Republicans Pass the One Big Beautiful Bill Act Ahead of the July 4 Deadline

July 3, 2025

Reading Time : 10+ min

Key Points

Republicans in Congress have passed a final budget reconciliation bill delivering on many of President Trump’s domestic policy priorities requiring congressional action.
President Trump is expected to sign the One Big Beautiful Bill Act into law on Friday, July 4.
This alert outlines key tax and health provisions included in the final version of the bill.

General and International Business Tax

On June 16, 2025, Senate Finance Committee Chairman Mike Crapo released text and a section-by-section summary of the Senate’s proposed One Big Beautiful Bill Act. The Senate passed a revised version of this measure on July 1, 2025, along party lines, and with Sens. Susan Collins (R-ME), Rand Paul (R-KY) and Thom Tillis (R-NC) voting no, and Vice President JD Vance casting the tie-breaking vote (51-50). Following Senate passage, the House took up and passed the bill on July 3, 2025, also on a party line vote of 218-214. Reps. Brian Fitzpatrick (R-PA) and Thomas Massie (R-KY) were the only House Republicans to vote against the bill.

The Senate bill retained the general structure and scope of the House-passed version that was passed on May 22 by a vote of 215-214, including permanently extending the modified tax brackets and lower tax rates and the doubled standard deductions for individuals from the 2017 Tax Cuts and Jobs Act (TCJA), which were set to expire at the end of this year. The final bill also includes several policies that President Trump discussed on the campaign trail, including no tax on tips, no tax on overtime, an increased tax deduction for seniors and an enhanced child tax credit.

However, the final bill also contained significant differences from the House measure, including with respect to major international and general corporate tax provisions.

Overall, the Senate approach reflected the Finance Committee Chairman’s long-stated priority to achieve permanency for key TCJA business provisions, while making certain trade-offs to meet that goal within the constraints of budget reconciliation. Among other differences from the House bill, the Senate draft included rate and structural changes to global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII) and base erosion and anti-abuse tax (BEAT); permanent extension of the Controlled Foreign Corporation (CFC) look-through rule; and a bifurcated approach to the retaliatory tax in new Section 899, which was ultimately removed altogether in the Senate-passed bill following productive G7 negotiations that led to an agreement in principle to exempt U.S. companies from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) components of Pillar 2.

Notably, the final version of the bill includes the Senate’s $5 trillion increase to the debt ceiling, up from the $4 trillion increase in the House-passed bill. Additionally, the Senate ultimately took a softer approach to some of the clean energy tax credits established in the Inflation Reduction Act that will allow certain tax incentives to continue with new requirements, or expire sooner versus terminating altogether under the House-passed bill.

The House and Senate both utilized special procedures under the Congressional Budget Act that allowed the Reconciliation measure to pass with a simple majority in both chambers—thereby eliminating the ability of a filibuster that would otherwise require 60 votes in the 53-47 Republican controlled U.S. Senate. Ultimate passage of H.R. 1 utilized the same simple majority process under the privileged Budget Reconciliation process that the Democrat majority used with President Biden to pass the Inflation Reduction Act in August 2022 absent any Republican support and the Republican majority used with President Trump in his first term to pass the Tax Cuts and Jobs Act of 2017.

The final bill being sent to the President for signature reflects changes negotiated by Senate and House leaders, along with adjustments that were required by the Senate parliamentarian to ensure that provisions are in compliance with the Senate’s Byrd Rule.

Keep in mind, the bill passed in the House and Senate provided for significant budget offsets and spending cuts to lower the budgetary impact of the final bill. The Congressional Budget Office (CBO) estimates on a preliminary basis that the bill passed by the Senate will increase the federal deficit by roughly $3.4 trillion over the 2025-2034 period. Republicans and the Trump administration believe that despite the CBO score, the corresponding spending cuts and programmatic changes—coupled with increased economic growth from pro-growth tax policies that were included in the bill—will result in a positive economic impact.

Summary of Tax Changes

Code Sec.	Current Policy	House-Passed	Senate-Passed	Final Passage
Tax Cuts & Jobs Act Permanence
Sec. 168 – Bonus depreciation	Expired	Temporary extension	Made permanent	Made permanent
Sec. 174 - R&D amortization	Expired	Temporary extension for domestic	Made permanent for domestic	Made permanent for domestic
Sec. 163(j) – Interest expense limitation	Expired	Temporary restoration of depreciation, amortization	Depreciation, amortization made permanent; Limitation calculated excluding Subpart F, GILTI, and Sec. 78 gross-up	Depreciation, amortization made permanent; Limitation calculated excluding Subpart F, GILTI, and Sec. 78 gross-up
International Tax Reforms
Sec. 59A - BEAT	Rate to increase from 10% to 12.5% in 2026; credits no longer allowed to offset liability	Rate reduced from 12.5 to 10.1% beginning January 1, 2026; permanently retained current treatment of tax credits for taxable years beginning after December 31, 2025	Rate permanently set at 10.5% of modified taxable income over adjusted regular tax liability; credit disallowance removed	Rate permanently set at 10.5% of modified taxable income over adjusted regular tax liability; credit disallowance removed
Sec. 951A - GILTI	Rate to increase from 13.125% to 16.406% in 2026	Change rate to 10.6%	Eliminate expense allocation; reduce FTC haircut from 20 to 10%; eliminates QBAI; increase effective rate to 14%	Eliminate expense allocation; reduce FTC haircut from 20 to 10%; eliminates QBAI; increase effective rate to 14%
Sec. 250 - FDII	Rate to increase from 13.125% to 16.406% in 2026	Change rate to 13.3%	Increase effective rate to 14%; eliminates QBAI	Increase effective rate to 14%; eliminates QBAI
Sec. 954(c)(6) - CFC Look Through	Expires end of 2025	N/A	Made permanent	Made permanent
New Sec. 899 – “Revenge Tax”	N/A	Increased tax rates on taxpayers from jurisdictions with extraterritorial or discriminatory taxes; super BEAT imposed against discriminatory taxes	N/A	N/A
Passthroughs/Small Businesses
Sec. 199A – Passthrough deduction	20% deduction expiring end of 2025	Permanently extended and increased to 23%	Permanently extended at 20%	Permanently extended at 20%
Sec. 461(l) – Loss limitation	Limited to $250k/$500k joint; EBL carries forward as NOL; expires 2028	Limitation made permanent; EBL carryforward disallowed	Limitation made permanent; cost of living increase delayed	Limitation made permanent; cost of living increase delayed
PTET workaround	N/A	Disallowed	N/A	N/A
Other Business Provisions
Remittances	N/A	3.5% tax on non-commercial payments sent abroad; refundable for U.S. citizens; transfer providers liable for failure to remit	1% tax on non-commercial payments sent abroad; restricted to cash payments; no credit for U.S. citizens	1% tax on non-commercial payments sent abroad; restricted to cash payments; no credit for U.S. citizens

Health Care

On July 1, 2025, the Senate passed a reconciliation measure that maintained much of the efforts of the initial House-passed legislation (passed on May 22, 2025) with respect to health care, yet made several considerable shifts, such as deeper cuts into the Medicaid program to accommodate permanent tax credits, which were not included in the House measure. In total, the CBO estimates that the health provisions will reduce federal spending by $1.2 trillion over 10 years and 11.8 million people will lose health coverage and remain uninsured under the final bill. The Senate excluded a handful of provisions from the initial House-passed bill primarily relating to health savings accounts and others that did not conform to the Byrd Rule. The House passed the Senate measure on July 3, 2025, sending the final bill to the President for signature. Among the most significant changes to federal health care programs are the following further discussed below.

Medicaid

The initial House bill included substantial reductions in federal spending for Medicaid, totaling nearly $800 billion, and cuts to the program are expected to total more than $900 billion under the Senate-passed and final bill. Specifically, the Senate further reduced federal spending for Medicaid by limiting state provider taxes to 3.5% of total net patient revenue from 6% over time for states that expanded Medicaid under the Affordable Care Act, with a freeze for states that have not expanded Medicaid, as opposed to a freeze for all states under the House bill.

The Senate largely adopted the House provision to limit federal spending for Medicaid State Directed Payments (SDPs) to 100% of Medicaid rates for states that expanded Medicaid and 110% of Medicare rates for states that did not expand Medicaid. Rates in non-expansion states phase down by 10 percentage points annually beginning in 2028 until Medicaid payment rates to providers match allowable Medicare rates. Lower provider rates for Medicaid expansion states begin immediately with a potential for a three-year phase in. The final legislation includes multiple incentives for non-expansion states to remain as non-expansion states. To address some members’ concern about the impact of Medicaid spending cuts, the final measure includes a $50 billion fund for grants to states to support and transform health care delivery in rural areas beginning January 1, 2026.

Additionally, the final bill requires 80 hours per month of work or community engagement for all non-elderly, non-disabled adults to maintain health coverage under Medicaid, with certain exceptions, and prohibits Medicaid eligibility for certain immigrant populations. The legislation also makes significant changes in Medicaid eligibility redetermination procedures, specifically for expansion populations, requiring redetermination every six months.

Prescription Drugs

The final bill expands the definition of orphan drugs as enacted under the Inflation Reduction Act, as initially passed by the House, to allow drugs that treat multiple rare diseases to be exempt from drug price negotiation under Medicare. Pharmacy benefit manager reforms included in the House bill were not included in the Senate or final bill.

Medicare

The final bill includes a 2.5% physician pay increase under the Medicare Physician Fee Schedule for 2026, which is a shorter-term increase than the initial House proposal.

The Senate-passed legislation also prohibits Medicare eligibility for some immigrant populations, with certain exceptions for refugees.

Individual Health Coverage

The final bill bolsters health savings accounts (HSAs) by increasing allowable coverage for health, fitness and wellness activities along with expanding access to HSAs in the Affordable Care Act market. It also eliminates automatic re-enrollment in marketplace plans and requires pre-enrollment verification. The measure also significantly restricts premium subsidies for immigrants, with some exceptions for certain refugees.

CMS Regulations

The final bill maintains the House moratorium on several significant Medicaid and Medicare rules, delaying implementation until fiscal year 2035. Delayed are a Centers for Medicare & Medicaid Services (CMS) rule that would have streamlined Medicaid enrollment procedures, another would have allowed Medicaid to cover premiums and cost sharing for more Medicare-eligible low-income beneficiaries, as well as a rule that would have required a minimum nurse staffing standard for skilled nursing facilities. Collectively, the delay of these rules reduces federal spending by nearly $200 billion over 10 years.

Health Care Provisions

**CBO cost estimates for final passage are not yet available as of July 3, 2025.

House Passed	CBO Estimate House-Passed H.R.1 FY 2025-2034	Senate Passed	Final Passage	Effective Date
Sec. 110205. Direct primary care service arrangements.	Revenue: -$2.8 B	Sec. 71308. Direct primary care service arrangements.	Sec. 71308	January 1, 2026
Sec. 110206. Bronze and catastrophic plans in connection with HSAs.	Revenue: -$3.6 B	Sec. 71307. Bronze and catastrophic plans in connection with HSAs.	Sec. 71307	January 1, 2026
N/A	N/A	Sec. 71306. Safe harbor for absence of deductible for telehealth services.	Sec. 71306	January 1, 2025
N/A	$50 B	Sec. 71401. Rural Health Transformation Program.	Sec. 71401	January 1, 2026
Sec. 112101. Permitting premium tax credit only for certain individuals.	-$74.1 B Revenue: $5.2 B	Sec. 71301. Permitting premium tax credit only for certain individuals.	Sec. 71301	January 1, 2027
Sec. 112102. Disallowing premium tax credit during periods of Medicaid ineligibility due to alien status.	-$49.5 B Revenue: $.2 B	Sec. 71302. Disallowing premium tax credit during periods of Medicaid ineligibility due to alien status.	Sec. 71302	January 1, 2028
Sec. 112103. Limiting Medicare coverage of certain individuals.	-$5.5 B Revenue: -$.1 B	Sec. 71201. Limiting Medicare coverage of certain individuals.	Sec. 71201	18 months post-enactment
Sec. 112104. Excise tax on remittance transfers	Revenue: $26 B	Sec. 70604. Excise tax on certain remittance transfers.	Sec. 70604	January 1, 2026
Sec. 112201. Requiring Exchange verification of eligibility for health plan.	-$36.9 B Revenue: $4.4 B	Sec. 71303. Requiring verification of eligibility for the premium tax credit.	Sec. 71303	January 1, 2028
Sec. 112202. Disallowing premium tax credit in case of certain coverage enrolled in during special enrollment period.	-$39.7 B Revenue: $1.3 B	Sec. 71304. Disallowing premium tax credit in case of certain coverage enrolled in during special enrollment period.	Sec. 71304	January 1, 2026
Sec. 112203. Eliminating limitation on recapture of advance payment of premium tax credit.	-$17.3 B Revenue: $2.3 B	Sec. 71305. Eliminating limitation on recapture of advance payment of premium tax credit.	Sec. 71305	January 1, 2026
Sec. 112205. Enforcement provisions with respect to COVID-19-related employee retention credits.	-$1.6 B Revenue: $4.7 B	Sec. 70605. Enforcement provisions with respect to COVID-19-related employee retention credits.	Sec. 70605	After date of enactment
Sec. 44101. Moratorium on implementation of rule relating to eligibility and enrollment in Medicare Savings Programs.	-$85.3 B	Sec. 71101. Moratorium on implementation of rule relating to eligibility and enrollment in Medicare Savings Program.	Sec. 71101	Date of enactment
Sec. 44102. Moratorium on implementation of rule relating to eligibility and enrollment for Medicaid, CHIP and the Basic Health Program.	-$82 B Revenue: -$4.4 B	Sec. 71102. Moratorium on implementation of rule relating to eligibility and enrollment for Medicaid, CHIP and the Basic Health Program.	Sec. 71102	Date of enactment
Sec. 44103. Ensuring appropriate address verification under the Medicaid and CHIP programs.	-$17.4 B	Sec. 71103. Reducing duplicate enrollment under the Medicaid and CHIP programs.	Sec. 71103	October 1, 2029
Sec. 44104. Modifying certain state requirements for ensuring deceased individuals do not remain enrolled.	*	Sec. 71104. Ensuring deceased individuals do not remain enrolled.	Sec. 71104	January 1, 2027
Sec. 44106. Additional Medicaid provider screening requirements.	*	Sec. 71105. Ensuring deceased providers do not remain enrolled.	Sec. 71105	January 1, 2028
Sec. 44107. Removing good faith waiver for payment reduction related to certain erroneous excess payments under Medicaid.	-$7.8 B Revenue: -$4 B	Sec. 71106. Payment reduction related to certain erroneous excess payments under Medicaid.	Sec. 71106	October 1, 2029
Sec. 44108. Increasing frequency of eligibility redeterminations for certain individuals.	-$63.8 B Revenue: -$3.8 B	Sec. 71107. Eligibility redeterminations.	Sec. 71107	January 1, 2027
Sec. 44109. Revising home equity limit for determining eligibility for long-term care services under the Medicaid program.	-$.2 B	Sec. 71108. Revising home equity limit for determining eligibility for long-term care services under the Medicaid program.	Sec. 71108	January 1, 2028
N/A	N/A	Sec. 71109. Alien Medicaid eligibility.	Sec. 71109	October 1, 2026
N/A	N/A	Sec. 71110. Expansion FMAP for emergency Medicaid.	Sec. 71110	October 1, 2026
Sec. 44121. Moratorium on implementation of rule relating to staffing standards for long-term care facilities under the Medicare and Medicaid programs.	-$23.1 B	Sec. 71111. Moratorium on implementation of rule relating to staffing standards for long-term care facilities under the Medicare and Medicaid programs.	Sec. 71111	Date of enactment
Section 44122. Modifying retroactive coverage under the Medicaid and CHIP programs.	-$6.3 B	Sec. 71112. Reducing State Medicaid costs	Sec. 71112	January 1, 2027
Section 44126. Federal payments to prohibited entities.	$.3 B	Sec. 71113. Federal payments to prohibited entities.	Sec. 71113	Date of enactment
Section 44131. Sunsetting eligibility for increased FMAP for new expansion states.	-$13.6 B Revenue: -$.9 B	Sec. 71114. Sunsetting increased FMAP incentive.	Sec. 71114	January 1, 2026
Section 44132. Moratorium on new or increased provider taxes.	-$89.3 B Revenue: -$2.5 B	Sec. 71115. Provider taxes.	Sec. 71115	October 1, 2027
Section 44133. Revising the payment limit for certain state directed payments.	-$71.8 B	Sec. 71116. State directed payments.	Sec. 71116	Date of enactment for the grandfather; January 1, 2028 for phase down
Section 44134. Requirements regarding waiver of uniform tax requirement for Medicaid provider tax.	-$34.6 B Revenue: -$.7 B	Sec. 71117. Requirements regarding waiver of uniform tax requirement for Medicaid provider tax.	Sec. 71117	Date of enactment
Section 44135. Requiring budget neutrality for Medicaid demonstration projects under Section 1115.	0	Sec. 71118. Requiring budget neutrality for Medicaid demonstration projects under Section 1115.	Sec. 71118	January 1, 2027
Section 44141. Requirement for States to establish Medicaid community engagement requirements for certain individuals.	-$344 B Revenue: -$8.4 B	Sec. 71119. Requirements for States to establish Medicaid community engagement requirements for certain individuals.	Sec. 71119	No later than January 1, 2027
Section 44142. Modifying cost sharing requirements for certain expansion individuals under the Medicaid program.	-$8.3 B	Sec. 71120. Modifying cost sharing requirements for certain expansion individuals under the Medicaid program.	Sec. 71120	October 1, 2028
N/A	N/A	Sec. 71121. Making certain adjustments to coverage of home or community-based services under Medicaid.	Sec. 71121	July 1, 2028
Section 44301. Expanding and clarifying the exclusion for orphan drugs under the Drug Price Negotiation Program.	$4.9 B	Sec. 71203. Expanding and clarifying the exclusion for orphan drugs under the Drug Price Negotiation Program.	Sec. 71203	January 1, 2028
Section 44304. Modifying update to the conversion factor under the physician fee schedule under the Medicare program.	$8.9 B	Sec. 71202. Temporary payment increase under the Medicare physician fee schedule to account for exceptional circumstances.	Sec. 71202	January 1, 2026

Authors

Kevin Brady

Senior Consultant