The US Senate has adjourned, joining the House, which began its August recess in late July. Prior to adjourning, the House and Senate passed competing continuing resolutions to keep the Federal Government funded past the Fiscal Year-end on 30 September. The Senate Continuing Resolution (CR) funds the government until 11 December and the House version until 4 December.

The two chambers will need to reach an agreement on the details of the CR during the September session. The House returns to Washington on 31 August and the Senate in September for a relatively short session before adjourning in the run-up to the mid-term elections on 3 November.

Before adjourning, Senate Budget Committee Chairman Ron Johnson (R-WI) on 7 August released a Fiscal Year 2027 budget resolution with budget reconciliation instructions to several committees — but not to the Finance Committee. The Senate did not vote on the budget resolution, which allows up to US$150b in total spending. There is an expectation that the Senate will broaden the scope of the budget reconciliation measure provided for under the House-passed FY2027 budget resolution.

Treasury and the IRS on 13 August released proposed IRC Section 987 regulations (REG-103844-26) on foreign currency gain or loss with respect to qualified business units (QBUs) of controlled foreign corporations (CFCs).

Among other things, the proposed regulations would implement the CFC "exemption election" from Notice 2026-17, which would permit CFCs to opt out of rules requiring them to compute or recognize IRC Section 987 gain or loss from their QBUs, except for certain inbound nonrecognition transactions. Taxpayers may rely on the proposed regulations to make the CFC exemption election for tax years beginning after 31 December 2024, if they and certain related taxpayers apply them consistently; the rules would otherwise apply to tax years ending on or after the date final regulations are filed.

The proposed regulations would also implement the 120-month amortization election for "pretransition" gain or loss from Notice 2025-72. A Tax Alert is pending.