H.R. 1 — One Big Beautiful Bill Act

This section permanently extends 100% bonus depreciation for property acquired and placed into service (and for certain plants planted or grafted) on or after January 19, 2025. (Bonus depreciation generally allows a business to deduct either the full cost or a large percentage of the cost of qualified property in the year that the property is placed into service, rather than depreciating such costs over a period of time.)

This section allows taxpayers to deduct domestic research and experimental expenses in the year such expenses are incurred (rather than requiring taxpayers to capitalize and amortize such expenses over 5 years or, if elected, over 10 years). However, under this section, taxpayers must continue to capitalize and amortize over a 15-year period foreign research and experimental expenses. Under this section, taxpayers may elect to capitalize and amortize over at least 60 months domestic research and experimental expenses. (Some exclusions apply.) Further, under this section (1) small business taxpayers (with average annual gross receipts of $31 million or less) may claim a tax deduction for domestic research and experimental expenses retroactively to tax years beginning after December 31, 2021, and (2) taxpayers may elect to accelerate amortization attributable to domestic research and experimental expenditures paid or incurred after December 31, 2021 and before January 1, 2025.

This section reinstates the exclusion of the tax deduction for depreciation, amortization, or depletion from the calculation of adjusted taxable income for purposes of the limitation on the tax deduction for interest expenses for tax years beginning after December 31, 2024. This section also expands the exclusion of interest on floor plan financing from the limit on the tax deduction for business interest expenses to include interest on floor plan financing of any camper or trailer designed to (1) provide temporary living quarters for recreational, camping, or seasonal use; and (2) be towed by, or affixed to, a motor vehicle.

This section makes permanent the business tax credit for paid family and medical leave and allows employers to base the tax credit on certain wages or premiums paid. Specifically, under this section, an eligible employer may claim a tax credit beginning in 2026, as part of the general business tax credit, for up to 25% of either (1) wages paid to qualifying employees during any period that such employees are on family and medical leave, or (2) the total amount of premiums paid or incurred for insurance policies that provide paid family and medical leave for employees. (As background, for 2018-2025, an eligible employer may claim a tax credit as part of the general business tax credit for up to 25% of wages paid to qualifying employees during any period that such employees are on family and medical leave.)

This section provides multiple exceptions to the limitation imposed on the tax deduction for employer-provided meals. Specifically, an employer generally may not deduct certain expenses paid or incurred after 2025 for (1) providing food or beverages to employees through an eating facility (operated by the employer for employees) that meets the de minimis requirements for fringe benefits (e.g., office snacks and coffee), or (2) meals provided by the employer for the convenience of the employer on the employer’s premises to employees and their spouses and dependents. (As background, de minimis fringe benefits are benefits that are so small as to make accounting for them unreasonable or impractical.) However, under this section, an employer may continue to deduct such expenses if sold to customers (including employees) for adequate and full consideration, required to be provided under federal law by the employer to the crew of a commercial vessel, provided by the employer to the crew of a fishing vessel, or provided to employees of certain fishing processing facilities in Alaska that are not located in a metropolitan area.

This section increases to $2.5 million (from $1.25 million in 2025 and adjusted annually for inflation) the maximum amount that may be deducted (expensed) for certain depreciable business assets. This section also increases to $4 million (from $3.13 million in 2025 and adjusted annually for inflation) the dollar amount at which the tax deduction begins to phase out. Both amounts continue to be annually adjusted for inflation.

This section provides for an elective 100% depreciation allowance for nonresidential real property that is placed into service before January 1, 2031, and that meets certain other requirements. (Some limitations apply.)

This section increases the advance manufacturing tax credit to 35% (from 25%) for property placed into service after December 31, 2025.

This section expands the exclusion from gross income for interest on certain bonds issued by state or local governments (specifically tax-exempt facility bonds) to include interest on bonds for which at least 95% of the net proceeds are used to finance a spaceport. (Thus, spaceports are treated in the same manner as airports for purposed of the federal tax-exempt facility bond rules.) Under this section, a spaceport is defined as any facility located at or in close proximity to a launch site or reentry site used for manufacturing, assembling, or repairing spacecraft, space cargo; flight control operations; providing launch services and reentry services; or transferring crew, spaceflight participants, or space cargo to or from spacecraft. Further, this section provides that a tax-exempt facility bond is not considered federally guaranteed because an agency of the U.S. government is paying rent, fees, or charges for the use of the spaceport. (As background, state and local bonds that are federally guaranteed are not tax-exempt unless an exception applies.) Subchapter B--Permanent America-First International Tax Reforms Part I--Foreign Tax Credit This part makes multiple changes to the foreign tax credit. Below is a summary of the provisions in this part.

This section increases the tax credit for employers that provide child care to their employees. Under this section, the portion of the tax credit for qualified child care expenses increases to 40% (from 25%) or to 50% for eligible small businesses. This section also increases the maximum amount of the tax credit to $500,000 (from $150,000) or $600,000 for eligible small businesses (adjusted for inflation).

This section makes up to $5,000 of the adoption tax credit refundable and adjusts this amount annually for inflation after 2025. However, under this section, the refundable portion of the adoption tax credit may not be carried forward. (Under current law, the amount of the allowed adoption tax credit that exceeds an individual’s tax liability may be carried forward for up to five years.)

This section allows Indian tribal governments to determine whether a child has special needs for purposes of calculating the adoption tax credit.

This section increases to $7,500 (or $3,750 for a married individual filing separately) from $5,000 (or $2,500 for a married person filing separately) the exclusion from gross income for amounts paid or incurred by an employer to an employee as part of a dependent care assistance program.

This section increases the non-refundable tax credit for expenses paid by an individual for the care of a child or dependent that enable such individual to be gainfully employed. Subchapter B--Permanent Investments in Students and Reforms to Tax-Exempt Institutions This subchapter makes multiple changes to federal tax provisions related to education and certain educational institutions. Below is a summary of the provisions in this subchapter.

This section establishes a nonrefundable tax credit of up to $1,700 for cash contributions made by an individual who is a citizen or resident of the United States to a tax-exempt organization that provides scholarships for qualified elementary and secondary school expenses to eligible students (scholarship granting organization), subject to limitations.

This section makes permanent the exclusion of education assistance paid by an employer to an employee (up to a maximum amount) from (1) gross income by an employee, and (2) wages by an employer (for employment tax purposes). Further, under this section, the maximum amount ($5,250 for 2025 and 2026) of employer-paid education assistance that may be excluded from gross income and wages is adjusted annually for inflation beginning in 2027.

This section expands the expenses eligible for tax-free withdrawals from qualified tuition programs (529 plans) to include certain additional expenses related to enrollment or attendance at an elementary or secondary school. This section also increases to $20,000 (from $10,000) the limit on distributions from a 529 plan used in connection with enrollment or attendance at an elementary or secondary school.

This section expands the expenses eligible for tax-free withdrawals from 529 plans to include tuition, fees, books, supplies, equipment, and other expenses related to the enrollment or attendance in a recognized postsecondary credentialing program.

This section replaces the excise tax of 1.4% imposed on the net investment income of certain private university and college endowments with a new rate structure of 1.4%, 4%, or 8%, depending on several variables including the value of the endowment and the number of full-time students who meet certain other requirements.

This section expands the excise tax imposed on certain tax-exempt organizations for excess compensation paid to certain employees (an employee who is one of the top five highest compensated employees of such organization) to include excess compensation paid to any employee of such organization. (Thus, a tax-exempt organization is liable for an excise equal to the corporate tax rate [21%] multiplied by the sum of remuneration in excess of $1 million and excess parachute payment paid to any employee by the tax-exempt organization.) Subchapter C--Permanent Investments in Community Development This subchapter makes multiple changes to certain federal tax incentives related to investing in certain communities and tax deductions for charitable contributions. Below is a summary of the provisions in this subchapter.

This section permanently extends the Opportunity Zone program, establishes specific tax incentives for investments in rural areas, and modifies the rules related to deferred gains and stepped-up basis. As background, the Tax Cuts and Jobs Act temporarily authorized tax incentives for investments (made through qualified opportunity funds) in designated economically distressed areas (called qualified opportunity zones). Specifically, qualified opportunity fund investors may (1) defer capital gain if such gain is reinvested in a qualified opportunity fund within 180 days, (2) exclude from gross income all (or part) of the capital gains from qualified opportunity fund investments held for a certain period of time, and (3) receive a step up in basis (value of the capital asset when it is sold) of 10% for qualified opportunity fund investments held for at least five years and an additional 5% for qualified opportunity fund investments held for at least seven years. (An increase in the basis of a capital asset generally lowers the taxable amount of such asset.) Under this section, capital gains from qualified opportunity fund investments made beginning in 2027, may be deferred to the earlier of the date on which such investment is sold or exchanged or five years after the date on which the investment is made. (Capital gain from qualified opportunity investments made before 2027, may be deferred to the earlier of the date on which such investment is sold or exchanged or December 31, 2026. (Thus, this section establishes a rolling five-year deferral for capital gains from qualified opportunity funds.) This section also eliminates the additional 5% step up in basis for qualified opportunity zone fund investments held for at least 7 years, but increases the basis for such investments held for at least 10 years to the fair market value of the investment. Finally, this section establishes qualified rural opportunity funds for investments in rural areas. Investors in qualified rural opportunity funds may be eligible for a 30% step up in basis if certain requirements are met.

This section increases eligibility for the low-income housing tax credit (LIHTC) by increasing the amount that a state may allocate for the LIHTC and reducing the tax-exempt bond financing threshold. As background, a taxpayer may claim the LIHTC for expenses incurred to rehabilitate or build rental housing for low-income tenants (1) if an allocation for the LIHTC is received from the state, or (2) a percentage of the project is financed by certain tax-exempt bonds. The amount a state may allocate for the LIHTC is calculated, in part, by multiplying a certain dollar amount (adjusted annually for inflation) by the state’s population. Under this section, beginning in 2026, the portion of the federal allocation to each state for the LIHTC that is based on the state’s population is increased by 12%. Further, this section lowers to 25% (from 50%) the tax-exempt bond threshold. Thus, under this section, if 25% or more of the aggregate basis (i.e., generally the costs) of the building and the land on which the building is located is financed with tax-exempt bonds, then the taxpayer is eligible for the LIHTC for the entire eligible basis of the project without a LIHTC allocation from the state. (If less than 25% of such basis is financed with tax-exempt bonds, then only the basis of the project that is financed with the tax-exempt bonds is eligible for the LIHTC.)

This section permanently extends the New Markets Tax Credit (a tax credit for certain investments in eligible, low-income communities).

This section makes permanent and increases to $1,000 for single filers (from $300) or $2,000 for joint filers (from $600 for joint filers) the tax deduction for charitable contributions made by individuals who do not itemize their federal income tax deductions.

This section imposes a new limitation on the itemized tax deduction for charitable contributions made by individuals beginning in 2026. Under this section, an itemized tax deduction for charitable contributions is allowed only to the extent that an individual’s aggregate charitable contributions exceed 0.5% of the individual’s contribution base (adjusted gross income calculated without including any net operating loss carryback amount). (This limitation is generally known as the 0.5% floor for the itemized tax deduction for individual charitable contributions and does not apply to tax deductions for charitable contributions made by individuals who do not itemize their tax deductions under Section 70424 of this act.) Further, under this section, the 0.5% floor also applies to excess charitable contributions made by individuals in 2026 or after that are carried forward to subsequent tax years. (Excess charitable contributions made prior to 2026 that are carried forward to subsequent tax year are not subject to the 0.5% floor.)

This section further limits the tax deduction for charitable contributions made by a corporation beginning in 2026. Under this section, a tax deduction for charitable contributions made by a corporation is allowed only to the extent that the corporation’s aggregate charitable contributions exceed 1% of the corporation’s taxable income. (This limitation is generally known as the 1% floor for the tax deduction for charitable contributions made by a corporation.) As a result of the 1% floor imposed by this section and existing limitations, a corporation may deduct charitable contributions only to the extent that such contributions exceed 1% of the corporation’s taxable income but do not exceed 10% of the corporation’s taxable income (10% limit). Finally, under this section, special rules and limitations also apply to corporate charitable contributions carried forward to subsequent tax years.

This section reinstates and makes permanent (beginning in 2026) the $13.25 (currently $10.50) per proof gallon limit on the amount that is transferred by the United States to Puerto Rico and the U.S. Virgin Islands for excise taxes collected on distilled spirits (e.g., rum) imported from Puerto Rico and the U.S. Virgin Islands. As background, the United States imposes an excise tax of $13.50 per proof gallon on distilled spirits produced in or imported into the United States. A certain amount of the excise tax collected on distilled spirits imported from Puerto Rico and the U.S. Virgin Islands are transferred back into the treasury of each possession. (This transfer is commonly known as the cover over or the rum cover over.) For 2022-2026, the rum cover over amount is limited to $10.50 per proof gallon. An additional rum cover over in the amount of $2.75 (for a total rum cover over of $13.25) authorized by Congress expired at the end of 2021.

This section treats participation or investment in fisheries (e.g., harvesting, processing, transportation, sales, and marketing of fish and fish products) in the Bering Sea and Aleutian Islands by certain tax-exempt Alaskan villages as substantially related to the village’s tax-exempt purpose and, thus, income gained from such activities remains tax-exempt.

This section increases to $50,000 (from $10,000) the limit on the tax deduction for expenses incurred by a whaling captain (as recognized by the Alaska Eskimo Whaling Commission) in carrying out sanctioned bowhead whaling activities.

This section allows certain residential construction contracts entered into in tax years beginning after July 4, 2025, to use another permissible method of accounting (e.g., the uniform capitalization rules), rather than the percentage of completion method of accounting. (The percentage of completion method of accounting or the percentage of completion-capitalized cost accounting method of accounting is used for residential construction contracts that are not home construction contracts and that are entered into in tax years beginning on or before July 4, 2025.) Subchapter D--Permanent Investments in Small Business and Rural America This subchapter modifies certain reporting requirements related to third-party settlement organizations and makes changes to several other federal tax provisions. Below is a summary of the key provisions in this subchapter.

This section expands the exclusion from gross income for gain from the sale or exchange of qualified small business stock by providing tiered exclusion percentages for stock acquired after the date of enactment—50 percent after 3 years, 75 percent after 4 years, and 100 percent after 5 or more years (from the prior 50 percent exclusion after more than 5 years)—while retaining the 50 percent exclusion for pre-enactment stock held more than 5 years. It increases the per-issuer limitation on eligible gain to $15,000,000 (from $10,000,000) for stock acquired after the date of enactment, with the limit inflation-adjusted for taxable years beginning after 2026 and rounded to the nearest multiple of $10,000, maintains the $10,000,000 limit for earlier stock, and applies half those amounts for married individuals filing separately.

This section modifies the reporting requirements applicable to third-party settlement organizations (e.g., certain online platforms, apps, and card payment processors). Under this section, such organizations are required to issue Internal Revenue Service (IRS) Form 1099-K to payees who receive more than $20,000 from more than 200 separate transactions. (This section reverses a provision in the American Rescue Plan Act of 2021 that lowered the reporting threshold to $600 with no minimum on the number of transactions, the implementation of which was delayed and phased in by the IRS. For 2025, under current law, such organizations are required to issue IRS Form 1099-K to payees who receive more than $2,500, regardless of the number of transactions.)

This section increases the threshold for information reporting under section 6041 from $600 to $2,000 (with the new threshold applying for payments made after December 31, 2025) and adds an inflation adjustment for calendar years after 2026. The adjustment increases the threshold by the cost-of-living adjustment under section 1(f)(3) (substituting calendar year 2025 for 2016), rounded to the nearest multiple of $100. It also (1) applies the new threshold to reporting of remuneration for services under section 6041A(a)(2) and to backup withholding under section 3406(b)(6), (2) changes the measurement period from taxable year to calendar year, and (3) makes conforming amendments to headings.

This section expands the federal tax deduction for certain film, television, and theatrical production costs to allow a deduction of up to $150,000 of qualified sound recording production costs in the tax year such costs are incurred. A qualified sound recording production is a sound recording that is produced and recorded in the United States. (Under current law, up to $20 million of film, television, and theatrical production costs incurred before 2026 may be deducted.) The section also extends bonus depreciation to qualified sound recording production costs.

This section establishes an exclusion from gross income for 25 percent of the interest received by a qualified lender on any qualified real estate loan. Qualified lenders include any bank or savings association insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), any State- or federally-regulated insurance company, certain entities owned by bank or insurance holding companies with a U.S. principal place of business, and specified federally chartered Farm Credit System instrumentalities. A qualified real estate loan is a post-enactment loan (with refinancing limitations) secured by rural or agricultural real estate—including property substantially used for agricultural production, fishing, seafood processing, or aquaculture facilities—made to a person other than a specified foreign entity. The provision coordinates the exclusion with the rules of section 265 of the Internal Revenue Code and applies to taxable years ending after the date of enactment.

This section eliminates the $200 excise tax imposed on the transfer of certain firearms other than machine guns and destructive devices (e.g., bombs, grenades, certain rockets, missiles, and mines). As a result, the $200 excise tax is not applicable to silencers, short-barreled rifles and short-barreled shotguns. Chapter 5--Ending Green New Deal Spending, Promoting America-First Energy and Other Reforms Subchapter A--Termination of Green New Deal Subsidies This subchapter terminates multiple energy-related federal tax credits. Below is a summary of the provisions in this subchapter.

This section authorizes a taxpayer to elect to pay in four equal installments the portion of net income tax attributable to gain from the sale or exchange of qualified farmland property to a qualified farmer. The first installment is due on the (unextended) due date for the return for the taxable year of the sale, with each subsequent installment due on the corresponding date for the following three taxable years; remaining installments accelerate upon failure to pay an installment, the death of an individual taxpayer, or the liquidation, cessation of business, or similar event for a C corporation, trust, or estate (with an exception for asset sales to a buyer that assumes the remaining liability). Qualified farmland property is U.S. real property that has been used by the taxpayer (or leased to a qualified farmer) as a farm for farming purposes during substantially all of the 10-year period ending on the sale date and that is subject to a covenant or other enforceable restriction prohibiting non-farm use for the 10-year period after the sale. A qualified farmer is an individual who is actively engaged in farming within the meaning of section 1001(b) and (c) of the Food Security Act of 1986 (7 U.S.C. 1308-1(b) and (c)). The election must be made by the due date for the return for the year of the sale (or at the partner or shareholder level for partnerships and S corporations), and the return must include a copy of the required covenant or restriction. The provision also redesignates the existing section 1062 as section 1063.

This section extends the rules for treatment of certain disaster-related personal casualty losses under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 to the date of enactment of this section (from December 27, 2020). (Thus, the special deduction rules in section 301 of that Act, which waive the 10%-of-AGI floor and allow above-the-line treatment for qualified disaster losses, apply to additional federally declared disasters occurring on or after January 1, 2020.)

This section increases to 25 percent (from 20 percent) the maximum percentage of a real estate investment trust’s (REIT’s) total assets that may be represented by securities of one or more taxable REIT subsidiaries. The amendment applies to taxable years beginning after December 31, 2025.

This section terminates the previously-owned clean vehicle tax credit. (Thus, taxpayers may claim a tax credit of up to $4,000 for the purchase of a qualified previously-owned clean vehicle before October 1, 2025.)

This section terminates the clean vehicle tax credit. (Thus, taxpayers may claim a tax credit of up to $7,500 for the purchase of a qualified new clean vehicle before October 1, 2025.)

This section terminates the qualified commercial clean vehicle tax credit. (Thus, businesses may claim a tax credit of up to $40,000 for the purchase of a commercial clean vehicle before October 1, 2025.)

This section terminates the alternative fuel refueling property tax credit. (Thus, a tax credit of up to $1,000 for individuals or up to $100,000 for businesses is allowed for the installation of property before July 1, 2026, that is used to store or dispense clean-burning fuel or to recharge electric vehicles.)

This section terminates the energy efficient home improvement tax credit. (Thus, taxpayers may claim a tax credit of up to $3,200, for certain energy-efficient property purchased and installed into a primary residence before 2026.)

This section terminates the residential clean energy tax credit. (Thus, taxpayers may claim a tax credit for certain renewable energy equipment for a principal residence before 2026.)

This section terminates the energy efficient commercial buildings tax deduction. (Thus, taxpayers may claim a deduction for certain energy efficient commercial property the construction of which begins before July 1, 2027.)

This section terminates the new energy efficient home tax credit. (Thus, contractors may claim a business tax credit for constructing an energy-efficient home that is acquired by a person for use as a residence before July 1, 2026.)

This section terminates the special five-year cost recovery period for investments in certain solar and wind property for which construction begins after December 31, 2024. As background, costs of property used in a trade or business to produce income generally are capitalized and then depreciated or amortized over a period of time (known as the cost recovery period). The cost recovery period for property used to produce electricity generally depends on the method for producing such electricity. However, for certain solar and wind property for which construction begins on or before December 31, 2024, the cost recovery period is five years. For solar and wind property for which construction begins after December 31, 2024, the general modified accelerated cost recovery system (MACRS) and Internal Revenue Service guidance apply.

This section disallows the zero-emission nuclear power production tax credit for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities). (The zero-emission nuclear power production tax credit generally is allowed for electricity produced at a qualified nuclear power facility and sold to an unrelated third person.)

This section terminates the clean hydrogen production tax credit in 2028 and, thus, the tax credit is allowed only for clean hydrogen production facilities for which construction begins before January 1, 2028. (As background, prior to changes made by this section, the tax credit is available for the production of clean hydrogen by a qualifying facility for which construction begins before 2033.)

This section terminates the clean electricity production tax credit for (1) wind and solar facilities placed into service after December 31, 2027, and (2) certain wind energy property or solar water heating property if such property is leased to a third party during the tax year. (As background, a tax credit is allowed, other than as provided by this section and subject to limitations, for clean electricity produced by a qualified facility. The tax credit is phased out beginning in the later of 2032 or when greenhouse gas emissions from the production of electricity are reduced to a certain level.) This section also disallows the clean electricity production tax credit for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities). Further, under this section, penalties may be imposed for (1) substantial misstatements of a certain amount related to the supply chain of manufactured products and product components for which the clean electricity production tax credit is claimed, and (2) overstating depreciable assets to claim the clean energy production tax credit. (Under this act, such penalties are also applicable to the clean electricity investment tax credit and the advanced manufacturing production tax credit.)

This section terminates the clean electricity investment credit for (1) wind and solar property, other than energy storage technology, placed into service after December 31, 2027; and (2) certain wind energy property, solar electric property, and solar water heating property if such property is leased to a third party during the tax year. (As background, a tax credit is allowed, other than as provided by this section and subject to limitations, for certain investments in energy storage technology or a facility that is used for generating electricity with an anticipated greenhouse gas admission rate of not greater than zero.) Under this section, the clean electricity production tax credit is not allowed for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities). This section also sets the clean electricity production tax credit percentage to 30% (which may not be increased) for qualified fuel cell property for which construction begins after 2025. (As background, the clean electricity production tax credit is 6%, but may be increased to 30% if certain requirements are met, and further increased for property that is placed into service in certain locations, that meets certain construction requirements, or for which an allocation is received from the Clean Electricity Low-Income Communities Bonus Credit Amount Program.)

This section terminates the advanced manufacturing production credit for wind energy components produced and sold after 2027, and for metallurgical coal (i.e., coking coal or coal used to manufacture steel) produced after 2029. This section also phases out the advanced manufacturing production tax credit for other critical minerals produced after 2030, as follows: 75% of the tax credit otherwise allowed for critical minerals produced in 2031, 50% of the tax credit otherwise allowed for critical minerals produced in 2032, 24% of the tax credit otherwise allowed for critical minerals produced in 2033, and 0% of the tax credit otherwise allowed for critical minerals produced in 2034. Under this section, the advanced manufacturing production tax credit is not allowed for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities).

This section provides that the Department of the Treasury may not reallocate amounts that are (1) allocated for the qualified advanced energy projects tax credit, and (2) subsequently revoked. (As background, the Treasury may allocate up to $10 billion [in the form of a tax credit] to taxpayers for approved investments in certain advanced energy projects, subject to certain conditions and limitations. An allocation of the tax credit may be revoked if the project is not completed on time or certain other requirements are not met.) Subchapter B--Enhancement of America-First Energy Policy This subchapter modifies multiple energy-related federal tax provisions and makes changes to the calculation of the corporate alternative minimum tax. Below is a summary of the key provisions in this subchapter.

This section extends the clean fuel production tax credit through 2029 and requires that clean fuels produced from feedstock use feedstock sourced from the Unites States, Canada, or Mexico; excludes emissions attributable to an indirect land use change from the calculation of lifecycle emissions estimates (used in part of the calculation of the clean fuel production tax credit); and requires the Department of the Treasury to provide distinct emission rates for specific feedstocks used to produce clean fuels, including dairy manure, swine manure, and poultry manure. This section also disallows the clean fuel production tax credit for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities).

This section increases the carbon oxide sequestration tax credit to $17 (from $12) per metric ton for qualified carbon dioxide used (1) as a tertiary injectant in a qualified oil or gas natural recovery project and then securely stored or (2) by fixing such carbon dioxide through photosynthesis or chemosynthesis, chemical conversion, or for some other commercial market purpose. (As a result, the same carbon oxide sequestration tax credit applies to carbon oxide captured and sequestered and carbon dioxide captured, used, and then sequestered.) This section also disallows the carbon oxide sequestration tax credit for certain foreign entities and foreign-influenced entities (e.g., taxpayers that make certain types of payments to certain foreign entities).

This section allows corporations to reduce their adjusted financial statement income (for purposes of calculating the corporate alternative minimum tax) to account for certain intangible costs related to oil, gas, or geothermal well drilling and development.

This section expands the definition of qualifying income for publicly traded partnerships under section 7704(d) of the Internal Revenue Code. As background, such partnerships are treated as corporations for federal tax purposes unless at least 90 percent of gross income consists of qualifying income (e.g., from specified natural resource activities). The provision adds income and gains derived from (1) the transportation or storage of fuels described in section 6426(b), (c), (d), (e), or (k), alcohol fuel, biodiesel, sustainable aviation fuel, or liquified or compressed hydrogen; (2) the generation, availability, or storage of electric power or the capture of carbon dioxide at a qualified facility (as defined in section 45Q(d)) where not less than 50 percent of total carbon oxide production is qualified carbon oxide (as defined in section 45Q(c)); (3) the production of electricity from an advanced nuclear facility (as defined in section 45J(d)(2)); (4) the production of electricity or thermal energy exclusively using hydropower or geothermal resources (as described in section 45(c)(1)(D) or (H)); or (5) the operation of energy property described in section 48(a)(3)(A)(iii) or (vii). The amendments apply to taxable years beginning after December 31, 2025.

This section provides for a refund of previously imposed and paid excise taxes upon the transfer of nontaxable, indelibly dyed diesel fuel or kerosene used for agricultural, off-road, or other nontaxable purposes. Subchapter C--Other Reforms This subchapter eliminates the de minimis exemption for certain imports into the United States and establishes a new civil penalty for using such exemption in a manner that violates U.S. customs laws. Below is a summary of the provision in this subchapter.

This section eliminates the exemption from certain duties, fees, and processes for imports of up to $800 (commonly referred to as the de minimis exemption), effective July 1, 2027. Further, this section establishes a civil penalty for entering, introducing, facilitating, or attempting to introduce an article into the United States using the de minimis exemption in a manner that violates U.S. customs laws. The amount of the civil penalty is up to $5,000 for the first violation and up to $10,000 for subsequent violations. Chapter 6--Enhancing Deduction and Income Tax Credit Guardrails, and Other Reforms This chapter modifies various federal tax deductions and credits. Below is a summary of the key provisions in this subchapter.

This section delays until FY2035 implementation of certain provisions of the rule titled Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment , which was issued by the Centers for Medicare & Medicaid Services (CMS) on September 21, 2023. Specifically, the section delays provisions of the rule that (1) specify that individuals who must pay a premium to enroll in Medicare hospital services, reside in a group payer state, and enroll during a general enrollment period may qualify for Medicare Savings Programs (MSPs) as early as the month of their entitlement to Medicare hospital services; (2) require states to use certain data from the Social Security Administration (SSA) to facilitate the enrollment of qualifying individuals in both MSPs and the Low-Income Subsidy (LIS) program under the Medicare prescription drug benefit; and (3) align the definition of family size under MSPs with the definition under the LIS program. (MSPs allow individuals to receive Medicare cost-sharing and premium assistance from state Medicaid programs if they meet certain income and resource criteria. The LIS program, also known as the Extra Help program, provides similar assistance with respect to cost-sharing for covered drugs under the Medicare prescription drug benefit.) The section provides $1 million for FY2026 for the CMS to implement this section and Sec. 71102 of this act.

This section delays until FY2035 implementation of certain provisions of the rule titled Medicaid Program; Streamlining the Medicaid, Children's Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes , which was issued by the CMS on April 2, 2024. Specifically, the section delays provisions of the rule that, among other changes, (1) allow state Medicaid programs to verify an individual’s U.S. citizenship and identity through certain systems without additional proof of identity; (2) align certain Medicaid enrollment processes for those whose eligibility is not based on income with those that are based on income; and (3) establish additional timelines for Medicaid eligibility terminations, including when there is a change in an individual’s circumstances.

This section requires the CMS to establish a centralized system for states to check whether enrollees are simultaneously enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) in multiple states. Beginning no later than 2027, states must regularly obtain the addresses of Medicaid and CHIP enrollees from specified authorized sources. Beginning no later than FY2030, states must report on at least a monthly basis the Social Security numbers of enrollees to the CMS' newly established system. The CMS must notify states on at least a monthly basis of individuals who are enrolled in multiple states so that states may take appropriate action. The section provides $10 million for FY2026 and $20 million for FY2029 for the CMS to establish and maintain the new system, respectively.

This section requires state Medicaid programs to check, beginning in 2028, the SSA's Death Master File on at least a quarterly basis to determine whether Medicaid enrollees are deceased.

This section provides statutory authority for the requirement that state Medicaid programs check, as part of the provider enrollment and reenrollment process, whether providers are deceased through the SSA's Death Master File. Beginning in 2028, the section requires states to continue to check this database on at least a quarterly basis after providers are enrolled.

This section includes Medicaid payments to individuals for whom there is insufficient information as to their eligibility as erroneous excess payments that may ultimately reduce a state’s federal matching funds. These changes apply beginning in FY2030.

This section requires state Medicaid programs to redetermine every six months, beginning with the first quarter after December 31, 2026, the eligibility of individuals who are enrolled in Medicaid as part of the Medicaid expansion population under the Patient Protection and Affordable Care Act. (That act allows states to extend Medicaid coverage to all adults under the age of 65 with incomes of up to 138% of the federal poverty level, including able-bodied adults without dependent children.) The section provides $75 million for FY2026 for the CMS to implement these provisions.

This section caps home equity limits for Medicaid nursing facility or other long-term care services beginning in 2028. Currently, in order to qualify for such services, an individual’s home equity may not exceed certain limits, as set by states in accordance with federal standards and adjusted annually for inflation. For 2025, home equity limits set by states must be between $730,000 and $1,097,000. The section caps the maximum home equity limit to $1 million, regardless of inflation. This limit does not apply to homes located on agricultural lots.

This section generally restricts, beginning in FY2027, federal payment for Medicaid and CHIP to services for individuals who are U.S. residents and are either U.S. citizens, lawful permanent residents, Cuban-Haitian entrants, or Compact of Free Association migrants lawfully residing in the United States. The restrictions do not apply to certain mandatory emergency services provided to individuals who are not lawfully residing in the United States or to optional services provided to certain lawfully residing children and pregnant women. Current law authorizes federal payment with respect to additional categories of individuals, including refugees; noncitizens granted parole for at least one year, asylum, or related relief; and Violence Against Women Act (VAWA) self-petitioners. The section excludes these individuals from eligibility. The section provides $15 million for FY2026 for the CMS to implement these provisions.

This section reduces the Medicaid federal matching rate for emergency services provided to individuals who are not lawfully residing in the United States but who would otherwise qualify for Medicaid as part of the Medicaid expansion population in states that have expanded Medicaid. Specifically, the section limits, beginning in FY2027, the Medicaid federal matching rate for emergency services provided to individuals who are not lawfully residing in the United States to the same matching rate as would otherwise apply for such services (rather than the enhanced federal matching rate for states that have expanded Medicaid). The section provides $1 million for FY2026 for the CMS to implement these provisions. Subchapter B--Preventing Wasteful Spending

This section delays until FY2035 implementation of certain provisions of the rule titled Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting , which was issued by the CMS on May 10, 2024. Specifically, the section delays provisions of the rule that, among other changes, (1) establish minimum staffing standards for nurses in Medicare and Medicaid long-term care facilities, including requiring a nurse to be onsite 24/7 and requiring a minimum of 3.48 total nurse staffing hours per resident per day; and (2) require state Medicaid programs to report on payments to direct care workers and support staff of nursing facilities and intermediate care facilities for individuals with intellectual disabilities.

This section shortens the window for retroactive Medicaid coverage. Specifically, the section specifies that, beginning with the first quarter after December 31, 2026, Medicaid coverage may begin retroactively (1) for individuals in the Medicaid expansion population, one month prior to the application filing date; and (2) for all other individuals, two months prior to the application filing date. Additionally, CHIP coverage may retroactively begin two months prior to the application filing date. (Currently, coverage may begin three months prior to the application filing date.) The section provides $10 million for FY2026 for the CMS to implement these provisions.

This section prohibits federal Medicaid payment for one year to nonprofit health care providers that serve predominantly low-income, medically underserved individuals (i.e., essential community providers) if the provider (1) primarily furnishes family planning services, reproductive health, and related care; (2) offers abortions in cases other than that of rape, incest, or life-threatening conditions for the woman; and (3) in FY2023, received federal and state Medicaid payments totaling more than $800,000. The section provides $1 million for FY2026 for the CMS to implement these provisions. Subchapter C--Stopping Abusive Financing Practices

This section requires states that had not chosen to expand Medicaid pursuant to the Patient Protection and Affordable Care Act prior to March 11, 2021, to do so by January 1, 2026, in order to receive the corresponding enhanced federal matching rate.

This section generally limits Medicaid provider taxes beginning in FY2027. Under current law, states may impose a provider tax of up to 6% of net patient service revenues to potentially receive additional federal matching funds. The section precludes states that have not expanded Medicaid from increasing the rate of a provider tax beyond that currently in effect in order to qualify for federal matching funds. For states that have expanded Medicaid, a provider tax may not exceed the current rate or a specified rate, whichever is lower; the maximum rate gradually decreases from FY2028-FY2032, with a maximum rate of 3.5% beginning in FY2032 (these limits do not apply to nursing and intermediate care facilities, which are instead limited to current rates). The section additionally precludes states from imposing a new provider tax if there is not already one in effect. The section provides $20 million for FY2026 for the CMS to implement these provisions.

This section provides $7 million per fiscal year for FY2026-FY2033 for the CMS to revise regulations so as to limit state-directed payments for inpatient hospital services, outpatient hospital services, nursing facility services, and qualified practitioner services at an academic medical center under Medicaid managed care contracts to the payment rate for services under Medicare, rather than the average commercial rate. For states that cover the Medicaid expansion population, payment is limited to 100% of the Medicare rate; for other states, payment is limited to 110% of the Medicare rate. Subchapter D--Increasing Personal Accountability

This section modifies the generally redistributive requirements for health care-related taxes under the Medicaid provider tax rules in section 1903(w) of the Social Security Act. It adds three conditions under which a tax within a permissible class is not considered generally redistributive: (1) imposing a lower tax rate on any taxpayer or tax rate group explicitly defined by its relatively lower volume or percentage of Medicaid taxable units; (2) imposing a higher tax rate based on Medicaid taxable units than on non-Medicaid taxable units; and (3) excluding or lowering the tax rate on a taxpayer or group through descriptions that achieve the same effect as (1) or (2), including indirect references to Medicaid payments or expenditures. The section defines Medicaid taxable unit (e.g., Medicaid bed days, revenue, or charges), non-Medicaid taxable unit (e.g., non-Medicaid bed days, revenue, or charges), and tax rate group. These amendments apply only to the 50 states and the District of Columbia and take effect upon enactment, subject to a transition period determined by the Secretary of Health and Human Services not to exceed three fiscal years.

This section requires budget neutrality for Medicaid demonstration projects under section 1115 of the Social Security Act beginning January 1, 2027. As background, section 1115 authorizes the Secretary to waive certain Medicaid State plan requirements for experimental, pilot, or demonstration projects that promote the objectives of title XIX. The Secretary may not approve an application for, or renewal or amendment of, such a project unless the Chief Actuary for the Centers for Medicare & Medicaid Services certifies that the project is not expected to increase Federal expenditures compared to the amount that would otherwise be expended in the absence of the project; expenditures for populations and services that a State could otherwise cover under its Medicaid State plan or other title XIX authority (including at a different site of service) are treated as expenditures in the absence of the project. If expenditures under a project during an approval period are less than they would have been without the project, the Secretary must specify a methodology for taking the difference into account in the subsequent approval period. This section also appropriates $5,000,000 for each of fiscal years 2026 and 2027 to the Administrator of the Centers for Medicare & Medicaid Services for implementation, to remain available until expended.

This section requires, beginning not later than the first quarter after December 31, 2026 (or earlier, at the option of the state), individuals who are eligible for Medicaid as part of the Medicaid expansion population to engage in community service, work, or other activities in order to qualify for Medicaid. Specifically, the section requires these individuals to, on a monthly basis, (1) work at least 80 hours, (2) complete at least 80 hours of community service, (3) participate in a work program for at least 80 hours, (4) be enrolled at least half-time in an educational program, or (5) engage in any combination thereof for a total of at least 80 hours. Individuals may also qualify if they have a monthly income (or, for seasonal workers, an average monthly income over six months) that is at least as much as the equivalent of minimum wage multiplied by 80 hours. Individuals who are applying for Medicaid must demonstrate compliance with these requirements for one to three months (as determined by the state) consecutively and immediately prior to filing an application; individuals who are already enrolled in Medicaid must demonstrate compliance for one month or more (as determined by the state), whether or not consecutive, during the period between the individual’s last eligibility determination and the next scheduled eligibility determination. States must verify an individual’s compliance upon a determination or redetermination of eligibility but may also choose to verify compliance more frequently. States may not waive the new requirements. However, states may choose to provide an exception for individuals experiencing short-term hardships (e.g., hospitalization). The section excludes certain individuals from these requirements, including those with serious medical conditions or with dependent children aged 13 or younger. Upon request, the CMS may exempt a state from fully implementing these requirements until December 31, 2028. States requesting an exemption must demonstrate good faith efforts to comply with the requirements and provide a detailed timeline for implementation. The section provides $200 million to states and $200 million to the CMS for FY2026 to implement these requirements.

This section requires, beginning in FY2029, states to institute cost-sharing requirements for individuals who are eligible for Medicaid as part of the Medicaid expansion population and whose family income exceeds the federal poverty line. Cost sharing may not exceed $35 for an item or service; total cost sharing for all individuals in a family may not exceed 5% of the family’s income. The requirements do not apply to (1) services for which cost sharing is already prohibited (e.g., emergency services); (2) primary care, mental health, or substance use disorder services; or (3) services provided by federally qualified health centers, certified community behavioral health clinics, or rural health clinics. States may allow providers to condition the provision of services upon the payment of any required cost sharing. The section provides $15 million for FY2026 for the CMS to implement these provisions. Subchapter E--Expanding Access to Care

This section authorizes additional home and community-based services (HCBS) waivers (also known as Section 1915(c) waivers) for state Medicaid programs beginning on July 1, 2028. States may seek waivers to provide HCBS to individuals without the need for certain determinations as to whether an individual requires hospital or institutional care (as is required for current waivers). States must establish other needs-based criteria for such services. The section provides $50 million for FY2026 for the CMS to implement these provisions. It also provides $100 million for FY2027 to support state HCBS programs. Chapter 2--Medicare Subchapter A--Strengthening Eligibility Requirements

This section generally restricts Medicare eligibility to U.S. citizens, lawful permanent residents, Cuban-Haitian entrants, and Compact of Free Association migrants lawfully residing in the United States. The SSA must identify Medicare enrollees who do not meet these requirements and terminate their enrollment within 18 months of this section’s enactment. Current law authorizes additional categories of individuals who are lawfully present in the United States to qualify for Medicare, including refugees; noncitizens granted parole for at least one year, asylum, or related relief; noncitizens with Temporary Protected Status; and noncitizens with deferred action, including Deferred Action for Childhood Arrivals (DACA) recipients. The section excludes these individuals from eligibility.

This section increases payments under the Medicare physician fee schedule for services furnished between January 1, 2026, and January 1, 2027. Subchapter B--Improving Services for Seniors

This section modifies certain provisions under the Medicare Drug Price Negotiation Program with respect to orphan drugs, including by excluding additional orphan drugs from qualifying for negotiation. The Medicare Drug Price Negotiation Program requires the CMS to negotiate the prices of certain prescription drugs under Medicare beginning in 2026. Among other requirements, drugs must have had market approval for at least 7 years (for drug products) or 11 years (for biologics) to qualify for negotiation. The program does not apply to orphan drugs that are approved to treat only one rare disease or condition. The section modifies these provisions so as to exclude any period in which a drug was an orphan drug from market approval calculations. It also excludes orphan drugs that are approved to treat more than one rare disease or condition from the program. The changes take effect in 2028. Chapter 3--Health Tax Subchapter A-- Improving Eligibility Criteria This subchapter modifies eligibility and verification requirements for the premium tax credit (which may be used to purchase health insurance on an exchange). Below is a summary of the provisions in this subchapter.

This section limits a lawfully-present alien’s eligibility for the premium tax credit to an alien who is lawfully admitted for permanent residence; an alien who has been granted the status of Cuban and Haitian entrant; or an individual who is lawfully residing in the United States in accordance with the Compacts of Free Association between the United States and Micronesia, the Marshall Islands, and Palau.

This section repeals the rule that allows certain lawfully-present aliens who have a household income of less than 100% of the federal poverty level and are ineligible for Medicaid (based on the individual’s alien status) to claim the premium tax credit. Subchapter B--Preventing Waste, Fraud, and Abuse This subchapter requires verification of certain information supplied by individuals for purposes of determining eligibility for the premium tax credit, limits use of the premium tax credit, and expands recapture of excess advance payments of the premium tax credit. Below is a summary of the provisions of this subchapter.

This section requires the verification, beginning in 2028, of certain information for an individual to enroll in a health insurance plan through a health insurance exchange and to generally qualify for the premium tax credit. (Under current law, eligible individuals are allowed a premium tax credit, which applies toward the cost of obtaining health insurance through health insurance exchanges.) Specifically, under this section, a health insurance exchange must verify, using applicable enrollment information provided (or verified) by an individual, the following information: household income and family size, whether the individual is an eligible alien, any health coverage status or eligibility for coverage, place of residence, and any other information required by the Department of the Treasury. The verification requirements may be waived for individuals who enroll in a health insurance plan through a health insurance exchange during a special enrollment period due to a change in family size.

This section provides that the premium tax credit is not allowed for any health insurance plan enrolled in through a health insurance exchange during a special enrollment period provided by such exchange (1) on the basis of the relationship between the individual’s expected household income to the federal poverty level, and (2) not in connection with with the occurrence of an event or change in circumstances specified by the Department of Health and Human Services for such purposes.

This section eliminates the limit on the recapture of excess advance payments of the premium tax credit and, accordingly, allows the full amount of any such excess payments to be recaptured. (Under current law, individuals with incomes below 400% of the federal poverty level may be required to pay back only a portion of any excess advance payment of the premium tax credit.) Subchapter C--Enhancing Choice for Patients This subchapter expands health savings account (HSA) eligibility requirements. As background, individuals may establish and contribute to an HSA if they are covered under a high-deductible health plan (HDHP) and not covered under a health plan that (1) is not an HDHP and (2) provides coverage for any benefits that is covered under the HDHP (subject to certain exceptions). Below is a summary of the provisions in this subchapter.

This section allows individuals to establish and make tax-deductible contributions to a health savings account (HSA) if covered by a health insurance plan that provides telehealth and other remote care services without requiring a deductible but otherwise meets the requirements of an HDHP.

This section expands eligibility to make tax-deductible HSA contributions to include individuals who have a bronze-level or catastrophic health insurance plan through a health insurance exchange. (A bronze-level health insurance plan provided through a health insurance exchange may or may not qualify as a HDHP, depending on the specific plan features. Catastrophic health plans provided through a health insurance exchange generally do not meet the requirements of a HDHP.)

This section expands eligibility to make tax-deductible HSA contributions to include individuals who have a direct primary care service arrangement with a fixed period fee that does not exceed $150 a month (or $300 a month if the arrangement covers more than one individual). The amounts are adjusted annually for inflation. (Some limitations apply.) Chapter 4--Protecting Rural Hospitals and Providers