JD Supra
Taxation & Representation, Jan. 2026
January 12, 2026
Tax Worldview
OECD Announces Pillar Two Agreement: On Monday, the Organisation of Economic Co-operation and Development (OECD) announced a “Side-by-Side package” under the Pillar Two global minimum tax regime that reflects the June 2025 framework between the United States and the G-7. Critically, the package establishes a safe harbor under which U.S.-headquartered groups can elect to be exempted from the global minimum tax’s income inclusion rule and undertaxed profits rules, provided certain conditions are met. The package introduces several GLOBE simplifications and safeguards, including a Simplified ETR safe harbor, new safe harbors for eligible substance-based tax incentives and jurisdictions under the side by side system and an evidence based “stocktake” process to maintain a level playing field across Inclusive Framework Members.
The new framework applies for fiscal years beginning on or after Jan. 1, 2026, while the package extends the transitional country-by-country reporting safe harbor to fiscal years beginning on or before 2027.
Legislative Landscape
Senate Confirms Theurer in En Bloc Package: Before Congress adjourned for the holiday recess, the Senate confirmed Derek Theurer to be deputy undersecretary for legislative affairs as part of an en bloc package of 89 nominees. He will be responsible for acting as the liaison between the Treasury Department and Congress to address any issues that lawmakers may have. He will also continue to perform the duties of deputy treasury secretary.
Krishnamoorthi, Warner Introduce the Investing in American Workers Act: On Dec. 16, Rep. Raja Krishnamoorthi (D-IL) and Sen. Mark Warner (D-VA) introduced companion versions of the Investing in American Workers Act. The bill would create a 20% tax credit for employers increasing spending on training for certain employees, prioritizing programs such as registered apprenticeships and credential-leading initiatives. It would also incentivize small businesses and tax-exempt entities to utilize the credit by allowing it to be applied against payroll taxes.
Miller, Horsford Unveil Draft of the Digital Asset PARITY Act: On Dec. 20, Reps. Max Miller (R-OH) and Steven Horsford (D-NV) released a draft of the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Yields (PARITY) Act. The draft bill would treat regulated dollar-pegged stablecoins as cash equivalents and proposes a $200 per transaction de minimis rule. It also would align digital assets with securities by applying the wash-sale and constructive sale rules, permit the mark-to-market election for dealers/traders of digital assets and extend securities-lending principles to digital assets, among other provisions. Additionally, the draft bill would address phantom income of miners/stakers and clarify that passive-fund staking does not qualify as a trade or business.
Lawmakers Send Letter to Bessent on Staking Treatment: On Dec.18, Rep. Mike Carey (R-OH) led a letter to Acting Internal Revenue Service (IRS) Commissioner and Treasury Secretary Scott Bessent urging him to review the application of Revenue Ruling 2023-14 to cryptocurrency staking rewards. The lawmakers contend that stakers should be treated as first owners of newly created property and taxed only upon sale, rather than upon receipt. They also stressed that the current guidance is burdensome and misaligned with tax principles, and they requested updated guidance along with answers to questions about the IRS’ analysis, policy rationale, administrative barriers and plans for revisions.
Ossoff, Hyde-Smith Introduce the Support Small Business Growth Act: On Dec. 16, Sens. Jon Ossoff (D-GA) and Cindy Hyde-Smith (R-MS) introduced the Support Small Business Growth Act. The bill would create a new payroll tax deduction for small businesses with less than 15 employees. The deduction would phase out beginning in tax year 2028 and fully expire in 2033.
Justice, Warner Introduce the Child Care Supply Tax Credit Act: On Dec. 18, Sens. Jim Justice (R-WV) and Mark Warner (D-VA) introduced the Child Care Supply Tax Credit. The bill would create a refundable tax credit to licensed child care facilities serving at least six children, covering wages paid to direct-care workers (excluding supervisors and directors), with nonprofits eligible via a direct-pay option.
Energy-Tax Mainlines
IRS Provides Safe Harbor for Carbon Capture Verification Standards: On Dec. 19, 2025, the IRS issued Notice 2026-01, which provides a safe harbor for eligibility determinations for taxpayers claiming the Section 45Q Carbon Capture and Sequestration credit. The guidance allows sequestration data to be verified by an independent engineer or geologist beginning in tax year 2025 to ensure continued compliance until a long-term solution replaces the greenhouse gas reporting framework. The change follows the Environmental Protection Agency (EPA)’s September proposal to terminate its Greenhouse Gas Reporting Program (GHGRP) for industrial facilities. Current regulations require section 45Q credit claimants to use for verification of sequestration volumes.
Residential Clean Energy Credits Expire: On Dec. 31, the section 25C energy-efficient home improvement credit and section 25D residential clean energy credit expired under the accelerated termination adopted by the One Big Beautiful Bill Act (OBBBA, Public Law 119-21). The section 25C credit allowed taxpayers to claim a 30% credit for qualified energy efficient improvements, residential energy property or home energy audits not exceeding $1,200 annually. A separate $2,000 annual limit applied for heat pumps, heat pump water heaters and biomass stoves and boilers. The section 25D credit allowed taxpayers to claim a credit for residential solar electric generating and heating property, small wind energy property, geothermal heat and battery property. Both credits were terminated for property placed in service after Dec. 31, 2025.
W&M Committee Democrats Introduce the American Affordability Act: On Dec. 18, the House Ways and Means Committee Democrats introduced the American Affordability Act. The bill covers housing, child care, education, health care, and labor issues. It also addresses energy and transportation costs by restoring the following credits to their pre-OBBBA status:
• Section 25D Clean Energy Home Improvement Credit
• Section 45Y and 48E Investment and Production Tax Credits
• Section 45X Advanced Manufacturing Production Credit
• Section 45V Hydrogen Production Credit
• Section 48C Advanced Energy Project Credit Program
• Section 30D Clean Vehicle Credit
• Section 45Z Clean Fuels Production Credit
• Section 179D New Energy Efficient Commercial Buildings Deduction
• Section 168 Cost Recovery for Property
• Section 25E Previously Owned Clean Vehicle Credit
• Section 45W Qualified Commercial Clean Vehicle Credit
• Section 30C Alternative Fuel Vehicle Refueling Property Credit
Maloy Introduces the Geothermal Tax Parity Act: On Dec. 18, Reps. Celeste Maloy (R-UT), Blake Moore (R-UT), Steven Horsford (D-NV) and Russ Fulcher (R-ID) introduced the Geothermal Tax Parity Act. The bill would allow amortization of geological and geophysical expenditures for geothermal exploration or development and creates an exception to passive loss limitations for geothermal projects.