2025: The Year of the Tax Bill  

Dominating all policy headlines this year will be the tax bill as legislators seek to extend the expiring tax cuts from the Tax Cuts and Jobs Act (TCJA) before increases go into effect in 2026. Senate confirmations, congressional spending and addressing the debt limit are the other must-do items on the list, which will likely happen in the year’s first half.  

Appropriations 
The proverbial can for Fiscal Year (FY) 2025 spending was just kicked down the road again – this time until March 14. From there, legislators have two options to get them through the rest of the fiscal year, through September 30: pass another continuing resolution, which essentially carries forward the prior year’s funding levels; or approve FY 2025 funding through some combination of omnibuses. Expect the FY 2026 process to start around the same time with the release of the President’s budget in early March.  

Debt Limit 
In 2023, legislators suspended the federal debt limit through Jan. 1, 2025. Come the new year, the debt ceiling will be reinstated based on the current amount of debt. In practical terms, that means that come January 2 we will already have exceeded the debt limit, and the Treasury will once again start using extraordinary measures to temporarily keep the government from defaulting on its debt. Expect to see action on the debt limit in the first half of 2025 – likely sometime between March and June as Treasury runs through the so-called extraordinary measures and the threat of default becomes ever more dire.  

The Other CRA & Reconciliation 
With Republicans controlling both houses of Congress and the White House, they are poised to use two wonky policy tools: the Congressional Review Act (CRA) and reconciliation. Nuance and technicalities abound in these tools, for more details check out these primers on CRA and reconciliation.  

CRA allows Congress to undo regulatory actions from the prior administration. The procedure can only be used for administrative actions approved after roughly August of 2024 and requires both chambers to pass disapproval resolutions with simple majorities in the first few months of the new Congress. Many rules were finalized before the August deadline to avoid this very potential, but a recently finalized rule from the Department of Housing and Urban Development requiring 30-day notification of lease termination for nonpayment of rent could be on the chopping block, as well as anything the agency finalizes before the next administration.  

Reconciliation is the legislative process by which most major policy changes pass when a party controls all three levers of government. A few recent examples include the Affordable Care Act (Obama), TCJA (Trump), American Recuse Plan Act and Inflation Reduction Act (Biden). The mechanism limits debate (sidestepping a Senator’s ability to filibuster) and requires a simple majority in the Senate (bypassing the chamber’s typical two-thirds majority.)  

The legislative tool was designed to fast-track reconciling the differences between the House and Senate-passed budgets. This is important for several reasons:  

• The legislation must pass the Byrd rule, which requires “extraneous” policy measures without a budgetary impact to be removed; and 

• Republicans in the 119^th Congress will have several opportunities to use reconciliation. Each year’s budget comes with three reconciliation opportunities to address 1) spending, 2) revenue (tax) and the 3) debt limit. Those opportunities are multiplied out across the still unfinished FY 2025 appropriations and again for FY 2026 and 2027 appropriations.  

My best guess is that the first half of the year will be spent approving nominations, crossing off the must-do’s and preparing for the real policy work to come in the second half of the year. The multi-trillion-dollar questions are: how large the tax package will be and if those costs must be offset. Extending the tax levels in TCJA for another ten years is estimated to cost $4.6 trillion. Budget instructions that lay out the price tag for reconciliation will likely come in the spring and then jockeying to be included within that framework will commence.  

The impending tax bill represents the best opportunity for enacting provisions from the Affordable Housing Credit Improvement Act. We’ve been waiting for this moment for several years and an opportunity like this will not come around again for another several years.  

I’d be remiss to not point out that as exciting as this opportunity is, it could quickly turn into a threat as legislators seek pay-fors. In 2017, there was an eleventh-hour scramble to preserve Private Activity Bonds from the chopping block in the TCJA. Housing is much better positioned this time around, but nothing is guaranteed. As legislators lay the groundwork for action in the second half of the year, we must do the same. The House Ways and Means Committee has established Tax Teams to work on policy for the 2025 tax bill. The community development team is led by Representative Mike Kelly (R-PA) and includes Reps. Claudia Tenney (R-NY), Darin LaHood (R-IL), Blake Moore (R-UT) and Mike Carey (R-OH). A new congress means the reintroduction of legislation and recruiting members to sign on as co-sponsors again. It’s a great opportunity to reach out to your members to ensure their support for affordable housing – both for the Affordable Housing Credit Improvement Act and as we prepare for the tax bill. As always, if you need any support in your outreach please don’t hesitate to reach out.