Last Wednesday, the House of Representatives pulled an all-nighter to pass House Resolution 1, dubbed the “One Big Beautiful Bill Act” by President Trump and Republican members. The bill passed out of the Rules Committee at 1:45 am on Thursday, May 22, and passed the floor vote mostly along party lines with a one-vote majority (215-214).
The bill advances President Trump’s tax agenda by mostly extending provisions of the Tax Cuts and Jobs Act (TCJA), which would primarily benefit the top 20% of households. If passed, the bill would add an additional $3.8 trillion to federal deficits by 2034. To offset these cuts, the reconciliation bill includes devastating cuts of over $700 billion to Medicaid and nearly $300 billion to SNAP, which will impact the most vulnerable households in the US.
What NCRC Members Need to Know
There are a few provisions in the bill that relate to our NCRC members’ community development priorities and could directly impact low- to moderate-income (LMI) communities, as outlined below.
Expansion of the Low-Income Housing Tax Credit (LIHTC)
The House reconciliation bill includes provisions to expand the Low-Income Housing Tax Credit, which incentivizes private investors to finance the development of more affordable housing rental units. The bill, as outlined by the Affordable Housing Tax Credit Coalition, would specifically:
- Restore the 12.5% LIHTC allocation increase for 2026 through 2029.
- Lower the 50% private activity bond threshold test to 25% for obligations made after December 31, 2025 and before January 1, 2030.
- Provide a 30% basis boost for buildings constructed in rural and Native American communities placed in service after December 31, 2025 and before January 1, 2030.
If enacted, these housing credit provisions would provide $14.1 billion in funding for the LIHTC program and either create or preserve over 527,000 affordable homes over the next 10 years.
Increasing Child Tax Credit to $2,500
The One Big Beautiful Bill Act temporarily expands the Child Tax Credit (CTC) from $2,000 to $2,500 through 2028. The bill also includes a new provision that would require both the child and the parent to have a Social Security number to receive the tax credit. The bill also permanently extends the phase-out of CTC, starting at $200,000 for single parents and $400,000 for married couples. Overall, the expansion would cost $797 billion from 2025 through 2034. Despite being drafted as a temporary four-year expansion, many fiscal policy observers project that a short-term CTC expansion would ultimately be extended or become permanent.
New Savings Accounts for Children
The House reconciliation package proposed giving every child (who has a Social Security number) born between 2026 and 2029 a savings account of $1,000 with annual tax-free contributions of up to $5,000 from individuals, states, and local governments. These “Trump Accounts” would compound with interest and be accessible to children at the age of 18. These savings accounts are not the same as baby bonds, as baby bonds are progressive in design, with lower-income individuals receiving greater investments in order to meaningfully address the racial wealth gap. The $1,000 universal payment is not enough to address wealth inequities and may even reinforce economic inequality by providing opportunities for affluent families to transfer their generational wealth.
Changing Opportunity Zones
The reconciliation bill would sunset the current iteration of Opportunity Zones (OZs) two years early, and would create a new set of OZs starting in January 2027 that would extend until December 2033. There are several major changes with OZs being proposed:
- The wording of the new provision may discourage new investment in existing OZs during the remainder of 2025 and 2026.
- The new group of OZs would have to be rural, with investors receiving a significantly higher tax reduction (30% in rural zones versus 10% in other zones) in their capital gains for these investments.
- The bill would narrow the eligibility criteria for OZs, which could result in 30% fewer OZs, with the new threshold of $10,000 in ordinary income being so low that most OZs will not bother soliciting investments.
These provisions would incentivize investors to turn their sights to rural areas, likely to the detriment of urban communities that rely on this program for community development. However, OZs may not be the best tool to encourage equitable investment, as evidence shows that they incentivize investment in areas that are already higher-income and may even accelerate gentrification in LMI communities.
Slashing CFPB Funding
The House’s reconciliation bill slashes the budget for the Consumer Financial Protection Bureau (CFPB), reducing it from $755.1 million to a meager $249 million in 2025. Additionally, a new provision would require the CFPB to transfer any money remaining in its Civil Penalty Fund to the Treasury Department’s general fund, thereby leaving no funds for the CFPB to give to victims of financial fraud in future cases. In her recent Rules Committee testimony, House Financial Services Committee Ranking Member Rep. Maxine Waters, (D-CA), condemned the Republican plan to cut CFPB funding:
“This budget scheme will … put the agency’s crucial work – like cracking down on illegal junk fees, tackling discrimination in housing, and protecting servicemembers and students from scams – to a grinding halt,” Rep. Waters said.
Failure to Extend the New Markets Tax Credit (NMTC)
The House reconciliation bill did not include an extension of the New Markets Tax Credit program under the Treasury Department’s CDFI Fund, which is set to expire at the end of 2025. Since 2003, the NMTC program has deployed more than $135 billion in capital to low-income communities to develop thousands of health centers and community facilities. There is currently a standalone bill in both chambers of Congress that would permanently extend the NMTC program, which has major bipartisan support.
Provision Penalizing Nonprofits Is No Longer in the Package
In an earlier version of the reconciliation package, the measure included a provision that would have given the Treasury Secretary broad powers to strip nonprofit organizations of their tax-exempt status by designating them as terrorist-supporting organizations. This measure is similar to an earlier bill known as the Stop Terror-Financing and Tax Penalties on American Hostages Act, or H.R. 9495, which raised concerns among several of our members and other nonprofits about the ability to punish groups that speak out against the administration. This provision has been removed from the current reconciliation package.
What Happens Next?
The House-passed package will now go to the Senate, where senators will advance their own priorities. The two chambers will eventually need to agree on the same version of the measure before it can be signed into law. The target timeline for passage in the Senate is early July.
Reconciliation is not subject to the filibuster, meaning the bill could pass the Senate with a majority vote without any support from Democrats. However, the Senate GOP majority is so slim that the Senate Majority Leader can only afford to lose three Republican votes. Currently, more than three GOP senators have publicly expressed concerns with the bill.
Here are some key provisions of interest for NCRC members to pay attention to in the Senate:
- The CFPB funding provision is likely to be challenged before the Parliamentarian as it may violate the Byrd Rule, which does not allow for provisions that do not directly impact the budget to be included in reconciliation legislation. However, the Chairman of the Senate Banking, Housing and Urban Affairs Committee, Sen. Tim Scott (R-SC), introduced a bill during the last Congress that would have subjected the CFPB to the appropriations process, indicating that he will likely support these cuts.
- The Child Tax Credit expansion is likely to pass the Senate due to its wide appeal among constituents in both Democratic and Republican districts. Additionally, Senator Josh Hawley (R-MO) stated that he would like to double the Child Tax Credit, but would vote for anything higher than the $2,500 amount the House has currently set.
- The LIHTC expansion is likely to be included in the Senate bill due to its wide bipartisan support. The standalone bill, the Affordable Housing Credit Improvement Act, had 30 original cosponsors in the Senate and has support evenly split among Democrats and Republicans.
- Opportunity Zones may be further expanded or amended by the Senate, as the Chairman Tim Scott (R-SC) has been a vocal proponent of OZs.
- The Neighborhood Homes Investment Act, a bill that incentivizes home developers to build and renovate homes in distressed neighborhoods, was not included in the House reconciliation bill, but is anticipated to be included in the Senate package.
Manan Shah and Lauren Wolters are Government Affairs Associates with NCRC’s Policy team.
Photo by Julius Tejeda via Pexels.
