U.S. House Passes Reconciliation Bill: What it Means for Counties

Key Takeaways

On May 22, the full U.S. House voted to pass their version of reconciliation legislation, the One Big Beautiful Bill Act (H.R. 1), by a vote of 215-214. The bill includes several policy priorities of the 119^th Congress and the White House related to healthcare, social safety net programs, immigration and extending the 2017 Tax Cuts and Jobs Act. The bill now heads to the U.S. Senate where several changes to the text are expected. 

How did we get here?

On May 14, U.S. House committees completed markups of their respective committee bills. Each committee had budgetary guidelines based on instructions provided by the budget resolution passed by both the U.S. House and U.S. Senate. 

Each House committee’s approved text was packaged together as H.R. 1 in the House Budget Committee where the bill was advanced by the full committee on May 18 after initially being voted down just days prior during markup over concerns related to changes to Medicaid, the rollback of clean energy tax credits and the state and local tax (SALT) deduction. 

The House Rules Committee met on Wednesday, May 21 for an over 23-hour markup session where final changes were made to address these concerns before sending it to the House floor for a final vote.  

What are the next steps?

The bill now heads to the U.S. Senate, where changes will likely be made to the bill to ensure it can pass the chamber. Any non-budget provision may be challenged by the Senate Parliamentarian, as the “Byrd Rule” states that only budget-related provisions can be included in reconciliation and pass by a simple majority vote. 

Additionally, amendments could result from policy disagreements between the two chambers as several U.S. Senators have already indicated they would like changes to certain House-passed provisions. The U.S. House will have to consider and pass any changes made in the U.S. Senate. 

Counties should continue to advocate for county priorities to be included in the final budget reconciliation bill. NACo has compiled key highlights for counties below and a full analysis is forthcoming.
 

Positive Provisions for Counties

• Municipal Bonds Preserved:
  The bill leaves municipal bonds untouched, preserving the tax exemption for all bonds and protecting counties’ ability to finance critical infrastructure at lower costs. (House Ways & Means Committee)
• Major Event Preparedness:
  It includes $1.6 billion for local and state preparation for the 2026 World Cup and 2028 Olympics, funding counties through FEMA’s State Homeland Security Grant Program. (House Homeland Security Committee)  
• Secure Rural Schools (SRS):
  SRS is reauthorized through 2027, providing forested counties with essential funding to support schools, roads and emergency services in areas with limited taxable land. (House Agriculture Committee)
• Conservation Funding:
  The bill integrates $13 billion in Inflation Reduction Act (IRA) funding into the Farm Bill baseline and expands U.S. Department of Agriculture conservation programs, enabling counties and local partners to invest in soil, water and land stewardship. (House Agriculture Committee)
• Medicaid Provisions:
  • Medicaid DSH Delay:
    Cuts to Medicaid Disproportionate Share Hospital (DSH) payments are delayed until 2029, preserving a key funding source for county-supported hospitals serving low-income populations. (House Energy & Commerce Committee)
  • Nursing Home Staffing Rule Delay:
    Implementation of the federal nursing home staffing rule is delayed until 2035, easing pressure on county-run facilities facing workforce shortages. (House Energy & Commerce Committee)
• Renewable Energy Revenue Sharing:
  Counties would receive 25 percent of revenue from wind and solar energy produced on federal lands, mirroring oil and gas revenue-sharing models. (House Natural Resources Committee)
• Low-Income Housing Tax Credit: 
  The bill increases the volume of tax credits available for low-income housing by 12.5 percent and lowers the private activity bond financing required to access the credit to 25 percent through calendar year 2029. (House Ways & Means Committee)
• GOMESA revenue sharing:  
  The bill raises the cap on revenue sharing for Gulf of Mexico Energy Security Act (GOMESA) from $500 million to $650 million through 2034, allowing counties in Louisiana, Texas, Mississippi and Alabama to receive additional revenue for offshore oil and gas energy produced in the Gulf for coastal protection and restoration. (House Energy & Commerce Committee)

Key County Concerns

• FMAP Penalty for Coverage of Undocumented Immigrants:
  The bill reduces the Medicaid expansion FMAP from 90 percent to 80 percent for states that use state-only funds to provide coverage for individuals without qualified immigration status. The latest version of the bill extends the FMAP penalty to states that have adopted the Immigrant Children’s Health Improvement Act (ICHIA) option for waiving the five-year Medicaid waiting period for lawfully present children and pregnant women. Thirty-three expansion states and DC currently use this option and would now also be subject to the penalty. (House Energy & Commerce Committee)
• AI Regulation Freeze:
  A 10-year moratorium would block counties from enforcing local AI regulations, limiting our ability to manage evolving technologies in public services. (House Energy & Commerce Committee)
• Medicaid Provisions:
  • Work Requirements:
    New Medicaid work requirements on able-bodied adults could increase administrative burdens and reduce access to care for vulnerable county residents, with certain allowable exceptions outlined in the bill. The House- passed bill also eliminates federal authority to waive work requirements for specific populations in future administrations. (House Energy & Commerce Committee)
  • Medicaid Cost Sharing:
    The bill imposes new out-of-pocket costs on low-income Medicaid enrollees, likely increasing uncompensated care in county hospitals and clinics. The bill now excludes mental health and substance use disorder (SUD) services from cost-sharing requirements for the Medicaid expansion population. This is a modest but important win for counties, which often serve as behavioral health safety nets and rely on Medicaid to fund access to critical mental health and SUD treatment. (House Energy & Commerce Committee)
• New Markets Tax Credit: 
  The bill does not extend the New Markets Tax Credit (NMTC) that promotes community development and economic growth by attracting private investment in low-income communities with high unemployment and poverty. (House Ways & Means Committee)
• Energy Infrastructure on International Boundaries:
  The bill would create an expedited permitting process for pipelines and electric transmission facilities that cross an international border of the United States where a certificate crossing from the Federal Energy Regulatory Commission (FERC) can be obtained for a $50,000 fee, which could preempt county permitting/zoning authority. (House Energy & Commerce Committee)
• Supplemental Nutrition Assistance Program (SNAP):
  The bill increases the state and county administrative cost share from 50 to 75 percent, imposes a new benefit cost share for states and expands work requirements for certain program recipients. We estimate that this could raise the annual administrative cost share by $1.4 billion for counties in the 10 states where we administer SNAP.  (House Agriculture Committee)
• Sequestration: 
  According to estimates from the Congressional Budget Office, the legislation will trigger spending cuts through sequestration of some mandatory funding, putting the Social Services Block Grant (SSBG) and Promoting Safe and Stable Families (PSSF) funds at risk of elimination without additional action from Congress.
   

Other County Impacts

• SALT Deduction:
  The State and Local Tax (SALT) deduction cap would increase to $40,000 for individuals making under $500,000 in annual modified adjusted gross income (MAGI), and $20,000 for married individuals filing returns separately making under $200,000 in annual MAGI. The income threshold would increase by 1 percent each year through 2033 but the increased SALT cap would phase out by 30 percent for income in excess these limits until the cap returns to $10,000 or $5,000 depending on the filer. This provision offers partial relief to homeowners and takes a step towards restoring our federalist tax code. (House Ways & Means Committee)
• Elective Pay for Clean Energy:
  While counties can still use elective pay for clean energy projects, the bill rolls back eligibility for some key tax credits. (House Ways & Means Committee)
• Spectrum Auctions:
  The bill reauthorizes the FCC’s spectrum auction authority, raising concerns for counties that rely on key frequencies for broadband and public safety. (House Energy & Commerce Committee)
• Medicaid Provisions:
  • Shortened Presumptive Eligibility:
    The bill would cut retroactive Medicaid coverage from three to one month, which may increase delays in care and financial strain on county health systems. (House Energy & Commerce Committee)
  • New Verification and Redetermination Requirements:
    The bill adds several new administrative requirements that will increase the burden on counties, particularly in states where counties are responsible for Medicaid eligibility operations. These include monthly address checks beginning in 2029, quarterly death checks for enrollees starting in 2028, monthly provider eligibility and death screenings starting in 2028, and twice-yearly eligibility redeterminations beginning in 2026.
  • Provider Tax Restrictions:
    The bill limits states’ ability to levy provider taxes that help finance Medicaid, threatening funding stability for county-operated health services. (House Energy & Commerce Committee)
• IRA Funds Rescinded:
  The bill rescinds $262 million in unobligated IRA funds, potentially reducing county access to energy efficiency and conservation grants as well as certain transportation funding. (House Energy & Commerce Committee; House Transportation & Infrastructure Committee)
• Opportunity Zones: 
  The bill extends and revises the Opportunity Zones tax incentive program that provides tax incentives for investments in designated distressed neighborhoods, or qualified opportunity zones. (House Ways & Means Committee)
• Highway Trust Fund:
  The bill requires states—not counties—to collect annual registration fees on electric vehicles ($250 per year) and hybrid vehicles ($100 per year) to ensure that these vehicles pay into the Highway Trust Fund. (House Transportation & Infrastructure Committee)
• Air Traffic Control:
  The bill invests in upgrades to air traffic control systems at airports across the country, which would likely include some county-owned airports. (House Transportation & Infrastructure Committee)
• Child Tax Credit:
  Expands the Child Tax Credit from the current $2000 level to $2500 until 2028 and returns to $2000 after. However, the bill requires both parents and all children to be a U.S. citizen and have a social security number and does not address the credit’s phase in, leaving nearly 20 million children from low-income families from receiving the full credit. (House Ways & Means Committee)

NACo is monitoring the reconciliation process and will continue to keep members updated.