On February 9, 2018, the Senate approved 71-28 the Bipartisan Budget Act of 2018, a bill to set spending levels for two years, keep the government funded through March 23 while detailed appropriations for the remainder of FY 2018 are completed, and to lift the federal debt limit until March 1, 2019. The bill also includes extensions of tax extender provisions, disaster relief tax provisions, and health care policy changes (detail below). Shortly following the Senate vote, the House voted 240-186 to approve the deal, sending the legislation to President Trump to end a brief government shutdown that began at midnight.

The agreement was first announced last Thursday by Senate Majority Leader Mitch McConnell (R-KY) and Democratic Leader Chuck Schumer (D-NY), who negotiated a deal addressing priorities of both parties in the wake of a previous government funding disagreement that shut down the government for three days in January.

Previous budget legislation set 2018 discretionary spending limits at $549 billion for defense and $516 billion for non-defense. The bill would increase defense spending by $80 billion for FY 2018, to $629 billion; and by $85 billion for FY 2019, to $647 billion. Non-defense spending would be increased by $63 billion for FY 2018, to $579 billion; and by $68 billion for FY 2019, to $597 billion.

Tax provisions in the Bipartisan Budget Act have a net total cost of $17.4 billion, with disaster tax relief totaling $456 million, tax extenders about $15 billion, and other tax provisions nearly $2 billion, according to the Joint Committee on Taxation.

In a Statement of Administration Policy, the Trump administration expressed support for the bill but expressed concern "with future extensions of special interest tax deductions and benefits in the wake of tax cuts and reforms that were enacted in December 2017."

Disaster relief

Disaster relief provisions include an extension of the relief provided for last September in the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (H.R. 3823) to disaster areas with respect to Hurricanes Harvey, Irma, and Maria declared beyond the timeframe of that bill. Disaster tax relief benefits would also be provided for those affected by California wildfires, and include: an exception to the 10% early retirement plan withdrawal penalty for qualified disaster relief distributions; a tax credit for 40% of wages (up to $6,000 per employee) paid by a disaster-affected employer to an employee from a core disaster area; temporary suspension of the limitations on the deduction for charitable contributions associated with qualified disaster relief; and elimination of the current law requirements that personal casualty losses must exceed 10% of Adjusted Gross Income to qualify for deduction.

Tax provisions

Tax extender provisions that would be generally extended for one year, for 2017, under the bill include:

— Exclusion from gross income of discharge of qualified principal residence indebtedness
— Mortgage insurance premiums treated as qualified residence interest
— Above-the-line deduction for qualified tuition/related expenses
— Indian employment tax credit
— Railroad track maintenance credit
— Mine rescue team training credit
— Classification of certain race horses as 3-year property
— 7-year recovery period for motorsports entertainment complexes
— Accelerated depreciation for business property on an Indian Reservation
— Election to expense mine safety equipment
— Special expensing rules for certain productions
— Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
— Special rule on qualified timber gain
— Empowerment Zone tax incentives
— American Samoa Economic Development Credit
— Credit for nonbusiness energy property
— Credit for new qualified fuel cell motor vehicles
— Credit for alternative fuel vehicle refueling property
— Credit for 2-wheeled plug-in electric vehicles
— Second generation biofuel producer credit
— Biodiesel and renewable diesel incentives
— Production credit for Indian coal facilities
— Credits with respect to facilities producing energy from certain renewable resources
— Credit for energy-efficient new homes
— Special allowance for second generation biofuel plant property
— Energy efficient commercial buildings deduction
— Special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities
— Excise tax credits relating to alternative fuels.

The credit for residential energy would be extended for property placed in service prior to 2022, subject to a reduced rate of 26% for property placed in service during 2020 and 22% for property placed in service during 2021. The Oil Spill Liability Trust Fund financing rate would be reinstated on the first day of the first month after enactment.

The extension and phase-out of the energy credit provision would generally harmonize the expiration dates and phase-out schedules for different properties: the 30% Investment Tax Credit (ITC) for solar energy, fiber optic solar energy, qualified fuel cell, and qualified small wind energy property would be available for property the construction of which begins before 2020 and is then phased out for property the construction of which begins before 2022. The 10% ITC for qualified microturbine, combined heat and power system, and thermal energy property is made available for property the construction of which begins before 2022.

The bill also includes modifications of the advanced nuclear power production credit, modifications of the cover over of rum excise taxes, and enhancement of the carbon dioxide sequestration credit.

Another provision states that the provisions contained within the Craft Beverage Modernization and Tax Reform Section of the Tax Cuts and Jobs Act shall be not construed to preempt, supersede, or otherwise limit or restrict any State, local, or tribal law that prohibits or regulates the production or sale of distilled spirits, wine, or malt beverages.

The bill also includes provisions addressing a clarification regarding the excise tax based on investment income of private colleges and universities and an exception from the private foundation excess business holding tax for independently operated philanthropic business holdings.

Health care

The bill extends funding for the Children's Health Insurance Program (CHIP) through fiscal year 2027; extends funding for Community Health Centers for fiscal year 2018 and fiscal year 2019; extends the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) Program through 2022; repeals the Independent Payment Advisory Board (IPAB); incorporates elements of the CHRONIC Care Act, and funds many expired Medicare "extenders," along with other items.

Other key health care provisions include:

— Medicare payment cap repeal for outpatient therapy services, beginning January 1, 2018
— Temporary increase in ambulance fee schedule rates and add-on payments through December 31, 2022
— Inpatient hospital payment adjustments for certain low-volume hospitals beginning September 30, 2022
— Medicare-Dependent Hospital (MDH) Program extension through September 30, 2022
— Home health rural add-on payment extension for 2018
— Independent at Home Demonstration Program extension for by two years
— Expanded use of telehealth for those with end stage renal disease (ESRD) and individuals with stroke, beginning January 1, 2019, and for MA enrollees and Accountable Care Organizations (ACOs) starting in 2020
— Expansion of Medicare Advantage (MA) Special Needs Plans for vulnerable populations
— Expansion of supplemental benefits for chronically ill MA enrollees beginning in 2020
— Temporary transitional payment for Home Infusion Therapy beginning on January 1, 2019 and for certain radiation therapy services
— Modification to the Medicare Stark Rule
— Removal of the Medicare rental cap for durable medical equipment for speech generating devices
— Funding for the National Health Service Corps for fiscal years 2018 and 2019
— Funding for Teaching Health Centers that operate GME Programs for fiscal years 2019 and 2019
— Special Diabetes Program extension for fiscal years 2018 and 2019
— Home Health payment system reforms starting in 2020
— Access to Medicare intensive cardiac rehabilitation programs
— Blended site neutral payment rate for long-term care hospital discharges through fiscal year 2019
— Recognition of attending Physician Assistants (PAs) as attending physicians to serve hospice patients
— Allowing PAs, Nurse Practitioner and Clinical Nurse Specialists to supervise cardiac, intensive cardiac, and pulmonary rehabilitation programs, beginning in January 1, 2024.

The bill also contains several health-specific offsets, which include:

— Reducing the amount of funding for the Prevention and Public Health Fund by $12.7 billion
— Closing the "donut hole" for seniors by increasing drugmakers' share of costs for patients in the Medicare Part D coverage gap to 70%
— Revisions to the physician fee schedule
— Payment adjustments for other services and facilities
— Adjustments to Medicare premium subsidies for higher-income beneficiaries
— Rescinding funding for the Medicaid and Medicare Improvement Funds.

The overarching agreement also frees up $6 billion in funding to respond to the nation's opioid crisis and an additional $2 billion in funding for the National Institutes of Health (NIH).

Joint Select Committees

The bill would establish two Joint Select Committees. A Joint Select Committee on Solvency of Multiemployer Pension Plans will be made up of 16 members to be appointed by House and Senate leaders and must report a bill to improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation by the final week of November 30, 2018. A Joint Select Committee on Budget and Appropriations Process reform must vote on a report and proposed legislative language to carry out the recommendations of the report by November 30, 2018.

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