Resource Tracking the 2025 Budget Reconciliation Process

• Prohibits states from establishing new provider taxes or increasing rates of existing taxes. Effective upon enactment, with three-year transition period.
• Eliminates the temporary FMAP increase for states that newly adopt expansion. Effective Jan. 1, 2026.
• Requires states to impose work requirements on able-bodied adults in the state’s expansion program, mandates exemptions, requires states to verify compliance at least two times each year and prohibits states from waiving these provisions via a Section 1115 waiver. Effective Dec. 31, 2026.
• Requires states to conduct eligibility redeterminations at least every six months for expansion population. Effective Dec. 31, 2026.
• Reduces expansion match from 90% to 80% to states that provide health coverage for undocumented immigrants with state-only funding and to states that provide Medicaid/CHIP coverage to lawfully present immigrant children and pregnant people, regardless of source of funding. Effective Oct. 1, 2027.
• Requires states to impose a $35 fee per service on the expansion population (exceptions for primary care, mental health, and substance use disorder services). Effective Oct. 1, 2028.
• Requires states to conduct frequent provider checks to determine if a provider has been terminated by HHS or another state. Also requires states to conduct quarterly checks of the Social Security Administration’s Death Master File to determine if a provider is deceased. Effective Jan. 1, 2028.
• Delays Disproportionate Share Hospital payment reductions through Sept. 30, 2028. Effective upon enactment.
• Rolls back the nursing home minimum staffing rule. Effective upon enactment.
• Prohibits Medicaid funds from being used to pay providers primarily engaged in family planning services or reproductive services. Effective upon enactment for 10 years.
• Prohibits federal matching funds from being used to pay for gender transition procedures for Medicaid/CHIP enrollees. Effective upon enactment.
• Find more information on KFF’s tracker: Health Provisions in the 2025 Federal Budget Reconciliation Bill.

Cost Share

Requires a cost share with states between 5% and 25% of a state’s SNAP benefit cost based on the state’s error payment rate. In 2023, seven states had error rates in the lowest category and 25 states, Washington, D.C., the U.S. Virgin Islands and Guan had error rates over 25% (FFIS). Effective Oct. 1, 2027.

• Eliminates the tolerance level for error payments (currently errors of $57 or less are not counted against a state). Effective Oct. 1, 2025.

Administrative Costs

Requires states to pay 75% of administrative costs of their SNAP programs, an increase of 25% totaling $3.5 billion (FFIS). Effective upon passage. 

Work Requirements

Requires states to expand SNAP work requirements to able-bodied adults without dependents through age 64 (currently 18-54) and to people aged 18-64 with children age 7 and older (currently applies to people with children over 18). Includes an exemption to work requirements for a caregiver responsible for a child age 7 or older, married to and residing with someone who is in compliance with SNAP work requirements. Effective upon passage. 

Work Requirement Exemptions

Maintains exemptions for the work requirements for people experiencing homelessness, people who are under 24 and have aged out of foster care at 18, and veterans through Oct. 1, 2030. Effective upon passage.

• Prohibits states from granting waivers beyond 12 months. Effective upon passage.

State Waivers

Restricts states’ ability to waive work requirements in areas with unemployment over 10% and removes ability of states to waive work requirements on the basis of an insufficient availability of jobs. Effective upon passage. 

• Reduces the availability of state discretionary exemptions from 8% of a state’s SNAP caseload to 1%. Effective upon passage. 

Immigration Status

Limits SNAP eligibility to citizens or people lawfully admitted for permanent residence. Effective upon passage.

• Prohibits states from providing SNAP benefits to non-citizens or lawful permanent residents, including people with humanitarian, refugee or asylee status.

Updates to SNAP Benefits

Rolls back the Thrifty Food Plan update of 2021, preventing future SNAP benefit increases except for inflationary adjustments. Effective upon passage.

SNAP-Ed

Repeals the SNAP-Ed program which provided $536 million in federal funds to states in FY 2025. Effective upon passage.

Additional Resources

See just-released analysis from FFIS (requires access): First Look: Reconciliation Provisions Would Shift Federal SNAP Costs to States. Also see CBPP for additional information.

Proposes a 10-year moratorium on states' ability to regulate artificial intelligence.

The specific language approved by the Budget Committee imposes a 10-year moratorium on enforcement of state AI laws with a few exceptions. States can enforce laws that provide for criminal penalties, which captures state child sexual abuse material or CSAM laws. Other exemptions from the moratorium provide that states can enforce laws that facilitate faster AI deployment and easier permitting requirements, which may impact state laws addressing consumer protection and algorithm bias.

SALT Deduction

• Lifts the current cap of $10,000 to $40,000 for beneficiaries with incomes of $500,000 or lower with a phasedown for incomes higher than $500,000. 
• Eliminates IRS Notice 2020-75, "Forthcoming Regulations Regarding the Deductibility of Payments by Partnerships and S Corporations for Certain State and Local Income Taxes."
  • The IRS notice serves as the basis for states to apply tax law allowing certain partnerships, such as S corporations, to elect to pay state income tax as the entity level rather than at the individual owner level.
  • NCSL urges the continuance of states' ability to utilize pass-through entity tax election as a viable option to allow business owners to be able to deduct state taxes paid over any state and local tax deduction cap. 

Standard Deduction

Makes the current higher deduction permanent and includes a temporary boost of $1,000 for individuals and $2,000 for joint filers, bringing the deduction total to $16,000 and $32,000 through 2029.

State Income Tax

NCSL opposes the expansion of exemptions under PL 86-272 with the addition of language further defining "solicitation of orders." This and any similar changes would restrict a state's tax base and ability to collect income tax. States have the inherent right to maintain fiscal sovereignty and have historically been free from federal intervention. Furthermore, this new policy has no direct impact on the federal budget but rather interferes with state fiscal policy.

Business Taxes

• Earnings before interest, taxes, depreciation and amortization (EBITDA), (Section 163 (j)): Adjusted taxable income is computed without regard to the deduction for depreciation, amortization or depletion.
• Research and Development (Section 174): Suspends required capitalization of domestic research or experimental expenditures for amounts paid or incurred in taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2030.
• Bonus Depreciation (Section 179): The proposal extends and modifies the additional first-year depreciation deduction through 2029.
• Pass-Through Business Deduction (Section 199A): Makes several modifications, including the permanent deduction for qualified business income; increases three percentages used to calculate the deduction for qualified business income from 20% to 23%; and replaces the existing phase-in of W-2 wages, capital investment, and specified service trades or businesses with a two-step process for taxpayers whose taxable income exceeds the threshold amount, among others.

Child Tax Credit

Extends the child tax credit. In addition to making the $2,000 credit permanent, it includes a $500 boost to the credit ($2,500 per child) from 2025 through 2028 and indexes the credit to inflation beginning in 2028. Both the eligible child and all parents must be citizens to qualify.

Tax Credit for Employer-Provided Child Care

• Expands the credit rate from 25% to 40% and 50% for small businesses and maximum claim expenses from $150,000 to $500,000 and $600,000 for small businesses.
• Indexes the maximum claim to inflation beginning in 2027 and allows businesses to receive credit for child care facilities that are jointly owned or operated by a third party. 

Housing Credit

• Increases state housing credit ceilings for 2026-2029 with a multiplier of 1.125. 
• Allows additional buildings financed with tax-exempt bonds to qualify for housing credits without receiving a credit allocation from the state housing credit ceiling.

Municipal Bonds

Makes no changes to the tax-exempt status of state and local government bonds. 

Rescinds much of the remaining unobligated IRA funding. Contact NCSL staff for details on specific programs.

Creates a voluntary expedited permitting process for certain natural gas energy pipeline projects. The provision caps all federal, state, interstate and tribal review and approval processing to a maximum duration of one year upon payment of $10 million or 1% of the projects projected capital cost, whichever is less. The processing timeline can be extended by six months if an agency requests so, as long as the applicant consents. Projects that do not receive approval within the applicable timeline shall be deemed approved in perpetuity, with a few exceptions. 

Implements a $250 fee on electric vehicles and a $100 fee on hybrid vehicles to address Highway Trust Fund solvency concerns. The $20 registration fee for all vehicle types was removed by a manager’s amendment during the committee’s markup. 

Advanced a measure known as the Student Success and Taxpayer Savings Plan, which would reduce the federal deficit by $349 billion over 10 years as part of the broader budget reconciliation package. 

Pell Grant eligibility

• Expands Pell access to short-term programs and authorizes new funding to address the pending $2.7 billion Pell funding shortfall.
• Full-time eligibility for the maximum Pell Grant would increase from 12 hours per semester to 30 semester hours per academic year.
• Students would be considered ineligible for the grant if they attend school less than half time.

Student Loan Limits

• Implements annual borrowing limits based on the median program costs across institutions minus federal grant aid, instead of the current uniform annual borrowing limits.
• Allows institutions to implement their own borrowing limits.
• Establishes new lifetime caps on student borrowing, including $50,000 for undergraduate education or parent borrowing, $100,000 for graduate programs and $150,000 for professional programs.
• Eliminates need-based subsidized student loans, Grad PLUS and Parent PLUS programs. 

Student loan repayment and accountability

• Phases out nearly all existing repayment programs and offers two new plans.
• Allows borrowers to choose a new standard repayment plan that would offer fixed monthly payments, with repayment timelines increasing within a range of 10 to 25 years as borrowing amounts increase.
• Allows borrowers to choose a new repayment assistance plan that would base repayment amount on a borrower's income and would include subsidies that cover any unpaid interest and ensure at least $50 of the loan principal is paid down every month.
• Requires higher education institutions to make payments to the federal government based on a share of their former students' unrepaid student loans. 

Increased Private University Endowment Excise Tax Rates

Adds to the current 1.4% excise tax on net investment income from private universities endowments that are greater than $500,000 per student. The new tax rate is based on a tiered, student-adjusted system. Universities with per-student endowments above $2,000,000 are taxed at a 21% rate, between $1,250,000 and $1,999,999 at 14%, and between $750,000 and $1,249,999 at 7%. 

Tax Credits for Contributions to Scholarship Granting Organizations

Creates a new tax credit that runs from 2026-2029 for up to $5,000 in annual individual contributions to tax-exempt organizations that award scholarships to elementary and secondary school students in households with incomes below 300% of an area's median gross income. The program is generally capped at $5 billion in total credits annually.

529 Accounts

Expands 529 plans to cover additional elementary, secondary and home school education expenses, such as learning materials and tutoring fees. The measure expands qualified higher education expenses to include a broader array of programs offering postsecondary credentials.