Tax developments
DeFi regulations repealed
On April 10, President Trump signed into law a bill repealing the regulations promulgated under section 6045 that would have required decentralized finance platforms (commonly referred to as DeFi platforms) to comply with broker reporting requirements with respect to sales of digital assets. Generally, DeFi platforms offer services that allow for transactions that use automatically executing software, without the platform taking custody of digital assets. The legislation provides that those regulations have no force or effect, but the legislation does not impact other final regulations issued under section 6045 that require certain other brokers to report sales of digital assets.
Senate and House adopt budget resolution
On April 5, the Senate adopted a major budget resolution with a tight 51-48 vote. Shortly after, on April 10, the House also narrowly adopted the budget resolution by a 216-214 vote, paving the way for Congress to begin the budget reconciliation legislation drafting process. This resolution allows $5.3 trillion in deficit-financed tax cuts, which is a combination of $3.8 trillion of tax cuts under a current policy baseline plus $1.5 trillion in additional deficits attributable to $521 billion on defense and immigration spending, a minimum of $4 billion in spending cuts, and an increase in the debt limit of up to $5 trillion. The legislation is a budget blueprint, which includes few details, and Congress will refine the specific tax measures over the coming months.
Both chambers adopted an innovative “current-policy” approach to scoring these extensions, treating them as having no cost, unlike traditional scoring methods, which would have marked their cost at around $5.5 trillion1. President Trump has called for permanent extension of the 2017 tax cuts, additional policies— including no taxes on tips, overtime pay, and Social Security benefits for retirees, as well as creation of a deduction for auto loan interest for American made cars.
Budget reconciliation is a legislative tool established by the Congressional Budget Act of 1974 in response to budgeting challenges during President Nixon’s administration. It simplifies Congress’s ability to enact budget decisions by avoiding the Senate filibuster, which usually requires 60 votes. Reconciliation allows both the Senate and House to pass budget-related legislation—including tax changes, spending adjustments, and modifications to the debt ceiling—with just a simple majority. The reconciliation process begins with Congress adopting a budget resolution that sets spending and revenue targets. After the resolution is passed, specific congressional committees draft the detailed reconciliation legislation. Historical uses of reconciliation include passing significant legislation such as the TCJA, the American Rescue Plan, and the Inflation Reduction Act.
With the budget resolution now approved by both houses, the next step involves 11 House committees and 10 Senate committees drafting detailed portions of the reconciliation bill. These sections will be combined into comprehensive reconciliation legislation. Committees like Senate Finance and House Ways and Means will play critical roles, addressing the complexities of tax policy and spending cuts. During this drafting phase, congressional budget scorers will assess the exact cost of the proposals.
There has been considerable debate regarding the resolution. Senate Republicans defend the “current-policy” scoring approach as practical, given that these tax provisions are already established policy. In contrast, some Republicans in the House and budget experts criticize the method, arguing it obscures actual fiscal impacts and undermines budget discipline.
Additionally, the legislation includes a minimum of $4 billion in spending cuts, which is significantly less than the $1.5 trillion in cuts that had been included in a previous version approved by the House. The $4 billion amount has been identified as a minimal amount of spending cuts so additional spending cuts may also be required to reach agreement on future legislation.
It will be interesting to watch as the legislative language is drafted to fill out this initial blueprint. Closely watched will be statutory changes implementing this “current-policy” approach, as well as identifying spending cuts, both of which will be necessary to reach agreement on a single reconciliation bill. Further, the uncertainty created by the current fluctuations in the market and ongoing tariff negotiations will certainly affect future legislation.
Recent Eversheds Sutherland Tax insights
Cum-cum-share deals: International investors in the focus of German criminal prosecution
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1 According to the Tax Foundation, extending the expiring 2017 TCJA provisions would reduce federal tax revenue by $4.5 trillion from 2025 through 2034. Long-run GDP would be 1.1 percent higher, offsetting $710 billion, or 16 percent of the revenue losses.
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