Capitol Insights: January tax bill outlook
Capitol Insights tracks federal policy discussions in Washington that influence the Work Opportunity Tax Credit (WOTC), summarizing the implications most relevant to employers.
Latest update
In our most recent Insight, we reviewed how WOTC is being considered within broader year-end tax extender talks as Congress approaches its holiday recess. The update explored the House and Senate dynamics influencing whether tax extenders advance and what that uncertainty means for employers planning ahead. Read Week 9 here .
At a glance:
-
Action on a federal tax bill is now expected to slip into January
-
Several tax provisions, including a WOTC extension, could anchor a broader package
-
Tight House margins make a partisan reconciliation bill unlikely
-
Healthcare subsidy negotiations remain a key obstacle to tax legislation
-
An omnibus spending package may emerge if multiple deadlines converge
Although there were rumors of a possible tax bill before Congress adjourns for the holidays, the likelihood is that action on key tax provisions will be deferred until January. At that time, Congress will need to address extending federal appropriations for departments whose funding expires on January 31, 2026, as well as possible action on the enhanced healthcare premium credits, which expire at the end of this month.
Tax provisions shaping a potential January bill
Congressional tax writers believe that four tax provisions could drive efforts to enact a tax bill in January:
-
Extensions beyond 2025 of the Work Opportunity Tax Credit (WOTC)
-
Special expensing rules for films, television, and live theatrical productions
-
Seven-year recovery period for motorsports entertainment complexes (NASCAR)
-
A technical correction to the recently enacted provision in Budget Reconciliation that erroneously imposes tax on certain losses of professional gamblers
Political support for these provisions could serve as the foundation for a broader tax measure that includes additional priorities advocated by tax writers.
Constraints on a partisan path forward
Given the very tight margins in the House and divisions on spending priorities within the Republican Conference, a partisan budget reconciliation bill is unlikely. As a result, any tax bill considered early in the year will need to move on a bipartisan basis under regular order.
Healthcare subsidies remain a gating issue
Democrats, however, are unlikely to engage on a tax measure until the healthcare subsidy issue is resolved. The recent rejection of both a Republican and a Democratic approach to subsidies in the Senate leaves the issue unresolved as the current session closes. Many Democrats expect that Republicans will hear complaints from constituents over the lapse in subsidies during the holidays and may return motivated to extend them temporarily to avoid controversy ahead of the mid-term elections next November.
Possible convergence in an omnibus package
A resolution of this issue, combined with the need to address spending by the end of January, could result in an omnibus spending package that includes both tax and healthcare provisions, a common combination in past negotiations.
Outlook as Congress adjourns
Despite rumors that a tax bill markup could occur this week, tax writers believe the more likely scenario is an early departure by Congress. Extending federal spending until January has been described by several Republican legislators as a way to avoid being forced into difficult tax, spending, and healthcare compromises under the pressure of the holiday recess.
Stay tuned for updates as Congress prepares for a busy start to the new year.
Employers planning ahead for WOTC should reach out to Maximus WOTC specialists to understand how evolving policy discussions may affect their workforce strategy.
