Fiscal pressures and trade policy continue to shape the tax policy landscape this month, with new projections showing Social Security’s main trust fund may be depleted sooner than expected and tariff policy remaining in flux. At the same time, legislative efforts continue to move forward, while ongoing litigation adds to the uncertainty.
Key Developments
Social Security is projected to reach its reserve depletion point sooner than expected, according to a new trustees report released last week. The program’s Old-Age & Survivors Insurance (OASI) trust fund is expected to be depleted by the fourth quarter of 2032. Without reform, payments would be automatically reduced to 78% of scheduled benefits and would gradually decline to 62% by 2100.
The report underscores that Social Security, the federal budget’s largest annual expense, is on an unsustainable path under current law. Demographic shifts and recent legislative changes have further deteriorated the program’s financial status.
How the Social Security shortfall is addressed could also shape broader tax policy and federal priorities, particularly as rising debt levels add to fiscal pressures. The issue is also likely to become a focus in upcoming elections, including the 2028 presidential race, as the next president will be in office at the time of the program’s projected depletion.
Government Funding
On June 10, the president signed the Secure America Act, commonly referred to as “Reconciliation 2.0,” into law. The approximately $70 billion measure provides three years of funding for immigration and border security functions within the Department of Homeland Security, ending an almost four-month funding stalemate.
With fewer than four months remaining until the start of the next fiscal year, appropriators have begun working on FY27 funding bills. Early activity has been driven largely by the House of Representatives, where lawmakers have begun advancing funding packages that reflect Republican priorities. Progress in the Senate has been more limited, as lawmakers have yet to reach agreement on topline spending levels, particularly regarding the balance between defense and non-defense funding.
Any final appropriations package will require bipartisan agreement. Given the current lack of consensus, combined with the significantly reduced legislative calendar in an election year, lawmakers are likely to rely on a continuing resolution to fund the government into the next fiscal year.
Potential Legislation
As of June 17, 2026, there are only 32 House session days and 41 Senate session days remaining before the midterm elections. Given limited floor time, major tax legislation is unlikely before the election, though it may advance in a lame duck session. Below are short discussions of legislative efforts that have seen movement over the past month.
Housing Policy
The House and Senate have now each passed their own version of the 21st Century ROAD to Housing Act with overwhelming bipartisan support and must now reconcile the two versions to advance a final bill. While the current proposals do not include direct tax provisions, they are intended to increase housing supply and could have downstream implications for existing tax incentives.
Cryptocurrency Tax
Last week, the House Ways and Means (W&M) Committee held a legislative hearing on digital asset taxation, reviewing several discussion drafts of proposed cryptocurrency tax bills. Chairman Jason Smith (R–MO) has signaled his intent of building bipartisan consensus before moving forward with legislation. Democrats responded to the hearing with caution — calling for additional member education on the topic and raising concerns around the proposed policies on mining, staking and charitable giving.
Meanwhile, Senate Finance Committee Chair Mike Crapo (R–ID) has indicated the committee is working on a bipartisan digital assets tax package. In the House, Reps. Max Miller (R–OH) and Steven Horsford (D–NV) recently introduced an updated version of the Digital Asset PARITY Act. While still early, activity in both chambers suggests growing momentum toward a clearer federal tax framework for digital assets.
Rental Housing Depreciation Proposal
Lawmakers have introduced bipartisan, bicameral legislation — H.R.8996 and its Senate companion, S.4080, known as the Rental Housing Investment Act — to expand tax incentives for multifamily housing. The bills would allow accelerated bonus depreciation for new rental properties — up to $150,000 per unit and up to $250,000 for projects that commit to maintaining income-restricted units for at least 15 years.
Both measures are in the early stages, currently before the House Ways and Means and Senate Finance Committees, and their path forward remains uncertain.
Reconciliation 3.0
Republicans remain divided over whether to pursue a third reconciliation package before the end of the 119th Congress. Interest in another party-line effort has been bolstered by recent comments from President Trump supporting additional party-line legislation to provide supplemental defense funding (and to advance elements of the SAVE America Act, although those provisions do not have widespread support in the Senate and would likely face significant hurdles in meeting reconciliation requirements).
While many House Republicans support pursuing a third reconciliation bill, divisions remain. W&M Chair Smith has indicated that any such effort would need to include tax policy, stating he “won’t support it unless tax is in it.” Senate Republicans remain skeptical, with Sen. Mitch McConnell (R–KY) suggesting “it’s safe to conclude there will not be another reconciliation bill” — a view echoed by Sen. Susan Collins (R–ME).
Even if momentum builds, advancing another reconciliation measure would be complex and time-consuming. Narrow majorities in both chambers, combined with competing legislative priorities, put the feasibility of a third package in doubt.
Implementing Tax Reform
The most significant recent development in tax reform implementation is the release of the Joint Committee on Taxation’s (JCT’s) Blue Book for P.L. 119‑21, commonly referred to as the “One Big Beautiful Bill Act” (OBBBA). Issued on May 28, nearly eleven months after enactment, the Blue Book provides an official explanation of the law, outlining how its provisions are intended to operate and be interpreted. JCT worked with the Senate Finance Committee, House Ways and Means Committee, and Treasury’s Office of Tax Policy to produce the document.
Other OBBBA guidance includes:
- Excise Tax on Excess Executive Compensation for Tax-exempt Organizations: Notice 2026-36 announces that the Treasury Department (Treasury) and the Internal Revenue Service (IRS) intend to issue proposed regulations under Section 4960 to implement OBBBA’s expansion of the excise tax on excess tax-exempt organization executive compensation. The notice clarifies how the new definition will apply beginning in 2026, expanding the tax beyond the prior “top five” employees to any employee who makes over $1 million, and provides interim transition relief while regulations are developed.
- Preview of Scholarship Granting Organization (SGO) Guidance: Treasury released a preview of forthcoming guidance for OBBBA’s new federal scholarship tax credit for cash contributions to SGOs. Official guidance is expected in the coming months.
Tax Litigation
Recent federal court decisions, including Kwong v. United States and Abdo v. Commissioner, have expanded potential relief for taxpayers who paid or were assessed penalties or interest to the IRS during the COVID-19 federally declared disaster period. The rulings suggest the IRS may not have given taxpayers the full benefit of pandemic-related deadline extensions, creating opportunities to seek refunds or abatements for amounts tied to the period from January 20, 2020, through July 10, 2023. Affected taxpayers should consider filing protective refund claims by July 10, 2026, to preserve these potential claims.
For more information, see our recent alert, IRS Pandemic Refund Relief for COVID-19 Era Penalties and Interest.
Additionally, earlier this month, the U.S. District Court for the District of Columbia vacated IRS Notice 2025-42 in Oregon Environmental Council v. Internal Revenue Service. Notice 2025-42 eliminated the previously allowed 5% safe harbor rule used to demonstrate the start date of construction for most wind and most solar projects. However, the court found the IRS didn’t provide “adequate reasons or data” on the new restrictions.
IRS Updates
The IRS recently released its 2025 Data Book, the agency’s annual statistical report summarizing its operations. Headlines following the release highlighted that the IRS conducted fewer audits and, as a result, collected less additional tax than in the prior year — closing nearly 8,000 fewer audits (a 1.6% decrease) and collecting $2.2 billion less (a 7.6% decrease).
The Treasury Inspector General for Tax Administration released a Snapshot Report on the IRS’s Workforce last week. The report details staffing levels from January 2025 through January 2026, a period during which about 30% of employees separated from the agency.
The IRS announced it will launch a new Tax Professional Management Office beginning June 28, combining the Return Preparer Office and the Office of Professional Responsibility under a single umbrella. The agency indicated that both offices will continue to operate independently and that the reorganization will not alter the distinction between credentialed tax professionals and uncredentialed tax preparers.
Economic Outlook
As the labor market remains resilient and inflation continues to trend higher, all eyes are on the Federal Reserve’s Federal Open Market Committee (FOMC) as it considers its next steps on interest rates.
Mixed Economic Data Continues
The trends we saw in May continue to point to a mixed economic environment, with strong labor market data, elevated inflation, and tempered growth:
- Inflation: Annual inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI‑U), rose to 4.2% in May — its highest level in over three years and more than double the Federal Reserve’s 2.0% target.
- Employment: The U.S. economy added approximately 172,000 jobs in May, and the unemployment rate held steady at 4.3%. Estimates for the prior two months were also revised up by a total of 93,000 additional jobs.
- Gross Domestic Product (GDP): The second estimate of Q1 GDP came in at 1.6%, revised down from the initial 2.0% estimate, falling short of expectations.
The FOMC’s Next Move
The FOMC is meeting June 16–17, Kevin Warsh’s first meeting as Chair, and is widely expected to hold rates steady for the time being. Market interest is especially high as this will be his first meeting in the role.
Although Warsh took office amid expectations from the Trump administration for rate cuts, markets increasingly view that outcome as unlikely. Expectations for the FOMC’s rate path have shifted sharply in the last several months. At the beginning of the year, markets were pricing in up to two cuts to the federal funds rate; now, those cuts have been priced out, and there is a growing probability of hikes later in the year.
Trade Policy
Trade policy remains a central focus, with the Trump administration continuing to adjust its approach to global trade and its tariff framework.
International Emergency Economic Powers Act (IEEPA) Tariff Refunds
U.S. Customs and Border Protection (CBP) began processing the first phase of IEEPA tariff refund claims on April 20, 2026, for (1) unliquidated entries and (2) liquidated entries within 80 days of the date of liquidation. In recent filings with the Court of International Trade (CIT), CBP has indicated that the second phase of refund functionality, covering entries flagged for reconciliation, will be operational by the end of the month.
However, questions remain as to whether entries that are both liquidated and final will ultimately be refunded. CBP has appealed to the U.S. Court of Appeals, challenging the CIT’s order requiring refunds of finally liquidated entries, arguing it lacks authority to issue those payments absent a court order.
For more information, visit IEEPA Tariff Refund Update: Refunds on Final Liquidated Entries in Controversy.
Section 122 Tariff Update
The president’s broad 10% Section 122 tariffs remain in effect for now, following a ruling by the U.S. Court of Appeals for the Federal Circuit. The appeals court stayed the CIT’s May 7, 2026, decision that found the tariffs unlawful, allowing them to remain in place while the appeal proceeds.
Section 122 tariffs are temporary by design and are being used as a short-term measure while the government transitions away from IEEPA tariffs and considers more permanent trade actions, including potential tariffs under Section 301.
Section 301 Investigations
On June 2, 2026, the Office of the United States Trade Representative (USTR) announced the findings of its Section 301 investigation into 60 trading partners, concluding that all had failed to take sufficient action to prevent the importation of goods produced via forced labor.
In accordance with their findings, the USTR proposed two remedies:
- A 10% tariff on imports from “economies that impose a forced labor import prohibition, that have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or economies that have imposed a partial regime with the effect of preventing the importation of certain forced labor goods”
- A 12.5% tariff on imports from all other countries investigated
Additionally, the USTR released its determination on a Section 301 investigation into Brazil, finding several of its policies and practices are “unreasonable and burden or restrict U.S. commerce.” The USTR recommends an additional 25% tariff on most goods from Brazil.
Control of Congress: 2026 Midterms
We are roughly halfway through primary season and just over four months from the midterm elections, which will determine the composition of the 120th Congress and shape the near-term direction of tax policy.
Redistricting activity has largely concluded, with congressional maps for the midterm elections now mostly finalized. In total, 10 states enacted new maps for 2026, and current projections suggest Republicans could gain up to 16 House seats compared to six for Democrats — potentially giving them an overall advantage of about 10 seats.
Visit our 2026 Midterm Elections and Implications for Tax Policy resource for more information.
Your Guide Forward
Cherry Bekaert’s Tax Policy Group is committed to bringing you information on the latest tax policy developments and opportunities.
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- Article: Tax Policy Review: January 2026 Updates
