President Donald Trump signed the domestic policy on July 4, 2025, following the House’s passage of the Senate version of the One Big Beautiful Bill (OBBB) on July 3, 2025. The House passed this version after winning over several skeptical Republicans. Several members of the House Freedom Caucus said the President assured them he would address their concerns through Executive Orders or administrative implementation. How the bill gets implemented could still significantly impact many of the provisions in the OBBB. McGuireWoods Consulting will continue to stay engaged throughout the process.
Senate Action
On July 1, 2025, the Senate passed the One Big, Beautiful Bill Act by a vote of 51-50, with Vice President JD Vance casting the tie-breaking vote. Senators Thom Tillis, R-North Carolina, Rand Paul, R-Kentucky, and Susan Collins, R-Maine voted against the legislation. The senators participated in a 26-hour vote-a-rama that included votes on health care language and energy provisions. During the vote-a-rama, the Senate narrowly voted down an amendment that would have reduced the Federal Medical Assistance Percentage (FMAP) from 90% to 80% for expansion states providing Medicaid to undocumented individuals.
During the vote-a-rama, Senators Marsha Blackburn and Maria Cantwell introduced a bipartisan amendment to remove the controversial provision that would have restricted states from regulating artificial intelligence (AI) for a decade. The amendment passed 99-1. Early Tuesday morning, the Senate parliamentarian ruled that the provision regarding orphan drug exclusion from Medicare drug price negotiations could be reinstated in the bill.
The vast majority of Tuesday morning was spent convincing Senator Murkowski to vote yes, which ultimately succeeded. Murkowski had been expected to vote no following the failure of an amendment that would have increased the rural hospital fund from $25 billion over five years to $50 billion by raising taxes on the ultra-wealthy, and following the Senate parliamentarian’s ruling that the Medicaid carve out for Alaska was not compliant with the Byrd rule.
The legislation was modified at the final minute through a wraparound amendment introduced by Senator Lindsey Graham that made key changes to the bill.
Final Bill with “Wraparound Amendment”
The final Senate text from Tuesday morning doubles the Rural Hospital Stabilization Fund from $25 billion to $50 billion. The fund’s goal is to offset potential financial losses in response to the provider tax phase-down from 6% to 3.5%. Following a Friday update to the latest version, the Friday package also delays implementation of the provider tax freeze, with the drawdown beginning in 2028.
Following a parliamentarian ruling early Tuesday morning, the provision regarding expansion of enhanced Medicaid FMAP to some states, including Alaska, Hawaii, Wyoming, North Dakota and South Dakota, was removed from the Senate text. Additionally, the final Senate text excluded the provision prohibiting Medicaid and CHIP funding from being used for gender-affirming care. However, the text allows the Agriculture Secretary to waive both Alaska and Hawaii’s cost-share requirements for up to two years if they are “actively implementing”” a plan to lower their payment error rate for the SNAP program. To further secure Murkowski’s support, whaling boat captains in Alaska will be able to deduct up to $50,000 for whale-hunting related expenses, increased from the current $10,000.
The perfecting amendment excluded the proposal for a new excise tax on solar and wind sourcing from foreign entities and a tax credit for contributions to nonprofits granting elementary and secondary school scholarships is included. Additionally, the language to restore the taxable REIT subsidiary asset test is included.
Despite the parliamentarian’s ruling that the provision to expand Pell Grants to short-term workforce training programs violates the Byrd Rule, the HELP Committee found a workaround, and the provision is included in the bill text. After the parliamentarian ruled that several of the GOP’s civil service provisions violated the Byrd Rule, the updated text excludes the proposal to increase federal employees’ required retirement contributions and charge unions for time spent engaging in organizing activities.
Health Care Provisions
The Senate version of the budget reconciliation resulted in deeper Medicaid cuts totaling nearly $1 trillion. The bill maintains the House provisions related to state enforcement of provider enrollment and eligibility checks for enrollees. The Senate version includes several provisions different from the House version:
- Caps states’ ability to levy provider taxes at 3.5% by 2031, down from the current 6%, with a 0.5% phase-down each year.
- Establishes “community engagement” requirements as a condition of receiving Medicaid for able-bodied adults with children ages 15 and older. To meet this requirement, these individuals must work, engage in community service or education or participate in a combination of those activities for 80 hours per month. This requirement would not apply to pregnant women, individuals under age 19, individuals over age 64, foster youth and former foster youth under age 26, tribal members, 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 from incarceration. The provision also specifies the frequency by which a state must verify that the individual is meeting the requirement.
- Expands Medicare drug price negotiation exemptions for orphan drugs to include medicines treating multiple rare diseases.
- Allows the enhanced premium tax credits for the Affordable Care Act (ACA) to expire at the end of the year.
- Makes marketplace insurance coverage more costly and harder to enroll in by imposing new verification requirements on consumers and marketplaces; eliminates access to premium tax credits for those who use certain special enrollment periods and eliminates financial protections related to premium tax credits claw backs.
- Delay implementation of parts of Biden era rules that would streamline enrollment in Medicaid, and help children stay enrolled.
- Adopt a one-year Medicare physician fee “fix” and increase spending to hospitals in Alaska and Hawaii for certain non-labor related services.
Higher Education Provisions
While largely similar, the Senate version of the bill does not include a limit on traditional Pell Grant eligibility like the House version, which would have excluded thousands of part-time students. Furthermore, the Senate version does not include the risk-sharing model requiring colleges to pay a penalty based on students’ unpaid loans. Instead, the Senate version includes student outcomes-based accountability by ending federal loan eligibility for programs that leave students worse off than if they had never attended.
In a change from the House version, the Senate version will end Pell Grant eligibility for students on full scholarships. Like the House version, the Senate version includes:
- Ending Grad PLUS loans
- Restricting Parent PLUS loans
- Creating a workforce Pell Grant focused on workforce development programs
- Streamlining Income Driven Repayment by ending the SAVE repayment program
- Capping graduate student loans
- Appropriating funding to address the Pell Grant shortfall
In addition to these provisions, the House version also included capping undergraduate student loans, ending subsidized loans, changing Pell Grant eligibility, and repealing both the 90-10 rule and gainful employment regulations.
Supplemental Nutrition Assistance Program Provisions
The Senate Agriculture Committee text has numerous differences from the House-passed version, including a decrease in the benefit cost shift to states. The Senate version includes:
- Changes SNAP work requirements to no longer apply to individuals 18-65 years old if they are:
- Mentally and physically fit for employment
- Not pregnant women
- Children under 14
- Native Americans
- The Secretary’s ability to designate whole areas for SNAP eligibility applies only to the contiguous 48 states and District of Columbia where unemployment is 1.5 times the national average.
- Includes an error percentage system taking effect in Fiscal Year 2028:
- States with below 6% error pay 0% of SNAP costs
- 6%-8% error pay 5%
- 8%-10% error pay 10%
- 10%+ pay 15%
However, states with an error percentage over 20% when multiplied by 1.5 in Fiscal Year 2025 will not start the error percentage system until Fiscal Year 2029.
- Amends the Standard Utility Allowance to have automatic qualifications and funding through SNAP eligibility.
- Limits future updates to the Thrifty Food Plan to being cost-neutral and limits USDA discretion for adjusting benefit levels based on household size. These levels include:
- 1-person household – 30%
- 2-person household – 55%
- 3-person household – 79%
- 4-person household – 100%
- 5-person household – 119%
- 6-person household – 143%
- 7-person household – 158%
- 8-person household – 180%
- 9-person or more household – 22% per person, not to exceed 200%
- Mandates funding for rural areas for EQIP, CSP, ACEP, and RCPP.
The House version included reducing the tolerance level for SNAP error payments from $56 to $0, requiring all states to use the National Accuracy Clearinghouse to prevent multiple SNAP issuances, and decreasing the average monthly number of discretionary exemptions from ABAWD work requirements from 8% to 1% of the state’s caseload. These provisions were not included in the Senate version of the bill.
Tax Provisions
The legislation passed by the Senate makes many of the 2017 Tax Cuts and Jobs Act provisions permanent:
- The standard deduction is increased by $1,000-$1,500 for heads of households and $2,000 for married couples through Fiscal Year 2028.
- The State and Local Tax (SALT) Deduction Cap is increased to $40,000 for households earning under $500,000 through Fiscal Year 2029 and will return to $10,000 in Fiscal Year 2030.
- The Child Tax Credit is $2,200 in the Senate-passed legislation. The House-passed legislation included a $2,500 credit.
- The endowment tax in the Senate applies to educational institutions that had at least 3,000 tuition-paying students in the preceding taxable year and more than 50% of students are in the United States. The tax rate starts at 1.4% for a student-adjusted endowment of at least $500,000 but not exceeding $750,000, 4% for a student-adjusted endowment between $750,000 and $1,999,999, and 8% for those exceeding $2,000,000.
- The Senate-passed version includes a temporary bonus senior tax deduction of $6,000 per person, while the House-passed version included a $4,000 deduction.
- The legislation makes the qualified business income deduction permanent at the rate of 20%. It expands the deduction limit phase-in range for Specified Service Trades or Businesses (SSTBs) and other entities subject to the wage and investment limitation by increasing the threshold from $50,000 for nonjoint returns to $75,000 and from $100,000 for joint returns to $150,000.
- The Senate-passed legislation permanently increases the estate tax exemption and the lifetime gift tax exemption amounts to $15 million for single filers in Fiscal Year 2026.
- The language provides a temporary deduction of up to $25,000 for qualified tips received by an individual working in a profession that customarily and regularly receives tips for tax years 2025 to 2028. Employees receiving Form W-2, Form 1099-K or Form 1099-NEC or who report tips on Form 4137 would be eligible for the deduction.
- The proposed legislation also includes a temporary above the line deduction of up to $12,500 for tax years 2025 to 2028 for qualified overtime compensation.
- The House-passed version included tax-free savings accounts for minors titled Trump accounts. The Senate changes the concept to individual retirement accounts for the exclusive benefit of individuals under 18. Contributions can only be made in calendar years before the beneficiary turns 18.
In the Finance tax subtitle, there are important business provisions including:
- Reinstating and making permanent the expensing of R&D costs
- Reinstating the higher EBITDA cap on the deduction for interest
- Reinstating and making permanent the 100% bonus depreciation
- Renewing and reforming the Opportunity Zone program
- Adding a 100% first-year depreciation deduction for real property utilized in production activities
Energy Provisions
The Senate Reconciliation bill’s energy provisions are intended to expand the production of oil, gas, and coal while restructuring renewable energy policies. Additionally, Republicans in both the House and Senate have intended to rescind key provisions from the Inflation Reduction Act.
- Requires the Bureau of Land Management (BLM) to hold quarterly lease sales for onshore and offshore oil and gas on available land in nine Western states (WY, NM, CO, UT, MT, ND, OK, NV, AK) for ten years
- Does not include the controversial provision by Senator Mike Lee to sell certain BLM lands
- Requires a minimum of thirty regionwide oil and gas lease sales over 15 years in the Gulf of America, six offshore lease sales over the next 10 years in the Cook Inlet in Alaska’s Arctic National Wildlife Refuge and six lease sales over 10 years in the National Petroleum Reserve – Alaska
- Reinstates the 12.5% royalty rate on offshore and onshore production, as well as extracted methane, and reinstitutes BLM’s authority to issue noncompetitive leases. These measures reduce the royalty rate to pre Inflation Reduction Act of 2022 levels
- Institutes similar provisions for coal mining as for onshore and offshore oil and gas, including speeding up BLM’s permitting process for coal leases, lowering the royalty rate and requiring additional acreage to become available for mining
Inflation Reduction Act Rescissions
Rescinds the unobligated balances for eight programs in the Inflation Reduction Act:
- State-Based Home Energy Efficiency Contractor Training Grants (Section 50123 of IRA)
- Funding for the Department of Energy Loan Programs Office (50141)
- Energy Infrastructure Reinvestment Financing (50144)
- Tribal Energy Loan Guarantee Program (50145)
- Transmission Facility Financing (50151)
- Grants to Facilitate the Siting of Interstate Electricity Transmission Lines (50152)
- Interregional and Offshore Wind Electricity Transmission Planning, Modeling, and Analysis (50153)
- Advanced Industrial Facilities Deployment Program (50161)
Clean Energy Tax Credit Modifications
Comprehensive Clean Energy Credit Changes: Includes a section titled “Ending Green New Deal Spending, Promoting America-First Energy, and Other Reforms,” which terminates, modifies, or restricts 15 programs providing tax credits for clean energy: including credits or deductions for clean vehicles, qualified commercial clean vehicles, alternative fuel vehicle refueling property, energy efficient home improvements, residential clean energy, energy efficient commercial buildings, new energy efficient homes, clean hydrogen production, clean electricity production and clean electricity investments. The legislation also phases out the advanced manufacturing production credit, restricts the extension of advanced energy project credits, eliminates cost recovery for energy property and modifies the zero-emission nuclear power production credit.
Timeline and Deadline Extensions: The House-passed bill had eliminated production tax credits and investment tax credits for all clean energy projects, except nuclear, unless construction began within 60 days of enactment and the facilities were placed in service by December 2028. The Senate-passed version retains credits for nuclear, geothermal, hydropower, and energy storage if construction starts by 2033. Other tax credits for electric vehicle charging, residential clean energy, and clean hydrogen had strict deadlines as early as 60 days under the House version. The Senate bill extends those deadlines to 180 days after enactment.
Solar and Wind Specific Provisions:
- Eliminates the proposed new excise tax on wind and solar energy projects
- Extends solar and wind credit timeline with enhanced flexibility: full credit is retained for projects that begin construction within one year after enactment. Projects that begin construction later must be placed in service by the end of 2027
Foreign Entity Restrictions
Material Assistance Requirements: The House version excluded any facility that began construction after Dec. 31, 2025, if the construction included any material assistance from a prohibited foreign entity. The Senate changes this from a full exclusion to a material assistance cost ratio, meaning only facilities with material assistance above the accepted threshold are excluded from receiving credits. This threshold was calculated based on the level of non FEOC input sourcing across technology categories. For solar and wind projects, material assistance supply chain requirements relating to prohibited foreign entities are aligned with other generation technologies, applying to projects that begin construction after Dec. 31, 2025.
Enhanced Foreign Entity Provisions:
- Modifies the effective control payment rule for intellectual property contracts: whereas the prior draft automatically disqualified IP contracts, or related contracts, entered into or modified after June 16, 2025, the current version disqualifies IP contracts entered into or modified after the date of enactment.
- Increases the standard for supplier certification requirements for taxpayer reliance and penalty attachment regarding material assistance. Suppliers must now disclose if they have “reason to know” whether a prior supplier is a prohibited foreign entity.
- Limits certification penalties to situations where the supplier knows or reasonably should have known that the certification is inaccurate or false.
- Restricts the existing contract exclusion to facilities that began construction before Aug. 1, 2025.
Accelerated Depreciation and Technical Provisions
Depreciation Adjustments:
- Restores Section 45Y qualified facilities and Section 48E qualified investments and energy storage technology to the list of property eligible for 5-year cost recovery periods.
- Maintains the removal of 5-year treatment for energy property described in Section 48(a)(3) and wind energy property.
- Preserves 5-year treatment qualification for nuclear, geothermal, storage, and other technologies that qualify for 45Y/48E credits (including wind and solar that still qualify for 45Y/48E).
- Enables continued access to 100% bonus depreciation for some solar and wind property through the bill’s permanent 100% bonus depreciation provision for property with recovery periods under 20 years, even if not specifically listed as 5-year property.
Nuclear and Energy Storage Clarifications:
- Removes the prohibition from Section 45U existing nuclear credit that previously restricted nuclear power plants using nuclear fuel produced in covered nations or by covered entities. Specified foreign entity and foreign-influenced entity restrictions continue to apply but eliminates additional supply chain elements from foreign entity restrictions for 45U.
- Clarifies that energy storage technology is subject to escalating thresholds to qualify for domestic content bonuses under Section 48E.
- Establishes new coordination rules between Section 45Z and prior sustainable aviation fuel credits, with changes applied prospectively.
