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Page 17 – CMCS Informational Bulletin other taxpayer or tax rate group explicitly defined by its relatively higher volume or percentage of Medicaid taxable units. The tax would also not be considered generally redistributive if, within a permissible class, the tax rate imposed on any taxpayer or tax rate group based upon its Medicaid taxable units is higher than the tax rate imposed on any taxpayer or tax rate group based upon its non-Medicaid taxable units. Finally, a tax is not considered generally redistributive if it accomplishes the same effect as the first two provisions by identifying a taxpayer or tax rate group based on or defined by any description, including without explicitly naming Medicaid. Section 71117(c) provides authority to the Secretary to grant a transition period for states to come into compliance with section 71117, not to exceed 3 years. On November 14, 2025, CMS sent a letter41 to states outlining preliminary guidance on section 71117 (and section 71115, discussed previously), specifically the transition periods CMS is providing in accordance with section 71117(c). In the letter, we note these are the minimum transition periods that may be available; final policies will depend on the contents of notice and comment rulemaking. Under section 71117(b), the amendments made by this section are applicable to all states and the District of Columbia; they do not apply to the territories. Section 71118. Requiring Budget Neutrality for Medicaid Demonstration Projects under Section 1115 Under long-standing practice, CMS will not approve a demonstration project under section 1115 of the Act unless the project is expected to be budget neutral to the federal government. Currently, the CMS Office of the Actuary (OACT) does not play a role in determining whether a project is expected to be budget neutral; CMS determines budget neutrality for each project. Section 71118 adds budget neutrality as a new statutory requirement in subsection (g) of section 1115 of the Act. New subsection 1115(g) states that, beginning January 1, 2027, the Secretary may not approve an application for (or an amendment or renewal of) a Medicaid section 1115 demonstration project unless the CMS Chief Actuary certifies that such project is not expected to result in an increase in the amount of federal expenditures compared to the amount that such expenditures would otherwise be in the absence of such project. CMS expects to provide additional guidance to states on implementation of this provision. Section 1115(g) of the Act, as added by section 71118, is applicable to all states, the District of Columbia, and the territories. 41 https://www.medicaid.gov/medicaid/downloads/providertax_dcl_11142025.pdf