The final regulations generally retain the proposed regulations issued in August 2023, with some modifications. The 2023 proposed rules updated the regulations under IRC Section 1502 for statutory changes made over the last 50 years and partially or completely withdraw certain other notices of proposed rulemaking and temporary regulations that the government considered no longer necessary.

To address the appropriate timing for the single basis reduction for certain assumed deductible liabilities in intercompany IRC Section 351 transactions, the 2024 proposed regulations would repropose, in modified form, a portion of the 2023 proposed regulations under IRC Section 357(c) and Reg. 1.1502-80(d). The 2024 proposed regulations would not require a current basis reduction at the time of the IRC Section 351 transaction.

There were several cryptocurrency developments over the holidays. Treasury and the IRS on 27 December 2024 issued final regulations (TD 10021) for digital asset brokers under IRC Section 6045 that require certain decentralized finance (DeFi) industry participants to file and provide information returns as brokers. According to Treasury, the new reporting rules are aimed at "trading front-end service providers interacting directly with customers on digital asset transactions." The final regulations are effective 60 days after their 30 December 2024 publication in the Federal Register.

The IRS further released Notice 2025-3, providing transitional relief under IRC Section 6045 regarding information reporting and backup withholding on digital assets for digital asset brokers providing trading front-end services. More specifically, the notice offers transitional relief from penalties for certain brokers that fail to report sales of digital assets. The notice also provides relief from liability for the payment of IRC Section 3406 backup withholding tax and from penalties for DeFi brokers who fail to pay that tax with respect to certain sales of digital assets required to be reported under IRC Section 6045, and in certain other circumstances.

And the IRS issued Notice 2025-7 on 31 December 2024, providing temporary relief for "eligible taxpayers to use certain alternative methods for making an adequate identification … with respect to units of a digital asset held in the custody of a broker that are sold, disposed of, or transferred" during the period 1 January 2025 through 31 December 2025.

Recall that the government, in July 2024, published final regulations (TD 10000) on the information reporting of sales of digital assets. And, in June 2024, the IRS released Notice 2024-56 and Notice 2024-57, providing transitional relief for digital asset brokers, and Revenue Procedure 2024-28, with guidance for taxpayers on allocating basis among digital asset wallets and accounts.

A senior IRS official recently confirmed that the IRS can apply the economic substance doctrine to transfer pricing cases. Speaking at a Washington, DC conference on 13 December 2024, the official said "some taxpayers have made the argument that if you're in the related-party context and you can use [IRC Section] 482 that you're therefore insulated from the economic substance doctrine. And we disagree with that."

The official's remarks are consistent with past IRS statements on the use of the economic substance doctrine. A Tax Alert provides details.

The UN General Assembly on 24 December 2024 adopted a resolution on the "terms of reference for a United Nations Framework Convention on International Tax Cooperation. "An intergovernmental negotiating committee will be established to draft the Framework Convention and two early protocols over the next three years, with the committee expected to complete its work in 2027.