On Tuesday, after more than a full day of votes on proposed amendments, the Senate amended and passed H.R. 1, the “One Big Beautiful Bill” by a 51-50 margin, with Vice President J.D. Vance breaking the tie. The bill returns to the House for a vote on the modified legislation.
The following key changes were made in the Senate to the final bill:
SALT Cap Deduction. The Senate modified the State and Local Tax (SALT) Cap Deduction from the House bill. Under this legislation, the SALT cap deduction is $40,000 for married couples earning less than $500,000 annually, rising annually by 1%. The Senate added a five-year sunset provision, meaning the SALT cap deduction reverts to $10,000 in 2030. While the League is disappointed with the sunset provision, we are grateful for the short-term relief.
Neighborhood Access Transportation Grants. The Senate version includes a recission of the unobligated portion of the Neighborhood Access and Equity (NAE) grants. Several highway projects in multiple states will not receive funding. Importantly, due to the Senate parliamentarian ruling, the program stays on the books and cities who were awarded these grants still retain their project award designation but lose funding for it. Congress (or states or cities) couldfund these projects again in the near future (potentially in transportation reauthorization or appropriations).
Clean Energy Tax Credits. The final Senate text retains the full tax credit for solar and wind projects (45Y, 48E) that local governments have utilized through the Direct Pay provision for projects that begin construction within one year after enactment. For projects that begin construction after that time, they must be placed in service by the end of 2027 to receive the tax credit. Supply chain requirements related to Foreign Entities of Concern will apply to solar and wind projects that begin construction after Dec. 31, 2025. The final text removes the punitive tax on all solar and wind projects that was added over the weekend. Finally, for clean commercial vehicles (45W), the tax credit terminates for vehicles acquired after Sept. 30, 2025, and for alternative fuel charging (30C), the tax credit terminates for property placed in service after June 30, 2026.
Medicaid. The final Senate text increased the size of a proposed rural hospital relief fund to $50 billion, which was still $50 billion less than requested by Senator Collins (R-Maine) to offset the impact of Medicaid cuts on her state. This is double the size of the previously amended text. The money is to be distributed over the course of five years, but the distribution dates were also pushed up two years, with $10 billion in 2026 and 2027, , $2 billion in 2028 and 2029, and $1 billion in 2030. The Senate text removes several categories of "qualified aliens" who may become eligible for Medicaid under current law. This group includes refugees, asylees, certain abused spouses and children, and victims of trafficking. Legal immigrants who would remain eligible include lawful permanent residents (after a five-year or longer waiting period), certain Cuban and Haitian immigrants, and individuals living in the U.S. via a Compact of Free Association.
Intelligence Preemption. The proposal to preempt state and local regulation of artificial intelligence (AI) for 10 years was stripped from the Senate version of the bill at the eleventh hour. This removal was supported by a 99-1 vote, after negotiations on a 5-year version of the moratorium on state and local AI regulation fell apart. The Senate version of the moratorium also conditioned access to Broadband Equity, Access, and Deployment (BEAD) infrastructure grants on compliance with the moratorium. The House version of the bill included a 10-year moratorium. State and local government organizations have raised concerns that a preemption of authority over artificial intelligence will place residents at risk and hurt the ability of localities to safely and effectively innovate through the use of AI.
House Speaker Johnson has publicly indicated that he wants the House to act on this legislation by July 4. The House Rules Committee favorably reported the legislation, and the full House will consider it this week.
This situation is fluid, and we will report as developments warrant.
Contact: Paul Penna, Director of Government Affairs, ppenna@njlm.org, 609-695-3481, x110.