House Passes Reconciliation Bill with Major Tax and Health Policy Measures

On May 22, 2025, the House of Representatives cleared a major reconciliation hurdle, advancing its version of a 2025 Fiscal Year (FY2025) budget reconciliation bill, H.R. 1 — One Big Beautiful Bill Act of 2025 (OBBBA)—by a vote of 215 to 214. The process is being used to advance President Trump’s key policy priorities on tax, border security, defense and energy policy, as well as a debt limit increase, and the bill will now proceed to the U.S. Senate.

This client alert focuses on the major tax and health provisions of the House-passed bill, and what lies ahead.

Overview of the House Reconciliation Bill

The OBBBA is estimated by the Congressional Budget Office (CBO) to cost at least $2.5 trillion over 10 years. It includes extensions and modifications of expiring 2017 Tax Cuts and Jobs Act (TCJA) provisions, new corporate and individual tax provisions, repeal and modification of Inflation Reduction Act (IRA) energy tax provisions, $1.3 trillion in cuts from Medicaid and other federal health and nutrition programs—including the Supplemental Nutrition Assistance Program (SNAP), Medicare or Affordable Care Act (ACA) coverage—and modification of rules for health insurance sold in the commercial market.

Tax Provisions

The final tax portion of the House-passed reconciliation bill includes expected extensions of expiring TCJA business and individual provisions; new provisions providing individual tax breaks for seniors, overtime work, tipped income and loan interest on domestically assembled vehicles; rollbacks of IRA clean energy tax credits; and tax increases on certain tax-exempt organizations. Below are brief summaries of key provisions.

Extensions for Expired TCJA Business Provisions

• Temporarily reinstate the IRC §168(k) 100-% bonus depreciation (for property acquired after January 19, 2025, and before January 1, 2030; scored at $37 billion), suspend the IRC §174 amortization requirement for domestic research or experimental expenditures (for 2025 through 2029; scored at $23 billion) and reinstate the IRC §163(j) earnings before interest, taxes, depreciation and amortization (EBITDA) interest expense limitation for tax years beginning after December 31, 2024, and before January 1, 2030 (scored at $40 billion).

Permanency of TCJA Provisions

• Increase and make permanent the rates on Global Intangible Low Tax Income (GILTI) (from 10.5% to 10.668% instead of 13.125%) and Foreign-Derived Intangible Income (FDII) (from 13.125% to 13.335% instead of 16.406%), which are otherwise scheduled to increase more significantly after December 31, 2025 (scored at $143 billion before the slight increases to the rates were made).
• Increase and make permanent the rate on Base Erosion and Anti-Abuse Tax (BEAT) payments (from 10% to 10.1% instead of 12.5%), which is otherwise scheduled to increase more significantly after December 31, 2025 (scored at $31 billion before the slight rate increase was made). Additionally, it would repeal scheduled changes to the BEAT calculation that would have reduced regular tax liability by all tax credits.
• Increase to 23% and make permanent the deduction for qualified pass-through businesses under IRC §199A.

IRA Clean Energy Tax Credits

While the final House-passed bill retained most of the Ways and Means bill’s changes to the IRA’s clean energy credits, some significant adjustments were made that accelerate the elimination of the tech-neutral clean electricity production tax credit (PTC) and Investment Tax Credit (ITC) and extend more favorable treatment to the production of nuclear energy. (For a more in-depth analysis of energy tax provisions, please see Akin’s prior alert here).

• With certain exceptions, the bill would generally accelerate the termination of the following clean energy credits, including:
  • In 2026, the Clean Hydrogen PTC (§45V), the credits related to clean vehicles (Clean Vehicle Credit (§30D), Previously-Owned Clean Vehicles Credit (§25E), Alternative Fuel Vehicle Refueling Property Credit (§30C), Qualified Commercial Clean Vehicles Credit (§45W)), and the residential credits for energy efficiency and clean energy (Energy Efficient Home Improvement Credit (§25C), Residential Clean Energy Credit (§25D), New Energy Efficient Home Credit (§45L)) would no longer be available.
  • In 2028, the Advanced Manufacturing PTC (§45X) for wind components would no longer be available.
  • In 2029, the Clean Electricity PTC (§45Y) and the Clean Electricity ITC (§48E) would no longer be available (with an exception for certain nuclear facilities, which would remain eligible) — but the project must have a beginning of construction date that is before 60 days after the bill’s enactment.
  • In 2032, the Advanced Manufacturing PTC (§45X) for non-wind components and critical minerals and the Energy Property ITC (§48) for geothermal heat property would no longer be available (and the phase-out for both would start in 2030). The Zero-Emission Nuclear Power Production Credit (§45U) and Clean Fuel PTC (§45Z) would also go away in 3032 but neither would phase-out before that.
• Transferability to be terminated for facilities with beginning-of-construction dates falling after the second anniversary of the enactment of the bill for the Carbon Oxide Sequestration Credit (§45Q). Transferability would not be available for the Clean Fuel PTC (§45Z) or Advanced Manufacturing PTC (§ 45X) for credits generated after 2027.
• Foreign entity of concern prohibitions to be expanded where the taxpayer is either deemed to be a type of foreign entity or has certain relationships with certain foreign entities, subject to important new definitions. New restrictions would apply to: Clean Electricity ITC (§48E), Clean Electricity PTC (45Y), Advanced Manufacturing PTC (§45X), Carbon Oxide Sequestration Credit (§45Q), Zero-Emission Nuclear Power Production Credit (§45U), Clean Fuel PTC (§45Z), Energy Property ITC for Geothermal Heat Property (§48). For more details on these new Prohibited Foreign Entity (PFE) rules, see our alert here.
• Extend the Clean Fuel PTC (§45Z) by an additional four years through 2031 (scored at $45 billion).

Tax-Exempt Sector

The House-passed bill includes a variety of tax increases on the tax-exempt sector: increase and expansion of the so-called endowment tax through a new tiered rate structure of up to 21% (scored at $7 billion), expansion of the excise tax on tax-exempt employee compensation (scored at $4 billion), a new tiered structure for the excise tax on net investment income of private foundations (scored at $16 billion), an increase in unrelated business income to include transportation fringe benefits (scored at $3 billion) and an increase in unrelated business income to include research if results are not freely available to the general public (negligible score).

New Tax Provisions

• New special depreciation allowance for qualified production property would provide a 100% depreciation allowance, versus the current 39-year cost recovery period for nonresidential real property, where “qualified production property” is property used by a taxpayer as an integral part of certain production activities, generally manufacturing, production or refining of a qualified product (scored at $148 billion).
• Retaliatory measures under new section 899 for “unfair foreign taxes” would impose increased tax rates on certain individuals and entities, including foreign corporations that are tax residents of a foreign country with an “unfair foreign tax” (excluding U.S.-owned foreign corporations). The bill defines the Undertaxed Profits Rule (UTPR), digital service tax (DST) and diverted profits tax, as de facto “unfair foreign taxes” subject to the retaliatory measures. It also provides discretion to the Treasury Secretary to designate others that may be subject to retaliation as discriminatory or extraterritorial.

Health Provisions

The House Energy and Commerc­­e Committee’s title makes a number of significant changes that alter and reduce federal spending for the Medicaid program over the next 10 years, including these major provisions: 

Medicaid

• Work and community engagement requirements for individuals (80 hours per month) linked to Medicaid eligibility, similar to requirements implemented in Georgia. The start date was accelerated to December 31, 2026, instead of January 1, 2029, in the final bill. This requirement is expected to save more than $300 billion over 10 years with the new start date.
• Suspension of Biden-era rules that streamlined eligibility and facilitated enrollment under Medicaid (saves $163 billion).
• Moratorium on new or additional provider taxes and limitations on state-directed payments. This freezes states’ provider taxes at current dollar amounts and bars states that expanded Medicaid from using payments to pay providers more than 100% of Medicare rates and states that did not expand Medicaid coverage from paying providers more than 110% of Medicare rates. Final score is being updated since the 110% Medicare allowance was included in the final bill (prior estimates saved $196 billion).
• Increase in eligibility redeterminations by states that expanded Medicaid coverage (saves $53 billion).
• Mandate for cost sharing for all Medicaid expansion adult enrollees with incomes above the federal poverty line ($15,560 for a single person) up to $35 per service. Primary care, mental health care and substance use disorder services would be exempt (saves $13 billion).
• Reduced federal spending to states (Federal Medical Assistance Percentage or FMAP) that expanded Medicaid and use their own funds to provide Medicaid coverage to undocumented immigrants. The reduction also applies to people who are otherwise lawfully present per the final bill with a score in progress (prior estimate saved $11 billion).
• Ban on use of Medicaid funds for gender affirming care for kids and adults under Medicaid, ACA and the Children’s Health Insurance Program (CHIP). Final score in progress as the ban for adults was included in the final bill (prior estimate saved $830 million and includes a ban on ACA and CHIP).

The House Ways and Means Committee’s title makes payment, eligibility and other reforms to Medicare and significant changes to commercial insurance and ACA coverage. Major provisions include: 

• Medicare: Increases Medicare payment to physicians in 2026 and future years by tying payment to medical inflation (costs $8 billion); reforms pharmacy benefit manager (PBM) practices under Medicare and Medicaid (saves $3.4 billion); ends Medicare eligibility for some lawfully present foreign nationals and retains eligibility for permanent residents who hold green cards or are from the Marshall Islands, Palau, Micronesia and Cuba (saves $132 million).
• Commercial Health Insurance: Expands individual coverage reimbursement arrangements to allow individuals to purchase health coverage on ACA marketplaces, and includes several provisions that expand contributions that can be made to tax-preferred health savings accounts, and expands primary care, health and fitness services that can be covered under health savings accounts and by employers as medical costs (costs $32 billion).

• ACA Marketplace Coverage: Imposes stricter eligibility and income verification for enrollees, shortens enrollment windows and allows health insurers to require premium payment before coverage begins (saves $101 billion); limits lawful immigrant access to ACA coverage (saves $63 billion); restores cost-sharing reduction payments that were repealed under the first Trump administration and blocks these funds for abortion care (saves $50 billion); requires individuals to make full repayment of excess premium tax credits paid to health insurers on their behalf (saves $2.3 billion).

Senate Action on Deck: What’s Next?

The Senate will now receive the House measure and work to develop its version of the bill that meets Senate reconciliation instructions in order to maintain the bill’s privileged status and proceed under expedited consideration with a simple majority threshold. The Senate is expected to make potentially substantial changes to the House-passed measure for policy reasons and if needed to make changes to adhere to the Byrd Rule as applicable in the Senate. While it’s still unclear what legislative text the Senate Republicans will utilize, one option the Senate may utilize includes assembling a substitute amendment to the House-passed version for formal floor consideration.

The Senate Finance Committee instruction under the Senate-passed Budget Resolution includes a net spending ceiling of $1.5 trillion for tax cuts and other spending outside the scope of extending the TCJA. The Finance Committee also benefits from a “current policy baseline” per the budget resolution that excludes the $3.8 trillion cost of making the 2017 tax cuts permanent. This exclusion and net ceiling amount are intended to allow the Finance Committee to spend up to $5.3 trillion on tax cuts or other spending priorities, creating flexibility for additional tax cuts and spending priorities of Republicans and President Trump. The use of the current policy baseline in adhering to the Byrd Rule is expected to be a point of discussion among Republicans, Democrats and the Senate Parliamentarian. 

The Finance Committee is also instructed to propose changes that increase the statutory debt limit by not more than $5 trillion, a $1 trillion increase compared to the Ways and Means Committee’s instruction. This difference was likely intended to provide flexibility for bill writers and ensure that the federal debt limit does not have to be revisited prior to the 2026 mid-term election.

Next Steps, The Byrd Rule and the “X” Date

Senate consideration of its reconciliation bill will follow expedited procedures if the bill meets budget resolution instructions and reconciliation rules. A Senate reconciliation bill is filibuster-proof, debate time is limited to 20 hours and amendments must be germane—understanding that points of order that require 60-vote thresholds can be raised by any member against provisions in the budget reconciliation package for which the Parliamentarian has determined run afoul of the Byrd Rule.

Following 20 hours of debate, there will be a vote-a-rama. In a typical session, hundreds of amendments will be proposed, but only a dozen or more will be voted on and even less adopted. Often used as a political messaging tactic, this process allows the minority party and any member to force votes on amendments that ordinarily would not be considered on the Senate floor.

The Byrd Rule is a Senate feature of the budget reconciliation process that can lead to exclusion of non-budgetary provisions, or unrelated legislative items. The rule comprises a multi-pronged test applied to individual provisions and the reconciliation bill as a whole. The Senate Parliamentarian presides over the application of the Byrd Rule, but individual points of order need to be raised to potentially eliminate provisions in the Senate reconciliation bill, or Senators can offer an amendment to recommit the measure with instructions.

The main premise of the Byrd Rule is that to have the filibuster-proof privilege, the Senate reconciliation provisions and the bill as a whole must be primarily budgetary (i.e., produce increases or decreases in federal spending in ways that alter the federal deficit as a first order). Alterations can increase or decrease the deficit, but the budget impact must be substantially greater than the policy or non-budgetary impact. Scoring of reconciliation provisions and the package is conducted by the CBO and the Joint Committee on Taxation (JCT). A provision that does not meet the budgetary impact requirements of the Byrd Rule are deemed “extraneous” and still may be included in a reconciliation bill, but a point of order can be raised by any member to require a 60-vote threshold to remain in the bill. Not meeting certain Byrd Rule provisions can endanger a provision or the privilege of the entire bill. Note, Appendix A lists the criteria that constitutes an extraneous matter under the Byrd Rule.

Since all Senate Democrats opposed the budget resolution, the first step in the Budget Reconciliation process earlier this year, Democrats are expected to test all provisions in the OBBBA against the Byrd Rule and raise objections or points of order to ones they believe do not pass muster. Major changes to the Medicaid program could fall into this category, as well as other provisions that do not change revenue or outlays. An example of such a provision includes the House-passed bill’s 10-year moratorium on state regulation of artificial intelligence (AI). A provision not meeting the Byrd Rule and failing to secure 60 or more votes in the Senate would be removed from the bill—regardless of whether it was in the House-passed budget reconciliation measure or included as part of a potential Senate substitute.

As a last step, both the House and Senate must pass an identical version of the reconciliation bill that can be presented to the President. While the President can veto the bill at this stage, it would require the process to completely restart, beginning with the adoption of a fresh budget resolution.

That said, inaction on the budget reconciliation bill is not an option in terms of the personal tax rates that will otherwise increase at the end of 2025—per the TCJA from 2017. The most pressing deadline, however, to deliver a reconciliation bill that can be signed by President Trump is sometime in July or early August. On May 9, Treasury Secretary Bessent warned Congress that there is a reasonable probability the federal government’s cash and extraordinary measures will be exhausted in August, while Congress is slated to be in its annual month-long recess. To “protect the full faith and credit of the United States,” Secretary Bessent is urging Congress to increase or suspend the debt limit by mid-July. Therefore, the Senate has a clear deadline to not only pass the budget reconciliation package, but to ensure whatever is adopted can also be approved by the U.S. House and signed into law by the President over the coming weeks.

Appendix A:

The following is a list of the criteria for what constitutes an extraneous matter under the Byrd Rule.

• It does not produce a change in outlays or revenues or a change in the terms and conditions under which outlays are made or revenues are collected.
• It produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions.
• It is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure.
• It produces a change in outlays or revenues which is “merely incidental” to the non-budgetary components of the provision.
• It would increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure.
• It recommends changes in Social Security.