Bill Analysis: The Big, Beautiful Bill Act Advances to Senate

President Donald Trump’s ‘Big Beautiful Bill’ narrowly cleared the House of Representatives on Thursday morning, advancing a major legislative package designed to prevent a year-end tax increase and adjust several critical government programs. The bill’s passage meets Speaker Johnson’s goal of successful action by the House before Memorial Day. Among its key provisions is a $4 trillion increase in the U.S. debt ceiling, which the Treasury Department warns is critical to avoid a potential default as early as August or September, an added pressure to the legislative timeline.

The measure passed the House by a razor-thin 215–214 margin, with one member abstaining (Rep. Andy Harris (R-MD-01), Chair of the House Freedom Caucus), prompting applause from Republicans in the chamber. The Big Beautiful Bill Act (H.R. 1) now heads to the Senate, where several Republican factions are already demanding major revisions. Of course, adjustments to the bill will necessitate the legislation passing the House of Representatives once more. Lawmakers aim to approve the legislation by August.

This legislative package is being carried via the ‘budget reconciliation’ process, a fast-track budgetary mechanism that enables policy changes related to spending, revenues, and federal debt limits to be enacted into law. This process requires only 51 votes in the Senate, or 50 votes with the vice president’s tie-breaking vote, allowing it to bypass the threat of a filibuster. You can read more about the budget reconciliation process here.

Click here for a PDF download of the bill analysis

Section-by-Section Summary

Each of the 11 authorizing committees contributed legislative language to the reconciliation bill. While using your computer’s search function is helpful, key issues are located in specific Titles: SNAP in Title I (Agriculture Committee), Tax Reform in Title XI (Ways & Means Committee), and Medicaid Reform in Title IV (Energy & Commerce Committee).

Notably, the Ways & Means section at the end of this alert – which provides details on proposed tax reform provisions – is the most detailed and extensive.

Also noteworthy, while www.congress.gov often has the latest versions of legislation, last-minute negotiations with House Republican holdouts necessitated a ‘Managers Amendment,’ which made some changes to the legislation not currently reflected on www.Congress.gov at the time of publication. You can view the Managers Amendment here.

Title I - Agriculture (Link to bill section)

The bill makes substantial changes to the Supplemental Nutrition Assistance Program (SNAP), tightening work requirements and eligibility. It raises the age range subject to general work requirements to 18–64 (previously 16–59) and narrows exemptions, such as limiting caregiver exceptions to those responsible for children under seven. States face stricter limits on their ability to waive work requirements during periods of high unemployment, and hardship exemptions are reduced. The bill also shifts more administrative cost burden to states, increasing their share from 50% to 75%. Beginning in 2028, states will be required to contribute to the actual benefits disbursed, with cost-sharing levels tied to their payment error rates. Additionally, future SNAP benefit adjustments are restricted to align with inflation, blocking USDA from making discretionary upward adjustments to the Thrifty Food Plan. The bill eliminates funding for nutrition education efforts like the National Education and Obesity Prevention Grant Program and explicitly bars the use of SNAP benefits for internet services and similar expenses. It also tightens immigration-related eligibility, excluding non-citizen categories that previously qualified for assistance.

Beyond nutrition, the bill reauthorizes the Specialty Crop Block Grant Program, maintaining federal support for fruit, vegetable, and horticultural producers. It preserves funding for pest and disease management programs, organic certification cost-share initiatives, and efforts to strengthen local and regional food systems.

In conservation, the legislation extends the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP), both of which support producers implementing practices to improve soil health, water quality, and wildlife habitat. The reforms reflect an emphasis on promoting climate-smart agriculture and natural resource stewardship.

The bill continues support for the Rural Energy for America Program (REAP), advancing energy efficiency and renewable energy projects for farms and rural businesses. It reinforces USDA’s authority to back clean energy infrastructure that reduces operational costs and emissions in the agricultural sector.

In the area of agricultural research, the legislation sustains funding for the Agriculture and Food Research Initiative (AFRI) and other priority research programs. It promotes innovation in sustainable farming techniques, climate resilience, and productivity-enhancing technologies across crops and livestock.

Lastly, Title I reauthorizes key agricultural trade programs, including the Market Access Program (MAP) and the Foreign Market Development Program (FMDP). These initiatives aim to expand international markets for U.S. agricultural products by funding promotion efforts and strengthening partnerships abroad.

Title II – Armed Services (Link to Section in Legislation)

Key provisions include investments in the Marine Corps Barracks 2030 initiative, the Defense Health Program, supplemental Basic Allowance for Housing payments, and expanded tuition and child care assistance for service members. The bill extends Temporary Lodging Expense eligibility from 14 to 21 days for certain service members undergoing permanent change of station. It also increases authorized investments in military housing through private contracts.

Further allocations support shipbuilding, development of space-based missile intercept capabilities, military space-based sensors, and ground-based missile defense systems. Funding is provided for various military weapon systems, including hypersonic, air-to-air, cruise, and anti-ship missiles. The bill emphasizes the expansion of the small unmanned aerial system industrial base and the integration of artificial intelligence in military technology. It also supports the replacement of business systems and deployment of automation to accelerate DOD financial audits.

Additional resources are dedicated to modernizing fighter and transport aircraft, preventing the retirement of certain aircraft like the F-22, and producing next-generation manned and unmanned aircraft. The bill enhances nuclear defense resources, military exercises in the Indo-Pacific region, and support to Taiwan. It also funds the modernization of military depots and shipyards, Special Operations Command equipment, border operations, and military intelligence programs. Oversight is strengthened through funding for the DOD Office of Inspector General and requirements for detailed spending plans and expenditure reports to Congress. A provision prohibits agreements requiring payment of funds provided under this title after September 30, 2034.

Title III – Education & Workforce (Link to Section in Legislation)

Subtitle A expands federal student aid eligibility to include certain nationals from Cuba, Ukraine, and Afghanistan, as well as individuals lawfully residing in the U.S. under Compacts of Free Association with Pacific nations. It also revises the calculation of need-based aid by basing it on the median cost of attendance across all institutions offering a specific program, rather than the cost at a student's chosen institution. Additionally, it restores exemptions for family farms and small businesses on the FAFSA form.

Subtitle B addresses federal student loan limits, while Subtitle C focuses on loan repayment, deferment, forbearance, rehabilitation, public service loan forgiveness, and student loan servicing. Subtitle D introduces "Workforce Pell Grants" starting July 1, 2026, to support students in workforce-oriented programs, and addresses potential funding shortfalls in the Pell Grant program. Subtitle E enhances institutional accountability by requiring agreements with institutions and revising campus-based aid programs. Subtitle F provides regulatory relief, and Subtitle G limits the Secretary of Education's authority to propose or issue new regulations and executive actions. These comprehensive changes aim to improve access to education, streamline financial aid processes, and ensure institutional responsibility.

Title IV – Energy & Commerce (Link to Section in Legislation)

A key component is the rescission of unobligated funds allocated by the Inflation Reduction Act (IRA). Section 41001 specifically targets these funds, effectively rolling back financial commitments made under the IRA. Funding is rescinded for several key programs, including the Advanced Technology Vehicle Manufacturing program, transmission facility financing initiatives, wind energy planning, energy infrastructure loans, and others.

In terms of energy permitting, the bill introduces measures to expedite the approval process for energy infrastructure projects. Sections 41002 and 41005 address the Federal Energy Regulatory Commission's (FERC) role in certifying and setting fees for energy infrastructure at international boundaries, as well as implementing expedited permitting procedures. These changes are designed to streamline the development of energy projects, reduce bureaucratic delays, and promote energy independence.

Regarding healthcare, the bill includes significant reforms to the Medicaid program, focusing on reducing federal expenditures and modifying eligibility and coverage parameters.

A central provision is the acceleration of Medicaid work requirements. Originally set to commence in January 2029, these requirements are now slated to begin by December 2026. Under this mandate, many Medicaid recipients must engage in at least 80 hours monthly of work, education, or volunteer activities, with certain exemptions. This change is projected to increase federal savings beyond the previously estimated $280 billion over a decade.

The bill also introduces financial disincentives for states to expand Medicaid under the ACA. States that choose not to expand their programs may receive higher payments to providers for uncompensated care, thereby discouraging expansion efforts.

Additionally, the legislation imposes stricter penalties on states that provide Medicaid coverage to undocumented individuals. It also extends the prohibition of Medicaid coverage for gender-affirming care to adults, expanding upon previous restrictions that targeted minors.

Another notable provision is the moratorium on implementing a 2023 Centers for Medicare & Medicaid Services (CMS) rule aimed at streamlining eligibility and enrollment in Medicare Savings Programs. This moratorium is set to remain in effect until January 1, 2035, effectively halting efforts to simplify enrollment processes for low-income individuals.

Title V – Financial Services (Link to Section in Legislation)

Title V of the bill includes several reforms targeting federal financial regulatory bodies and funding structures. It rescinds unused funds from HUD’s Green and Resilient Retrofit Program, curtails the independence of the Public Company Accounting Oversight Board by transferring its functions to the SEC, and reduces funding for the Consumer Financial Protection Bureau while placing its budget under congressional control. It also redirects surplus money in the CFPB’s Civil Penalty Fund to the U.S. Treasury rather than consumer education efforts. Lastly, it caps the Office of Financial Research’s funding authority, potentially limiting its research capabilities.

Title VI – Homeland Security (Link to Section in Legislation)

Title VI of the bill aims to bolster U.S. border security by investing in infrastructure, personnel, and technology. It authorizes the construction of border barriers, upgrades to security facilities, and efforts to manage invasive species. The bill also funds the hiring and deployment of additional Customs and Border Protection agents and the acquisition of support vehicles. Furthermore, it supports the development of advanced security technologies and enhancements to the National Vetting Center. Together, these measures seek to strengthen border infrastructure, expand operational capacity, and improve the efficiency of border security operations.

Title VII – Judiciary (Link to Section in Legislation)

Title VII focuses on reforms within the federal judiciary to enhance transparency, accountability, and ethical standards. It mandates the Supreme Court to adopt a formal code of conduct, aligning it with ethical expectations already in place for lower federal courts. This measure aims to address longstanding concerns about the absence of binding ethical guidelines for the nation's highest court.

The legislation also seeks to improve public access to federal court proceedings by requiring the Supreme Court and federal appellate courts to provide live audio streams of their sessions. This initiative is designed to foster greater transparency and public trust in the judicial process.

To address potential conflicts of interest, Title VII introduces stricter financial disclosure requirements for federal judges. Judges are now obligated to report any significant financial transactions and holdings, thereby promoting impartiality and accountability.

Furthermore, the bill enhances the process for investigating judicial misconduct. It establishes clearer procedures for filing and handling complaints against judges, ensuring that allegations are addressed promptly and fairly.

Title VIII – Natural Resources (Link to Section in Legislation)

Title VIII focuses on reforms to federal energy and mineral resource policies under the jurisdiction of the House Committee on Natural Resources. It is structured into several sections, most notably: Oil and Gas, Geothermal, Alaska, Coal, NEPA, Misc., and Renewables.

The oil and gas section mandates the Department of the Interior to immediately resume quarterly onshore oil and gas lease sales, as per the Mineral Leasing Act. It modifies noncompetitive leasing procedures by requiring lands that receive no bids or bids below the national minimum during a lease sale to be offered within 30 days for noncompetitive leasing. The bill introduces a permit-by-rule process, allowing leaseholders to obtain drilling approvals on federal land by paying a $5,000 fee and complying with established regulations. Additionally, it permits the commingling of production from multiple sources before royalty measurement, provided a $10,000 fee is paid and other conditions are met. The Department is also prohibited from requiring a drilling permit under certain conditions if a $5,000 fee is paid. Furthermore, the bill decreases the minimum royalty rates for onshore and offshore oil and gas development on federal lands.

The geothermal section directs the Department of the Interior to hold annual geothermal lease sales and conduct replacement sales for any that are canceled or delayed. It also modifies royalty provisions under the Geothermal Steam Act of 1970, stipulating that geothermal facilities on the same lease are treated as separate entities concerning royalty payments.

The Alaska section is specifically focused on the Arctic National Wildlife Refuge (ANWR). It modifies provisions related to oil and gas production in the region, including the reissuance of certain leases for energy development.

The coal section advances federal coal development by requiring new lease sales, repealing a moratorium on future leasing, and reducing royalty rates. These changes are designed to accelerate coal leasing, eliminate regulatory delays, and lower operational costs to boost domestic coal production.

The NEPA section aims to expedite environmental reviews under the National Environmental Policy Act. Another section rescinds funding related to environmental and climate data collection.

A miscellaneous section authorizes the collection of protest fees from individuals or entities challenging federal land use decisions, potentially discouraging frivolous objections and offsetting administrative costs.

On the renewables side, the bill eliminates certain rental and fee requirements for renewable energy projects on federal lands, reducing financial barriers for solar and wind developers. Another section establishes a new revenue-sharing structure, directing a portion of income from renewable energy projects to states and counties where the projects are located.

Title IX – Oversight & Reform (Link to Section in Legislation)

Key provisions include increasing employee contributions to the Federal Employees Retirement System (FERS), eliminating the FERS annuity supplement, and modifying pension calculations by adopting a "high-5" average salary method instead of the current "high-3." Additionally, the bill offers new federal hires the option of at-will employment in exchange for lower FERS contributions.

To deter frivolous claims, it imposes a filing fee for appeals to the Merit Systems Protection Board. The legislation also emphasizes the protection of the Federal Employees Health Benefits (FEHB) program. Collectively, these measures aim to streamline federal employment benefits, promote fiscal responsibility, and strengthen oversight of government operations.

Title X – Transportation & Infrastructure (Link to Section in Legislation)

Title X focuses on enhancing the United States' transportation and infrastructure systems. It begins by allocating funds to the U.S. Coast Guard for fiscal year 2025, with availability through 2029, to support the acquisition and maintenance of various assets. These include fixed and rotary wing aircraft, long-range unmanned aircraft systems, Offshore Patrol Cutters, Fast Response Cutters, Polar Security Cutters, Arctic Security Cutters, domestic icebreakers, depot maintenance, and shoreside infrastructure. Additionally, it authorizes the activation of Selected Reserve members for up to 365 consecutive days for missions related to maritime border security and drug interdiction, with such service counting toward Post-9/11 GI Bill benefits.

The title also addresses maritime commerce by increasing vessel tonnage duties by 125% compared to current rates. In the realm of road transportation, it mandates annual federal registration fees for electric and hybrid vehicles – $250 and $100 respectively – adjusted annually for inflation, effective until October 1, 2035. The collected fees are to be transferred to the Highway Trust Fund. To facilitate this, the Federal Highway Administration (FHWA) is provided funding to assist states in implementing systems for fee collection.

For motor carrier safety, the Federal Motor Carrier Safety Administration (FMCSA) is tasked with establishing a public website displaying compliance data on motor carriers. An annual fee of $100 is imposed on individuals seeking access to this website. Brokers and freight forwarders using the site to verify carrier compliance are deemed to have exercised due diligence.

The title further rescinds unobligated balances from several programs funded by the Inflation Reduction Act of 2022, including the Alternative Fuel and Low-Emission Aviation Technology Program, Neighborhood Access and Equity Grant Program, and various green building initiatives.

In aviation, the Federal Aviation Administration (FAA) receives specified funds for FY2025, available through FY2029, to support projects such as replacing air traffic control towers and radar systems, upgrading telecommunications infrastructure, enhancing runway safety, and improving air traffic controller recruitment and training. The FAA is required to report to Congress every 90 days on these expenditures.

Lastly, the title allocates funds to the John F. Kennedy Center for the Performing Arts in Washington, D.C., for capital repairs, operations, maintenance, security, and administrative expenses

Title XI – Ways & Means (Link to Section in Legislation)

DEBT LIMIT

The measure would raise the statutory debt limit by $4 trillion, as directed by the budget resolution's reconciliation instructions to the House Ways and Means Committee. The Senate Finance Committee was authorized to consider an increase of up to $5 trillion.

The debt limit was reinstated on January 2 at $36.1 trillion following the expiration of a suspension enacted in June 2023. Since then, the Treasury Department has been employing extraordinary measures to keep the government under the ceiling and avoid default.

On May 9, Treasury Secretary Scott Bessent warned Congress that the U.S. could default as early as August without legislative action and urged lawmakers to raise or suspend the limit by mid-July.

2017 TAX LAW PERMANENCE

The measure would permanently extend several provisions from the 2017 Tax Cuts and Jobs Act (2017 tax law), many of which are set to expire on December 31. Without congressional action, those provisions would revert to pre-2017 levels.

Marginal Tax Rates: Beginning in 2026, the bill would make permanent the lower individual income tax rates established under the 2017 law. It would also apply an additional year of inflation adjustment to the income thresholds for all brackets – except the top 37% bracket – effectively expanding the income ranges subject to lower rates.

This expansion of modified rates under current law is the most expensive change of the GOP reconciliation measure, according to the Joint Committee on Taxation, and would increase the federal deficit by $2.2 trillion from fiscal 2025 through 2034.

Standard Deduction: The measure would permanently extend the enhanced standard deduction established under the 2017 tax law, which is adjusted annually for inflation and allows taxpayers who do not itemize to reduce their taxable income. It would also add one additional year of inflation-based adjustment to the deduction’s value.

In addition, the measure would temporarily boost the standard deduction from 2025 through 2028 by $1,000 for individual filers and $2,000 for joint filers. The original 2017 law nearly doubled the deduction starting in tax year 2018; for instance, raising the individual deduction from $6,500 to $12,000.

According to the Joint Committee on Taxation (JCT), these provisions would increase the federal deficit by an estimated $1.3 trillion over ten years.

Pass-Through Business Income: Pass-through business income (income earned by partnerships, LLCs, S corporations, and self-employed individuals) is taxed at the individual level rather than the corporate level. The 2017 tax law created a 20% deduction for qualified business income (QBI) from these entities.

The measure would permanently extend and increase the QBI deduction to 23%, starting in tax year 2026. It would also expand eligibility to include income from business development companies (investment entities that support small or financially struggling firms).

According to the JCT, this measure would increase the federal deficit by approximately $819.7 billion over the next decade.

State and Local Tax Deduction: The measure would permanently extend the cap on the state and local tax (SALT) deduction originally set by the 2017 tax law, while modifying its structure. Under current law, most filers are limited to a $10,000 SALT deduction through 2026.

Beginning in tax year 2025, the cap would increase to $40,000 for households earning under $500,000. In 2026, that threshold would rise to $40,400 for households earning under $505,000, with both the cap and income threshold increasing by 1% annually through 2033, after which they would be fixed at those levels. For households exceeding the income threshold, the deduction would gradually phase down by 30% until it returns to the $10,000 cap.

The measure would also clarify which taxes are subject to the SALT cap and revise the accounting rules for pass-through entities such as partnerships and S corporations. Specifically, it would limit the ability of these businesses to circumvent the cap by paying state taxes at the entity level instead of the individual level, a method that critics have labeled as a loophole.

Personal Exemptions: The measure would permanently terminate the personal exemption that filers could claim for spouses or dependents to lower their taxable income, which the 2017 law had suspended through 2025. Prior to the changes, taxpayers could deduct $4,050 for each personal exemption.

Reducing the personal exemption to zero will decrease the deficit by about $1.9 trillion, according to JCT.

Child Tax Credit: The child tax credit allows eligible households to reduce their federal income tax liability by a certain amount for each qualifying child.

The measure would increase the maximum amount of the child tax credit (which the 2017 law doubled to $2,000) by an additional $500 for tax years 2025 through 2028. It would permanently revert to $2,000 afterward and adjusted annually for inflation.

Lower-income filers can receive some or all of the child tax credit as a refund if the amount exceeds their tax liability.

JCT estimates that extending and temporarily enhancing the child tax credit will increase the deficit by nearly $800 billion.

Alternative Minimum Tax: The measure would permanently extend key changes to the Alternative Minimum Tax (AMT) made by the 2017 tax law. Specifically, it would retain the higher AMT exemption amounts and the increased income thresholds at which those exemptions begin to phase out, both of which significantly reduced AMT exposure for many taxpayers.

JCT estimates that making these provisions permanent would increase the federal deficit by $1.4 trillion over 10 years.

Foreign Income: The measure would make permanent reductions to two key international tax deductions created by the 2017 tax law: the deduction for foreign-derived intangible income (FDII) would drop to 36.5% (from 37.5%), and the deduction for global intangible low-taxed income (GILTI) would fall to 49.2% (from 50%).

The measure permanently raises the base erosion and anti-abuse tax (BEAT) rate which is designed to prevent multinational corporations from shifting profits overseas from 10% to 10.1%.

Estate & Gift Tax: The exemption for the estate and gift tax would be permanently extended and increased to $15 million, from $10 million, starting in the 2026 tax year. The exemption would be indexed to inflation.

Paid Leave: The measure would make permanent the paid family and medical leave tax credit established by the 2017 tax law. Employers can claim a nonrefundable credit of 12.5% to 25% of wages paid to employees on qualifying paid leave.

It would also expand the credit’s flexibility by allowing employers to use it for premiums on insurance policies that provide paid leave. Additionally, eligibility would be broadened to include employees with at least six months of service, down from the current one-year requirement.

Other Permanent Extensions: The measure would make several additional provisions from the 2017 tax law permanent. These include maintaining the restriction on noncorporate taxpayers from deducting “excess business losses,” and preserving the reduced cap on the mortgage interest deduction at $750,000 of home mortgage debt, down from the previous $1 million limit. It would also continue allowing itemized deductions for disaster-related personal casualty losses.

For individuals with disabilities, the measure would make permanent the ability to make additional contributions to Achieving a Better Life Experience (ABLE) accounts, provide a $1,000 tax credit for such contributions, and permit tax-free rollovers from 529 education savings plans into ABLE accounts. Additionally, it would continue excluding from taxable income any student loan debt discharged due to death or disability, and would preserve the ability to deduct gambling losses up to the amount of reported gambling winnings.

NEW TAX DEDUCTIONS

Tip Deduction: The measure would create a deduction for qualified tips for tax years 2025 through 2028.

Employees with earned income that exceeds the threshold for “highly compensated employees” ($160,000 in 2025) would not be eligible for the deduction.

Overtime Deduction: Overtime pay is currently generally included in a taxpayer’s gross income and is subject to federal income and payroll taxes. This proposal establishes a deduction for overtime compensation for tax years 2025 through 2028. It is structured similarly to the tipped deduction, but overtime pay would exclude qualified tips.

JCT estimates this provision will increase the deficit by $124 billion.

Enhanced Deductions for Seniors: For tax years 2025 through 2028, taxpayers aged 65 and older are eligible for an additional $4,000 deduction from their taxable income. The deduction would begin to phase out at a rate of 4% for individuals earning over $75,000 and joint filers earning over $150,000.

Notably, this provision is viewed as a workaround to fulfill former President Trump’s campaign pledge to eliminate taxes on Social Security benefits, avoiding potential violations of budget reconciliation rules that prohibit direct changes to Social Security policy.

The JCT estimates the provision would add $71.6 billion to the federal deficit over 10 years.

Auto Loan Interest Deduction: The measure establishes a temporary deduction of up to $10,000 for interest paid on auto loans for tax years 2025 through 2028. To qualify, the vehicle’s final assembly must be in the United States.

The deduction would not apply to loans used for fleet purchases, commercial vehicles for non-personal use, or lease financing arrangements. Additionally, the deduction would phase down for taxpayers with a modified adjusted gross income exceeding $100,000 for individual filers or $200,000 for joint filers.

BUSINESS PROVISIONS

Depreciation Deductions: Prior to the 2017 tax law, businesses could immediately deduct certain costs of qualifying depreciable property. That law modified the 100% bonus depreciation provision, phasing it down until its scheduled expiration after 2026.

This measure would restore 100% bonus depreciation for qualifying property placed in service between 2025 and 2029.

Additionally, it would allow taxpayers to immediately deduct 100% of the cost of qualified production property placed in service before 2033, provided it is integral to a production activity such as manufacturing or refining. The deduction would not apply to office or administrative spaces, research facilities, lodging, or parking lots.

Beginning in tax year 2025, the measure would also increase the maximum allowable deduction for certain depreciable business assets to $2.5 million, up from $1 million, with the deduction phasing out for total qualifying property costs exceeding $4 million.

Publicly-Traded Partnerships Expansion: Amends Section 7704 of the Internal Revenue Code of 1986 to expand the definition of "qualifying income" to include income derived from the storage of liquefied or compressed hydrogen, as well as from the generation of electricity or the capture of carbon dioxide at a direct air capture or carbon capture facility. This would be effective beginning January 1, 2026.

Deduction for Qualified Business Income: Section 110005 permanently extends and enhances the Qualified Business Income (QBI) deduction under Section 199A, increasing the deduction rate from 20% to 23% and removing the sunset provision. It modifies income-based limitations by exempting lower-income taxpayers from restrictions and phasing in limitations more gradually for higher-income earners. The provision also expands eligibility to include qualified Business Development Company (BDC) interest dividends and updates the inflation adjustment base year to 2025. These changes apply to tax years beginning after December 31, 2025.

Calculation of Adjusted Taxable Income for Deductions: Reinstates the EBITDA-based calculation for the business interest deduction under Section 163(j), allowing businesses to calculate adjusted taxable income without deductions for depreciation, amortization, or depletion for tax years beginning after December 31, 2024, and before January 1, 2030. It also expands eligibility for floor plan financing interest to include trailers and campers designed as temporary living quarters for recreational or seasonal use. The changes apply to taxable years beginning after December 31, 2024, with authority granted to the Treasury to issue special rules for short taxable years that begin in 2025 and end before the law’s enactment.

Research & Development: The research and development (R&D) tax credit allows businesses to deduct qualifying research expenses. Under the 2017 tax law, starting in tax year 2022, businesses were required to amortize domestic R&D expenses over five years (and foreign R&D expenses over 15 years) rather than deducting them in the year incurred. This measure reverses that course for tax years 2025 through 2029, allowing businesses to immediately deduct domestic R&D expenses in the year they are paid or incurred. The treatment of foreign R&D expenses would remain unchanged. The provision would also permit deductions for software development costs but would exclude deductions for property acquisitions and oil and gas exploration activities.

Business Interest Expenses: Prior to the 2017 law, businesses were allowed to deduct the full amount of interest paid or accrued on valid debt in a tax year. The law limited the deduction to 30% of a taxpayer’s “adjusted taxable income,” (ATI) with some exceptions.

The measure would allow businesses to calculate their ATI without including deductions for depreciation and amortization for tax years 2025 through 2029.

Opportunity Zones: The measure would revise and expand the Opportunity Zone program, which was established by the 2017 tax law to provide capital gains tax incentives for investments in economically distressed communities. Under current law, the program allows for temporary deferral of capital gains and related basis adjustments through 2026.

The proposal would establish a new round of Opportunity Zones with benefits available from 2027 through 2033. To qualify, states would be required to ensure that:

• At least 33% of designated new zones are located entirely in rural areas;

• Zones are Census tracts with a poverty rate of at least 20%, or a median family income no greater than 70% of the area median – tightened from the current 80% threshold;

• Zones do not include Census tracts where the median family income is at least 125% of the metropolitan or statewide median;

• Zones are not contiguous with one another.

Currently, investments held in Opportunity Zones for at least five years are eligible for a 10% increase in basis, reducing taxable gains upon sale. The proposal would increase this step-up in basis to 30% for investments in rural Opportunity Zones. It would also ease the “substantial improvement” requirements for rural properties, lowering the threshold investors must meet to qualify for tax benefits.

Name & Logo Royalties: This provision amends current law to treat income from the sale or licensing of a nonprofit organization’s name or logo as unrelated business taxable income (UBTI). Historically, this income is generally exempt as royalty income. This provision narrows the royalty exemption and will require nonprofits – particularly those with branding-based sponsorships or affinity partnerships – to report this income as taxable. This increases both tax liability and compliance burdens for affected organizations. This adjustment was previously considered during the drafting of the 2017 tax law but was ultimately excluded.

Deductions Related to Publicly Available Research: This provision modifies current tax law by requiring nonprofit organizations whose exempt purpose is to conduct publicly available research to include income from non-public research in their UBTI. Previously, all research income – even from private or restricted projects – was exempt if the organization’s mission was public research. This change narrows that exemption to apply only to research income from work that is freely available to the public.

Nonprofits that conduct both public and private research may now face UBTI on the latter, encouraging a shift toward full public dissemination to preserve tax-exempt treatment.

Contractor Payments Reporting: The measure would raise the reporting threshold for payments to independent contractors on Forms 1099-NEC and 1099-MISC from $600 to $2,000, with the threshold indexed for inflation beginning in 2027.

Corporate Charitable Donations: Corporate taxpayers could deduct charitable contributions between 1% to 10% of taxable income. The measure allows contributions beyond the cap to be carried forward for as long as five tax years.

Employer-Provided Child Care Credit: The measure permanently increases the maximum nonrefundable tax credit businesses can claim for providing child care services to employees to $500,000, up from $150,000, and raise the share of eligible expenses that can be claimed to 40%, from 25%.

Small businesses could claim up to 50% of qualifying expenses, with a higher credit cap of $600,000. To receive the full credit, businesses must spend at least $1.25 million.

Payments to third-party child care providers would qualify as eligible expenses.

Low-Income Housing Credit : The measure would restore the 12.5% increase to the 9% Low-Income Housing Tax Credit (LIHTC) ceiling on annual state allocations for tax years 2026 through 2029.

The measure also reduces the bond financing threshold for the 4% LIHTC from 50% to 25% for projects funded by bonds issued before 2030, making it easier for developers to qualify for the credit and expand affordable housing production.

INTERNATIONAL PROVISIONS

Foreign Taxes: The measure would impose higher taxes on certain foreign income earned by individuals, corporations, or governments from countries the Treasury Department designates as having “discriminatory” tax policies, including digital services taxes or undertaxed profits rules. Treasury would publish a quarterly list of such countries.

The tax hikes would take effect based on the later of three dates: 90 days after enactment, 180 days after the foreign tax is enacted, or when the foreign tax takes effect. Tax rates would rise by 5 to 20 percentage points annually until the foreign tax is repealed. A temporary safe harbor would protect taxpayers making good-faith compliance efforts through 2026.

‘De Minimis’ Exemption: The measure would repeal the de minimis privilege, which allows commercial merchandise entering the US valued under $800 to be exempt from tariffs. Trump repealed the policy for merchandise from China and Hong Kong by executive order in April.

The measure would end the exemption worldwide effective July 1, 2027, and impose penalties for violations.

CLEAN ENERGY CREDITS

Clean Fuel Credit Extension: The measure extends the clean fuel production credit for four years, moving its expiration from the end of 2027 to 2031. The credit, which supports low-emission fuels made from renewable sources like soybeans and corn, would be limited to fuels derived from feedstocks produced in the U.S., Mexico, or Canada. It would also repeal the credit's transferability, eliminating the ability for entities to sell the credit to third parties.

JCT estimates the extension will increase the federal deficit by $45.4 billion through fiscal year 2034.

EV Tax Credit Termination: The measure would accelerate the phaseout of federal tax credits for electric and hybrid vehicles, eliminating the current $7,500 credit for most new vehicles beginning in 2026. In 2026, the credit would only be available to manufacturers that have sold fewer than 200,000 clean vehicles as of December 31, 2025, and it will be fully eliminated by 2027.

The proposal would also repeal the $4,000 credit for certain pre-owned electric and hybrid passenger vehicles, as well as credits for electric and hybrid commercial vehicles, starting in 2026.

JCT estimates these changes will reduce the federal deficit by more than $190 billion through fiscal year 2034.

Other Repealed Tax Credits: The measure would eliminate several other clean energy-related tax credits beginning in 2026. Among the credits slated for repeal are the Alternative Fuel Vehicle Refueling Property Tax Credit, which supports EV charging infrastructure; the Clean Hydrogen Production Credit, which benefits hydrogen produced using nuclear energy or natural gas with carbon capture; and the Energy Efficient Home Improvement Credit, which subsidizes upgrades like heat pumps and energy-efficient windows. It would also repeal the residential Clean Energy Credit for Home Solar And Similar Installations, and the new Energy Efficient Home Credit for newly constructed homes that meet Energy Star standards. Homes that began construction before May 12 could still qualify for the latter if sold by the end of 2026.

While most of these credits are currently scheduled to expire in 2033, the residential clean energy credit is set to expire in 2035. Its early repeal would generate the most revenue ($77.4 billion) among the credits listed.

Ending Phased-Out Credits: The measure would accelerate the phaseout or repeal of several other clean energy tax credits. It would end eligibility for the clean electricity production and investment credits for facilities that begin construction more than 60 days after enactment or are placed in service after December 31, 2028, with an exception allowing advanced nuclear facilities to begin construction through the end of 2028. Currently, these credits are set to phase out starting in 2032 or once U.S. electricity-related greenhouse gas emissions fall to 25% of 2022 levels, whichever comes later. The measure would also prohibit these credits from being used for certain wind and solar leasing arrangements.

Additionally, the zero-emission nuclear power production credit for non-advanced nuclear facilities would expire one year earlier, at the end of 2031. The Advanced Manufacturing Production Credit would be fully phased out by 2032, a year earlier than planned, and would exclude wind energy components beginning in 2028. Lastly, the measure would reduce credits for geothermal equipment beginning in 2030 and phase them out completely by 2032 instead of 2035.

Foreign Entity Restrictions: The measure would prohibit the use of the credits by specified foreign entities, which would include any business incorporated in China and other US adversaries, terrorist organizations, sanctioned entities, and Chinese military companies.

The restrictions would also apply to foreign-influenced entities, which would include those that are at least 10% owned by a specified foreign entity. The restrictions would also apply to carbon capture credits, which weren’t phased out in the bill and are scheduled to expire in 2033 under current law.

The measure would prohibit the advanced manufacturing and electricity production and investment credits from going to entities that receive material assistance from specified foreign entities, including by using their components or critical minerals. The credits also couldn’t go to entities that make frequent payments to a specified foreign entity making up at least 5% of their total payments related to electricity production, or 15% for more than one foreign entity.

Partnership Income: Income derived from specified clean energy activities would be considered qualifying income for publicly traded partnerships to be treated as corporations for tax purposes. Activities would include transportation or storage of hydrogen energy and electricity generation from carbon capture facilities.

HEALTH CARE

The bill expands the ways employees could use health reimbursement arrangements and health savings accounts. The changes would broadly go into effect for plan or tax years beginning after Dec. 31, 2025.

CHOICE Arrangements: The measure would codify a 2019 Trump-era rule that allows employers to fund tax-preferred health reimbursement arrangements (HRAs) for employees to use toward individual market insurance premiums. It would rename these plans as “custom health option and individual care expense” (CHOICE) arrangements. Employees could also opt to reduce their salary to help cover individual premiums. To encourage adoption, the measure would establish a temporary tax credit for small businesses (50 or fewer employees) that offer CHOICE arrangements for the first time, providing $100 per employee per month in the first year and $50 in the second year, with adjustments for inflation.

Health Savings Accounts: The measure would expand and modernize rules governing tax-advantaged Health Savings Accounts (HSAs), particularly benefiting low- and middle-income individuals and families. Those earning under $75,000 (individuals) or $150,000 (families) annually would be allowed to contribute up to double the standard HSA limit – set at $4,300 for individuals and $8,550 for families in 2025, with inflation adjustments thereafter. The bill would also broaden eligibility by treating bronze and catastrophic plans purchased on the exchange as high-deductible health plans (HDHPs) and allowing HSA use for a wider range of expenses, including up to $500 ($1,000 for families) in fitness costs and direct primary care payments capped at $150 per month for individuals and $300 for families.

Additional provisions would permit HSA contributions for those 65 or older enrolled in Medicare Part A but still covered under an HDHP, enable married couples to make catch-up contributions to a single HSA, and allow transfers from flexible spending accounts or HRAs upon enrolling in a qualifying HDHP. Individuals could also use HSAs for qualified medical expenses incurred up to 60 days before account creation, and HSA eligibility would extend to those whose spouses are enrolled in a flexible spending arrangement, subject to contribution limits.

ACA Enrollment Eligibility: The measure would require individuals to annually verify their eligibility to remain enrolled in an ACA exchange and continue receiving advance premium tax credits, starting in tax years after December 31, 2027. Applicants would need to confirm details such as income, immigration status, residence, health coverage, and family size, as determined necessary by the Department of Health and Human Services.

Coverage for a given month would only be valid if the exchange confirms eligibility before the month begins, though individuals wouldn't be denied enrollment in a qualified health plan solely for failing to meet the verification requirements. Additionally, the measure would require health plans to implement a process for verifying eligibility before enrollment for individuals seeking advance payment of the premium assistance credit.

ACA Subsidies for Noncitizens: The measure would significantly narrow the categories of noncitizens eligible for the Affordable Care Act’s premium tax credit and cost-sharing reductions, effective in 2027. While current law allows all individuals “lawfully present” in the U.S. (citizens, lawful permanent residents, refugees, asylees, and parolees) to claim the credit, the measure would restrict noncitizen eligibility to only lawful permanent residents, certain Cuban nationals, and individuals from Micronesia, the Marshall Islands, or Palau. Although a provision explicitly barring asylees and parolees was removed, they would still likely be excluded under the new criteria.

Additionally, the measure would prohibit lawfully present noncitizens with incomes below the federal poverty level from receiving the credit while awaiting Medicaid eligibility, reversing a current allowance that supports recent immigrants ineligible for Medicaid due to the program’s separate residency requirements.

Medicare Eligibility for Noncitizens: The measure would limit Medicare eligibility for noncitizens to lawful permanent residents; certain nationals from Cuba; and individuals from Micronesia, the Marshall Islands, or Palau who live in the US.

Rural Hospitals: The measure would expand which facilities could qualify as Rural Emergency Hospitals, which receive larger Medicare payments in an effort to prevent further closures of rural hospitals.

Starting in 2027, certain hospitals that were in service from January 2014 to Dec. 26, 2020, but subsequently closed could reopen with the designation. Current law only applies to facilities enrolled in Medicare as of Dec. 27, 2020, the date the measure creating the hospital provider type was signed.

TRUMP ACCOUNTS

The bill establishes tax-advantaged "TRUMP account" trusts beginning January 1, 2026, designed to help U.S. citizens born after December 31, 2024,. The vision is to help young Americans save for higher education, first-time home purchases, or small business loan repayment. Trusts must be created before the beneficiary turns eight years old, and contributions, which would be capped at $5,000 annually and indexed for inflation after 2026, can be made until the beneficiary turns 18. From ages 18 to 25, distributions would be limited to half the account’s value at age 18, with full access allowed at age 25. Accounts would terminate and fully distributed by age 31.

Qualified distributions would be taxed as capital gains, while nonqualified distributions would incur regular income tax plus a 10% penalty. Contributions could be made in cash or via qualified rollovers. Trusts must be administered by a bank or approved trustee, with funds invested in low-fee U.S. index funds or diversified portfolios. Commingling of assets would be limited to common trust or investment funds.

The measure also directs the Treasury Department to pilot a program providing a one-time $1,000 contribution to each eligible account for children born between January 1, 2025, and January 1, 2029. If an account is not voluntarily established, the Treasury Department will automatically create one.

OTHER TAX CHANGES

Gun Silencer Tax: The measure would repeal a $200 transfer tax on firearm silencers and remove silencers from being regulated by the National Firearms Act. It would also repeal a $200 tax for the manufacture of silencers.

School Endowment Tax: The measure would modify the existing 1.4% excise tax on net investment income of private college and university endowments by introducing a tiered tax structure based on a school’s “student-adjusted endowment”: total investment assets divided by the number of eligible students.

Institutions with endowments exceeding $2 million per student would face a 21% tax rate, with lower rates of 14%, 7%, and 1.4% applied to institutions with per-student endowments between $750,000 and $2 million. The calculation would exclude foreign students in the U.S. solely for education without intent to remain and broaden the tax base to include income from student loans, intellectual property royalties derived from federal funding, and investment income from affiliated foundations.

Religious institutions with missions tied to religious teachings would be exempt.

The Treasury Department is tasked with issuing anti-avoidance regulations.

JCT estimates the changes will reduce the federal deficit by $6.7 billion between fiscal years 2025 and 2034.

Scholarship Granting Organizations: The measure would establish a new, nonrefundable tax credit for individuals who donate to tax-exempt organizations that provide scholarships to low-income elementary and secondary school students.

These scholarships could be used for tuition, books, tutoring, and standardized testing fees at public, private, or religious schools. The credit would be limited to the greater of 10% of an individual’s adjusted gross income or $5,000, with a nationwide cap of $5 billion in total credits for tax years 2026 through 2029. To qualify, scholarship-granting organizations must support at least two students attending different schools, verify household income, and disburse nearly all funds within three years.

The measure would prohibit any level of government from excluding or discouraging the use of scholarships at private or religious schools. Scholarship amounts disbursed between January 1, 2026, and December 31, 2029, would not be counted as taxable income for recipients.

International Money Transfers: The measure establishes a new 3.5% excise tax on remittance transfers sent from individuals in the U.S. to recipients in foreign countries via financial institutions. Financial service providers would be responsible for collecting the tax from the sender and remitting the funds to the Treasury Department on a quarterly basis and they would also be held liable for any unpaid taxes not collected at the time of transfer. Remittances made by U.S. citizens or nationals through a “qualified” remittance service provider (one that partners with the Treasury to verify the sender’s citizenship status) would be exempt from the tax.

The measure also establishes a refundable tax credit for U.S. citizens, nationals, and lawful permanent residents with valid Social Security numbers, reimbursing them for the full cost of the excise tax.

529 Plans: The measure expands the use of 529 “qualified tuition program” funds beyond their current scope, which includes tax-free withdrawals for higher education and K-12 tuition. Under the proposal, 529 funds could also be used for a broader range of K-12 expenses, including homeschooling costs such as curricular materials, online learning resources, tutoring, standardized testing fees, and therapies for students with disabilities. Additionally, the measure would permit the use of 529 plans for tuition, fees, and supplies related to earning postsecondary credentials through recognized vocational and certificate programs.

Adoption Credit: The measure makes the adoption tax credit partially refundable – up to $5,000 starting in tax year 2025. The credit reimburses adoption-related expenses such as legal fees, court costs, and travel, and unused amounts can be carried forward for up to five years. The measure would also authorize tribal governments, alongside states, to determine if a child qualifies as having special needs, which allows for expanded access to the credit under existing special needs provisions.

Private Foundations: The measure would increase excise taxes on the net investment income of tax-exempt private foundations by replacing the current flat 1.39% rate with a tiered structure based on asset size.

Foundations with at least $5 billion in assets would face a 10% tax rate, those with $250 million to less than $5 billion would pay 5%, those with $50 million to under $250 million would be taxed at 2.78%, and foundations with less than $50 million in assets would continue to pay the current 1.39% rate.

Earned Income Tax Credit: The measure would require the Treasury Department to create a certification program to verify a child’s eligibility for the Earned Income Tax Credit (EITC), with full implementation by tax year 2028 and phased-in starting in 2024. Taxpayers would be ineligible to receive the EITC without this certification.

Misstatements on the certification application would incur a $100 penalty, increased to $500 in cases of fraud. Additionally, the measure would enhance the EITC for Purple Heart recipients and service members with war-related injuries whose disability benefits have ended due to qualifying work activity.

E-file: The bill would direct the Treasury Department to terminate the IRS’s tax prep service that allows taxpayers to file their federal income tax returns for free.

The bill also directs the department to report on using a new public-private partnership to provide free tax filings.

Other Provisions: The bill includes several additional provisions across tax enforcement, fraud prevention, and targeted incentives. It would require the Department of Health and Human Services to contract with an AI vendor to detect and reduce improper Medicare payments. It would bar any new claims or refunds under the employee retention tax credit (ERTC) unless filed by January 31, 2024, and retroactively expand penalties for ERTC-related fraud back to March 12, 2020. Penalties for unauthorized disclosure of tax return information would be significantly increased – from $5,000 or five years in prison to $250,000 or 10 years.

The measure would also repeal the lower 1099-K reporting threshold unless a payee receives more than $20,000 and has over 200 transactions. It would broaden the application of the excise tax on excess compensation at tax-exempt organizations and expand the existing $150,000 production cost deduction for film, TV, and theater to include sound production expenses through 2028.

Additionally, the bill would temporarily allow non-itemizing taxpayers to deduct charitable donations from 2025 through 2028 – up to $150 for individuals and $300 for joint filers. It would also make permanent the exclusion from gross income for employer-paid student loan contributions, with the current $5,250 cap indexed for inflation starting in 2026.