CMS Releases Healthcare Tax Final Rule

On January 29, 2026, the Centers for Medicare and Medicaid Services (CMS) posted the Medicaid Program; Preserving Medicaid Funding for Vulnerable Populations- Closing a Health Care-Related Tax Loophole final rule to the Federal Register. This rule codifies concepts initially introduced in the May 15, 2025 proposed rule under the same name, then enacted into the federal statute with passage of the Working Families Tax Cut Law (WFTCL), also known as HR1 or the One Big Beautiful Bill.

The rule is being finalized with meaningfully similar intent to the proposed rule, on which LeadingAge submitted comments, which suggested limiting states' abilities to use waivers of uniformity or broad basedness to unduly burden the Medicaid program. From the inception of provider taxes, their purpose was to be 'generally redistributive' to state Medicaid programs, meaning the burden of the tax falls on a broad scope of providers or services, not only those in or participating in Medicaid. In the final rule, CMS takes additional steps in the definitions section to outline instances of taxes that do not meet generally redistributive principles. CMS added two nursing facility taxes to its analysis of non-compliance, but provided no other information in the body in the rule. LeadingAge is working to get more information about this and will report out when we know more.

Additionally, the rule finalizes slightly more generous timelines for state compliance efforts on taxes currently presumed out of compliance than was offered in their November 14 "Dear Colleague" letter. The earliest compliance date is now January 1, 2027 for taxes on managed care organizations with waivers approved within the last two years. Other taxes see slightly longer runways. The effective date of the rule is April 3, 2026.

LeadingAge will continue to review the rule and provide more comprehensive analysis in the coming days. The rule is available for review here.