House Budget Reconciliation Package Passes By One Vote

On May 22, 2025, the House of Representatives passed H.R. 1, the budget reconciliation package, commonly referred to as “The One, Big, Beautiful Bill” by a vote of 215-214.

Additionally, the manager’s amendment last night added these provisions:

Struck an existing tax on the manufacture of gun silencers.
Keeps the current tanning bed excise tax in place.
Scales the tax rate on remittances back to 3.5%, back from 5%.
Sets the state and local tax deduction at $40,000 for individuals making $500,000 or less.

It now goes to the Senate, where changes are likely to be made. Senate Leader John Thune has said he would like to have the bill completed by the Fourth of July recess.

Energy

The reconciliation bill modifies the Inflation Reduction Act (IRA) tax credits, accelerating the timelines for phaseout and expiration:

Phasedown:

Clean Energy Production Credit
Clean Energy Investment Credit
Zero-Emission Nuclear Power Production Credit
Advanced Manufacturing Production Credit
Investment Tax Credit for Certain Thermal Heating and Cooling Property

Expiration:

Clean Hydrogen Production Credit
Alternative Fuel Vehicle Refueling Property Credit
Previously-Owned Clean Vehicle Credit
Clean Vehicle Credit
Qualified Commercial Clean Vehicles Credit
Energy Efficient Home Improvement Credit
Residential Clean Energy Credit
New Energy Efficient Home Credit

The final bill also removes transferability for all except the nuclear power production credit. Transferability allows taxpayers to sell credits to buyers for cash.

Projects would also be required to “commence construction” within 60 days of enactment, and “placed in service” by the end of 2028, to qualify for the credit.

The bill prevents taxpayers from claiming credits if the taxpayer is “controlled by,” “influenced by,” or “provided material support to” a foreign entity of concern.

Grants and Funding

The legislation rescinds the unobligated funds for these programs from the Inflation Reduction Act:

State-Based Home Energy Efficiency Contractor Training Grants: The program provides training assistance and education for the implementation of Inflation Reduction Act’s (IRA) Home Energy Whole-House Rebate Program.
Department of Energy Loan Programs Office program: This funding covers the cost of credit subsidies associated with loan guarantees made under Section 1703 of the Energy Policy Act of 2005.
Advanced Technology Vehicle Manufacturing: This funding covered the cost of credit subsidies to provide loans for vehicle and vehicle supply chain manufacturing facilities.
Energy Infrastructure Reinvestment Financing: This funding covered the cost of loan guarantees under the new loan program, the Energy Infrastructure Reinvestment Financing program, for retooling, repowering or replacing energy infrastructure that ceased operations.
Tribal Energy Loan Guarantee Program: This funding covered credit subsidies under the Tribal Energy Loan Guarantee under the Energy Policy Act of 1992.
Transmission Facility Financing: The program pays direct loans to nonfederal borrowers for transmission facilities designated under the Federal Power Act in a National Interest Electric Transmission Corridor.
Grants to Facilitate the Siting of Interstate Electricity Transmission Lines: This program provides grants to transmission siting authorities to facilitate siting and permitting for certain interstate and offshore electricity transmission lines.
Interregional and Offshore Wind Electricity Transmission Planning, Modeling, and Analysis: This program covers expenses associated with interregional and offshore wind electricity transmission planning, modeling and analysis.
Advanced Industrial Facilities Deployment Program: The program provides financial assistance – grants, direct loans, rebates or cooperative agreements – for industrial or manufacturing facilities to subsidize technology installations with the intent of reducing greenhouse gas emissions.

Permitting Issues

Creates a $1 million user fee for importing natural gas from the United States paid for by non-free trade agreement country.
Appropriates $5 million to the Department of Energy for five years to conduct Section 116 of the Alaska Natural Gas Pipeline Act.
Generates an expedited permitting process if the applicant for an authorization of a certificate of public convenience and necessity under Section 7 of the Natural Gas Act pays $10 million or 1% of the project’s projected capital cost. The relevant authorities will review and approve the federal authorizations for the project within the year. There is the possibility of an extension of six months before the permits are automatic.
Allows applicants for carbon dioxide, oil or hydrogen pipeline projects to be considered in the same manner for a certificate of public convenience and necessity under Section 7 of the Natural Gas Act, including the fee of $10 million. This provision extends the federal pipeline routing and eminent domain authority over these gases’ infrastructure.
Appropriates $10 million through Sept. 30, 2034, to the Department of Energy to establish the De-Risking Compensation Program. The program would provide compensation for unrecoverable capital losses caused by future federal actions that revoke permits or approvals, or cancel, delay or render the federally permitted projects unviable. These projects would include energy projects investing in coal, critical minerals, oil, natural gas or nuclear energy valued at no less than $30 million that chose to enroll. The Secretary of Energy would compensate the project sponsor for up to the full amount of the loss. The funding will come from sponsors that pay 5% of their projected share of capital contribution to the project and an annual premium to the De-Risking Compensation Fund.
Appropriates $2 billion to the Department of Energy for activities related to the Strategic Petroleum Reserve.

Oil and Gas

Immediately resume quarterly onshore oil and gas lease sales in compliance with the Mineral Leasing Act. Eligible lands for these leases comprise all lands subject to leasing including designated as open for leasing.
- Secretary of Interior must conduct minimum of four oil and gas lease sales in the following states: Wyoming, New Mexico, Colorado, Utah, Montana, North Dakota, Oklahoma, Nevada, Alaska, and any other state where there is land available for oil and gas leasing.
Requires that the Secretary offer land for leasing if the Secretary determines the land is open to oil and gas leasing under an approved land use plan within 18 months of date of an expression of interest.
Makes Applicants for Permit to Drill valid for a single, non-renewable four-year period.
Requires land that does not receive bids during an oil and gas lease sale must be offered within 30 days for noncompetitive leasing.
- Land must also be offered for noncompetitive leasing within 30 days if the highest bid is less than the national minimum.
Requires the Secretary to approve applications for the commingling of production from two or more sources such as oil and gas leases or communitized areas, if a feed is paid.
Requires the Secretary to develop regulations to allow oil and gas activity to occur through a permit-by-rule process if a fee is paid.
Establishes that the Secretary does not need to issue a permit to drill for an oil and gas lease under the Mineral Leasing Act if the leasee pays a fee of $5,000 and the federal government owns less than 50% of the minerals in oil and gas drilling unit. The federal government also does not own the surface estate where the drilling will take place.
Reinstates the 12.5% royalty rate on offshore production and onshore production. These reduce the royalty rate to pre-Inflation Reduction Act of 2022 levels.

Geothermal

Requires geothermal lease sales yearly and to hold replacement sales in the event that a lease sale is delayed or cancelled.
Stipulates geothermal facilities on the same geothermal lease are treated as separate facilities with respect to royalty payment.

Alaska

Mandates four-year lease sales under the Coastal Plain Oil and Gas Leasing Program in the Artic National Wildlife Refuge in Alaska within the next 10 years.
Reissues the energy leases revoked previously under the Biden Administration.
Formalizes the National Petroleum Reserve-Alaska oil and gas program. The legislative provision requires that the leasing for energy production be resumed expeditiously. The Secretary must hold lease sales at least every other year and offer at least 4,000,000,000 acres per lease sale.
Mandates the revenues from the leases authorized by the act be split evenly between the state and the federal government until 2035. In 2035, the state will receive 90% of the revenue.

Mining

Rescinds Public Land Order No. 7917. The PLO withdrew federal lands in Northern Minnesota from mineral activity. The leases cancelled during the Biden administration in the Superior National Forest will be reinstated for 20 years.
Establishes a $500,000 a year rental fee for surface transportation access road from the Ambler Mining District to the Dalton Highway. The legislative provision requires a timely construction and operation of the road.

Coal

Mandates coal lease sales.
Rescinds Secretarial Order 3338, which placed a moratorium on new coal leasing and prevents a similar order from being enforced in the future.
Reduces the royalty rate from 12.5% to 7% on all coal leases, new and active.
Authorizes mining of all federal coal reserves leased under Federal Coal Lease MTM 97988.

NEPA

Allows a project sponsor to pay a fee equal to 125% of the anticipated costs of expected agency activity to prepare an environmental impact statement (EIS) or environmental assessment (EA). The project can pay the fee and expect their EIS in one year and EA in six months.
- The EA and EIS will not be subject to judicial review.
Repeals the funding from the Inflation Reduction Act for the Council on Environmental Quality.

Miscellaneous

Creates a filing fee for protests of oil and gas lease sales. The amount of the fee is based on the page length of the protest and the number of oil and gas parcels included in the protest.

Offshore Oil and Gas Leasing

Mandates a series of offshore oil and gas lease sales to generate federal revenue through bonus bids, rentals, and royalties over specified periods.
- Gulf of America: The legislative provision requires at least 30 lease sales in the Gulf of America over 15 years beginning in August 2025 and a minimum of 80 million acres per sale. The primary term will be 10 years for water depths of 800 meters or deeper.
- Cook Inlet Planning Area: The legislative provision requires six lease sales in the Cook Inlet, and each must include at least one million acres. The revenues for the leases authorized will be split evenly between the state and the federal government until 2035. After 2035, the state will receive 90% of the revenue.
Ensures that the sales will supplement the 2024-2029 Outer Continental Shelf Program to increase the revenue potential.
Establishes a process for state governors to nominate adjacent Outer Continental Shelf areas for inclusion and potentially expand leasable acreage.
Requires approval of downhole commingling applications from multiple reservoirs in a single wellbore in the Gulf of America Outer Continental Shelf unless conclusive evidence shows the practice would be unsafe or reduce recovery.
Increases federal revenue by boosting oil and gas production efficiency through additional royalty payments to the federal government.
Raises the cap on the distribution of Outer Continental Shelf revenues from $500 million to $650 million for FY 2026 through FY 2035 under the Gulf of Mexico Energy Security Act.

Renewable Energy

Codifies annual acreage rent and capacity fees for wind and solar energy projects on federal lands.
Removes the Secretary’s authority to reduce acreage rent and capacity fees.
Creates a revenue sharing mechanism for renewable energy produced on public lands. The legislative provision directs 25% to the state hosting the production, 25% to the county hosting production, and 50% to the federal government, deposited into the General Fund of the Treasury.

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 and 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 $40,000 for those making under $500,000. This provision is highly controversial for Republicans in the Senate and will be heavily discussed as the bill moves through the Senate.

Health Care

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 $4,300, or $8,550 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

Sequestration: While not in the bill, the Congressional Budget Office (CBO) issued a letter in response to questions asked by Rep. Brendan Boyle, ranking member of the House Committee on the Budget concerning Medicare sequestration. Because of the budgetary effects of the bill, CBO expects that the reconciliation legislation in its current form would increase the deficit compared to current law by at least $2.3 trillion. If enacted into law in its current form, that increase would trigger mandatory cuts known as sequestration. Unlike Social Security and programs for low-income people, Medicare is not exempt from sequestration cuts. Congress could choose to act to block the Medicare spending reductions by the end of the year. Congress has in the past done that, but to block the effects of sequestration requires 60 votes in the Senate.
Medicare Physician Update Fix: The committee proposed an update for 2026 that is 75% of the Medicare Economic Index (MEI) which is a measure of practice cost inflation. The provision would represent about $8.9 billion in Medicare physician payment system over ten years. In addition, the bill eliminates the dual conversion factor update of 0.25% for most physicians and 0.75% for alternative payment model participants and replaces them with a single conversion factor update for 2027 and beyond at 10% of the MEI.
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.
Ends special enrollment periods in Affordable Care Act (ACA) exchanges for income-based reasons.
Requires numerous verifications of income, and other criteria in relation to enrollment.
Requires individuals on whose behalf advance payments of the premium tax credits are made to file and reconcile on an annual basis.
Revises rules on allowable variation in actuarial value of health plans.
Prohibits automatic reenrollment from Bronze to Silver level qualified health plans.
Prohibits coverage of gender transition procedures as an essential health benefit under exchange plans.

Medicaid

Places a moratorium for 10 years of two Biden-era rules that were designed to streamline enrolment in Medicaid, CHIP and the Basic Health Program.
Places a moratorium on a Biden-era rule requiring 24-hour registered nurse staffing in skilled nursing facilities.
Requires states to verify enrollee’s address and ensure that individuals who are deceased do not remain enrolled as well as ensuring that providers who have been terminated from the program in another state are deceased are not included in provider enrolment.
Requires the Department of Health and Human Services (HHS) to reduce the federal financial participation to states for errors identified through a ratio of a state’s erroneous payments directly attributable to payments to ineligible individuals or for ineligible services.
Ends the temporary enhanced FMAP provided under the American Rescue Plan that was passed in part because of the COVID-19 pandemic. The provision would apply prospectively.
Freezes provider taxes at current rates in effect in states at the time of enactment.
Directs HHS to revise regulations to limit state directed payments for services furnished on or after the enactment of this legislation from exceeding the total published Medicare payment rate. This section revises a Biden-era rule that was in the process of being implemented.
Changes the criteria by which HHS must consider when determining whether certain health care related taxes are generally redistributive. A tax would not be considered generally redistributive if within a permissible class, the tax rate imposed on the taxpayer or group explicitly defined by its relatively lower volume or percentage of Medicaid taxable units is lower than the tax rate imposed on any other taxpayer or rate group.
Requires budget neutrality for Medicaid demonstration projects under Section 1115. HHS would be required to certify that the total expenditures for the federal portion do not exceed what would otherwise have been spent if the demonstration project had not been implemented.
Limits retroactive Medicaid coverage to one month prior to an individual’s application date. Current law permits retroactive coverage up to three months.
Established a ceiling of $1 million for permissible home equity values for individuals when determining allowable assets for Medicaid beneficiaries that are eligible for long term care services. This section also prohibits the use of asset disregards from being applied to waive home equity limits.
Removes the federal financial participation for individuals whose citizenship, nationality or immigration status has not been verified. Current law permits states to enroll individuals in coverage and then provide a 90-day period that allows individuals to immediately begin coverage and verification can occur up to 90 days and the state would receive a federal financial participation.
Reduces the Federal Medical Assistance Percentage (FMAP) for expansion states that provide coverage for undocumented immigrants under Medicaid or another state-based program. The amount of the reduction is 10%. This provision was changed to remove the phrase “otherwise lawfully residing in the United States” which means that the lower matching rate would also apply to expansion states that opted to cover lawfully residing immigrant children and pregnant women under the Legal Immigrant Children’s Health Improvement Act of 2013.
Prohibits federal funds in Medicaid and CHIP being used for gender transition procedures for minors and prohibits Medicaid funds from being used to pay providers that are nonprofit organizations that are essential community providers that are primarily engaged in family planning services or reproductive health such as Planned Parenthood.

Provisions Related to Drug Costs

Requires retail and applicable nonretail pharmacies participate in the National Average Drug Acquisition Cost survey which measures pharmacy acquisition costs and is often used in the Medicaid program to inform pharmacy reimbursement.
Bans “spread pricing” by pharmacy benefit managers in Medicaid.
Provides for reform of Pharmacy Benefit Managers business practices to provide more transparency.
Clarifies the exclusion of orphan drugs under the Medicare Drug Price Negotiation Program.

Increasing Personal Accountability

Establishes “community engagement” requirements as a condition of receiving Medicaid for able-bodied adults without dependents. To meet this requirement these individuals must work, be engaged in community service or education, or a combination of those activities for 80 hours a week. This requirement would not apply to pregnant women, individuals under the age of 19, over the age of 64, foster youth and former foster youth under the age of 26, members of tribes, those considered medically frail or who have a condition as defined by the state and approved by the secretary as meeting the definition of medically frail, individuals in compliance with work requirements for TANF or SNAP, individuals who are caregivers of a dependent child or an individual with a disability or those who are incarcerated or recently released form incarceration. The provision also specifies the frequency by which a state must verify the individual is meeting the requirement. The final version moved up the implementation date to Dec. 31, 2026.
Requires the imposition of cost sharing on Medicaid Expansion adults with incomes over 100% of the federal poverty level. The cost sharing cannot exceed $35 per service. Cost sharing may not exceed 5% of the individual’s income and would not permit cost sharing on primary care, prenatal care pediatric care or emergency room care except for nonemergency care provided in an emergency room.