Key Takeaways:
- Congress has extended federal funding through December 11, 2026, maintaining current IRS funding levels in the interim.
- The continuing resolution protects the IRS’s remaining Inflation Reduction Act funding from another rescission during the extension period.
- Post-election negotiations could shape the IRS’s longer-term funding and determine whether several outstanding tax provisions advance before year-end.
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Congress has extended federal funding through December 11, 2026, giving lawmakers additional time to negotiate fiscal year 2027 appropriations. The continuing resolution, signed into law on September 2, maintains current funding levels for the IRS and prevents another government shutdown when the fiscal year begins.
The measure also protects the IRS’s remaining Inflation Reduction Act (IRA) funding from another rescission during the extension period. With the November midterm elections approaching, lawmakers are expected to revisit IRS funding and other budget priorities during the post-election lame-duck session.
What’s Next for IRS Funding?
Following the November midterm elections, lawmakers will face a December 11 deadline to finalize fiscal year 2027 appropriations or pass another continuing resolution to prevent a funding lapse.
House Republicans have proposed a $10.2 billion IRS budget for the fiscal year beginning October 1, 2026, compared with $11.2 billion for the current year. Senate appropriators have not yet introduced an IRS funding bill, although the bipartisan appropriations process in the Senate is expected to result in a higher funding level.
Another possibility is a longer-term continuing resolution that maintains IRS funding at its current rate. The agency’s remaining IRA allocation could become a point of debate as negotiations continue. Republicans have secured a series of significant reductions to that funding over the past several funding cycles.
Year-End Tax Legislation Could Also Be in Play
A December government funding package could also serve as a vehicle for year-end tax legislation.
Several provisions have generated bipartisan interest, including an extension of the semiconductor manufacturing credit under Section 48D, the Work Opportunity Tax Credit, the seven-year recovery period for motorsports entertainment complexes, and expensing for film, television, and theatrical productions.
Other legislative priorities under consideration include IRS reform, providing Taiwan with tax treaty-like benefits, and reversing the limitation on the gambling deduction.
However, the compressed year-end legislative calendar could make it more difficult for Congress to address more substantial tax measures, including proposed reforms involving digital assets.
What This Means for You
The continuing resolution provides temporary stability for the IRS, maintaining current funding levels and protecting its remaining IRA allocation from another rescission during the extension period. However, the agency’s longer-term funding remains subject to congressional negotiations.
For businesses and taxpayers, the post-election legislative session could bring changes to IRS funding and several outstanding tax provisions. Monitoring these developments can help you evaluate potential effects on tax planning, compliance obligations, and business decisions as year-end approaches.
How MGO Can Help
With IRS funding and several tax provisions still subject to year-end negotiations, you should stay informed about developments that could affect your tax planning and compliance obligations.
MGO’s Tax professionals can help you understand the potential implications of evolving federal tax legislation, evaluate how proposed or enacted changes may affect your organization, and plan accordingly as Congress considers year-end tax legislation and fiscal year 2027 funding. Contact us to learn more.