President Trump addressed a joint session of Congress on 24 February for the State of the Union Address. The annual address came on the heels of the 20 February Supreme Court ruling that the International Emergency Economic Powers Act (IEEPA) does not provide authority to impose tariffs. (More on the Trump Administration's response to the Supreme Court's decision below.)

The President's address to Congress focused on economic issues, which are figuring prominently in this year's November midterm elections, but without many new details on actions the Administration is taking or proposals to be considered in Congress.

The President celebrated a number of provisions enacted in last year's One Big Beautiful Bill Act (OBBBA), underscoring some of the tax-reducing measures in the legislation.

A Treasury official said this week that proposed regulations on the OBBBA international tax transition rules will be released by mid-year. The official indicated this first tranche of proposed rules would be the next set of guidance to be released. Recall that the IRS released four international OBBBA-related notices in late 2025.

The government is under a statutory time constraint. IRC Section 7805 permits Treasury to apply rules retroactively if they are released within 18 months of a provision's enactment. According to the official, the US wants to issue as many OBBBA international tax final regulations as possible within the 18-month window. The OBBBA was enacted in early July 2025.

The Treasury official was also quoted as saying that proposed regulations on previously taxed earnings and profits (REG-105479-18), published on 2 December 2024, will be amended.

The IRS on 25 February issued guidance for determining foreign currency gain and loss of qualified business units under IRC Section 987. In Notice 2026-17, the government announced forthcoming proposed regulations that would allow taxpayers to elect to use the equity-and-basis-pool method for calculating unrecognized IRC Section 987 gain or loss. The method is substantially similar to the one provided in regulations proposed in 1991. The future proposed regulations would also simplify rules related to the final IRC Section 987 regulations published in December 2024.

The proposed regulations would further allow controlled foreign corporations (CFCs) to elect not to compute or recognize foreign currency gain or loss except in connection with US inbound transactions. A Tax Alert is forthcoming.

US officials this week said that recently proposed regulations under IRC Section 892 on the taxation of foreign governments' US investment income will not be applied retroactively.

Treasury and the IRS on 15 December 2025 issued long-awaited final regulations (TD 10042), along with temporary and proposed regulations (REG-101952-24) under IRC Section 892. The proposed regulations include new rules on when a foreign government's debt acquisition is considered investment activity. The proposed rules also address when a foreign government is considered to have "effective control" over an entity for purposes of determining whether the entity is a "controlled commercial entity."

There has been concern over how the government would apply the proposed rules' narrowed financing exemption.

A senior IRS official was quoted as saying the government "will be issuing something that will clarify that the effectiveness of the proposed regs will not affect existing structures." He noted, however, that those existing structures will still be required to comply with current rules. Treasury officials echoed the sentiment, with one official saying, "We do not want to penalize current market practices during this regulatory process."

A senior Treasury official this week said the US government's current priority for OECD guidance involves issues related to the Pillar Two side-by-side agreement. Speaking on 24 February, the official was quoted as saying the US wants guidance that will help countries enact measures that dovetail with the side-by-side deal, without the later need to address open or unanswered technical issues.

More specifically, there are a number of provisions within the Pillar Two Global Anti-Base Erosion (GloBE) rules and commentary, as well as administrative guidance that are not accounted for in the side-by-side agreement and that require clarification. The Treasury official further said that updates to the GloBE information return are necessary and will be addressed.

The official was quoted as saying there is recognition of the need to address these issues quickly. Treasury will remain as engaged in the Pillar Two technical work as it was before the side-by-side agreement, he said.

President Trump's responses and the many uncertainties in the wake of the Supreme Court's 20 February IEEPA decision continue to unfold. Following the decision, the Trump administration quickly amended previous executive orders, imposed new tariffs under Section 122 of the Trade Act of 1974 and detailed investigations that may be forthcoming under Section 301 of the Act.

President Trump issued a Proclamation detailing a temporary import surcharge of 10% ad valorem on articles imported into the United States, effective 24 February, under Section 122 for a period of 150 days (until 24 July 2026). A Global Tax Alert provides details.

US Trade Representative (USTR) Jamieson Greer put out a statement on 20 February saying that his agency would launch several new investigations under Section 301. During an interview on 22 February, the USTR said of the 150-day duration, "During that time, we're going to conduct investigations that can allow us to impose tariffs if it's justified by the investigation. So, we expect to have continuity in the President's tariff program."

US House Speaker Mike Johnson (R-LA) on 23 February said it would be "a challenge to find consensus" on codifying the tariffs through legislation.