On May 14, 2025, the House Ways and Means Committee passed their section of the budget reconciliation bill that is commonly referred to as “The One, Big, Beautiful Bill” following a markup. No further amendments were added to the draft language and it now moves to the House floor. The proposed language makes significant changes to the following sectors:
Energy
The reconciliation bill being marked up by the Ways and Means Committee on May 15, 2025, includes significant provisions related to energy, particularly focusing on modifications to the Inflation Reduction Act (IRA) tax credits. The bill outlines potential changes to the tax credits, including sunsetting some terms before their 2032 expiration and possibly eliminating the transferability option for clean energy credits. Specifically, the following provisions will be phased down or eliminated in the draft version of the bill:
Phasedowns
- Clean Energy Production Credit
- Clean Energy Investment Credit
- Zero-Emission Nuclear Power Production
- Advanced Manufacturing Production Credit
- Investment Tax Credit for Certain Thermal Heating and Cooling Property
Eliminations
- Clean Hydrogen Production Credit
- Alternative Fuel Vehicle Refueling Property Credit
- Previously-Owned Clean Vehicle Credit
- Clean Vehicle Credit
- Qualified Commercial Clean Vehicles Credit
- Residential Clean Energy Credit
- New Energy Efficient Home Credit
The phaseouts of the Investment Tax Credit (ITC) and Production Tax Credit (PTC) are based on a “placed in service” standard, which policymakers have recently avoided in favor of a “beginning of construction” standard because of the renewable energy industry’s need for predictability and financing in the construction of projects. This would cause the timing of the construction of renewable energy projects to be critical, with project losing 20% of their credits if they aim to be placed in service in 2029 or later. Additionally, the permanent ITC for solar is still available under Section 48(a) after the 48E phase-out at a 10% level with prevailing wage and apprenticeship compliance, which can be increased up to a 30% ITC if both the energy community and domestic content adders are applicable.
The bill would also repeal transferability for projects that “begin construction” two years after the date that the bill is enacted, and adopts a regime designed to stop certain credits from being generated when it is “controlled” or “influenced” by certain prohibited foreign entities.
Health Care
The House Ways and Means Committee’s reconciliation package included a number of health provisions, largely related to expanding the ability of individuals to save for health expenses, as well as provisions that relate to the Affordable Care Act exchanges and Medicare.
Health Reimbursement Arrangements
- Codifies 2019 regulations that expanded the use of health reimbursement arrangements (HRA) allowing employers to offer Individual Coverage HRAs which in addition to existing medical expenses, can also now be used to purchase qualified health insurance on the individual market without violating group health plan requirements. The provision renames the policy as Custom Health Option and Individual Care Expense (CHOICE) arrangements.
- Permits employees enrolled in a CHOICE arrangement to use a salary reduction to pay for health plan premiums purchased through an exchange.
- Creates a two-year tax credit for small businesses with fewer than 50 employers offering coverage through CHOICE arrangements for the first time. The general business credit amount is $100 per employee, per month in the first year and $50 per employee, per month in the second year.
Health Savings Accounts
- Allows working seniors who are eligible for Medicare Part A but enrolled in a high deductible health plan (HDHP) to continue contributing to a high deductible savings (HSA) plan.
- Allows individuals with HDHPs to also enroll in direct primary care (DPC) service arrangements and use HSA funds to pay for DPC services. HSA distributions for DPC services cannot exceed $150 per month for individuals or $300 per month for family arrangements, adjusted for inflation.
- Permits all bronze and catastrophic health insurance plans on the exchange to be eligible plans for the purpose of making HSA contributions.
- Allows individuals who use discounted health care services at an employee health clinic at their worksite to contribute to an HSA.
- Permits HSA funds to be used by individuals for physical fitness memberships and instructional physical activity up to $500 per year for an individual and $1,000 per year for a family with up to one-twelfth of such expenses allowed per month. The membership must be in a public entity.
- Allows both spouses to make their catchup contributions for their HSA accounts into one account instead of the current requirement of separate accounts.
- Allows employees, at the employer’s discretion, the ability to convert flexible spending accounts (FSA) and HRA balances into an HSA contribution upon enrolling in and HDHP-HSA. The conversion amount is capped at the annual FSA contribution limit.
- Allows medical expenses incurred within 60 days before the establishment of an HSA to be an eligible qualified medical expense for which the HSA funds may be used.
- Permits individuals to be eligible for an HSA even if the individual’s spouse is enrolled in an FSA.
- Increases HSA contribution limits for individuals who make less than $75,000 annually, or $150,000 for families, to contribute an additional $4300, or $8550 for families, each year to their HSA, indexed to inflation. This provision is phased out for individuals making $100,000 or families making $200,000 annually.
Medicare
Rural Emergency Hospital (REH) Definition
- Under current law, only certain hospitals that were enrolled in Medicare as of Dec. 27, 2020, are eligible to convert to the Rural Emergency Hospital designation. This provision establishes a look-back from Jan. 1, 2014, to Dec. 26, 2020, so that qualifying rural hospitals open during that period, but have closed, may reopen under the REH designation. These hospitals if located less than 35 miles from the nearest hospital, critical access hospital (CAH), or REH are not eligible for the 5% increase on outpatients. If these facilities are located less than 10 miles from the nearest hospital, CAH or REH are not eligible for the REH facility fee.
Artificial Intelligence and Improper Payments
- Provides $25 million for the Secretary of Health and Human Services to contract with artificial intelligence contractors and data scientists to examine Medicare improper payments and recoup payments. Additionally, the secretary is required to report to Congress on progress decreasing the number of Medicare improper payments
Limiting Medicare Eligibility
- Under current law, individuals who are lawfully present in the US and meet Medicare’s standard eligibility requirements are generally allowed to enroll in Medicare. This provision eliminates Medicare eligibility for illegal immigrants and only allows eligibility for Lawful Permanent Residents, certain Cuban immigrants and individuals living in the US through a Compact of Free Association.
Removing Benefits for Illegal Immigrants
- Eliminates premium tax credit eligibility for illegal immigrants and only allows eligibility for Lawful Permanent Residents, certain Cuban immigrants and individuals living in the US through a Compact of Free Association.
- Prohibits individuals with immigration status granted by asylum (or pending asylum application), parole, temporary protected status, deferred enforced departure, and withholding of removal from receiving premium tax credits.
- Strikes an exception to current law that allows aliens who report income below 100% of the federal poverty level and are in their five-year Medicaid waiting period due to immigration status to receive premium tax credits to purchase health insurance on the exchange.
Provisions Related to Health Exchanges and Premium Tax Credits
- Prohibits an individual from claiming the premium tax credit if the individual’s eligibility related to income, enrollment and other requirements is not actively verified annually.
- Prohibits individuals from receiving premium tax credits if they enroll in health coverage on the exchange through a special enrollment period associated with their income. This relates to the continuous special enrollment period that has been made available to individuals with a projected annual household income no greater than 150% of the federal poverty line.
- Removes the repayment limits in current law related to premium tax credits. Under current law, there is a limit on the amount of excess premium tax credit certain individuals must repay if they misestimate their projected income and benefit from a more generous advance payment of the tax credit than they qualified for. This provision removes the repayment limits and requires affected individuals to reimburse the IRS for the full amount of the excess tax credit received.
- Eliminates premium tax credit eligibility for illegal immigrants and only allow eligibility for Lawful Permanent Residents, certain Cuban immigrants and individuals living in the US through a Compact of Free Association.
- Prohibits individuals with immigration status granted by asylum, or with a pending asylum application, parole, temporary protected status, deferred enforced departure and withholding of removal from receiving premium tax credits.
- Strikes an exception to current law that allows aliens who report income below 100% of the federal poverty level and are in their five-year Medicaid waiting period due to immigration status to receive premium tax credits to purchase health insurance on the exchange.
Housing
The draft bill makes significant changes to important tax provisions related to housing development, including the low-income housing tax credit (LIHTC), opportunity zones (OZs) and the preservation of 1031 like-kind exchanges. Specifically, the bill requests a temporary 3.5% increase in the 9% LIHTC allocations and lowers the bond-financing threshold to 25% for projects financed by bonds with an issue date before 2030. The bill also designates Indian rural areas as difficult development areas and provides a 30% basis increase between Jan. 1, 2026, to Dec. 31, 2029.
The draft bill renews OZs for a second round while adjusting previous policy. OZs are areas designated as low-income communities that are awarded tax benefits for development that meet certain income criteria. The draft bill tightens the definition of low-income communities by dropping the income threshold from 80% to 70% and creates additional opportunities for rural communities to qualify for OZs by adding a provision that at least 33% of designated OZs be comprised entirely of a rural area.
Finally, the draft bill establishes qualified rural opportunity funds (QROFs). When held for at least five years, investments in QROFs will receive a 30% step up in basis, compared to 10% in traditional qualified opportunity funds.
While most of the significant provisions are related to housing production and economic development, the draft reconciliation bill also includes individual incentives for homeownership opportunities. The draft bill preserves the mortgage interest deduction in its current form and increases the state and local tax to $30,000 for those making under $400,000. This provision is highly controversial for blue state Republicans and may be amended as the bill moves through the House.
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