Limits of Budget Reconciliation Under the Byrd Rule’s “Merely Incidental” Test

The recurring temptation in Congress is to turn one broken process into a vehicle for fixing another, whether that means nuking the filibuster or treating budget reconciliation as a substitute for regular order.

Senate Republicans want to pass a roughly $72 billion reconciliation bill funding U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection—the two remaining pieces of Department of Homeland Security funding that could not be enacted through the annual appropriations process.

Reconciliation is not categorically limited to taxes or entitlement programs. It can also fund programs ordinarily handled through annual appropriations, so long as the funding is structured as mandatory spending—which in itself can create other fiscal problems—and moves through the proper authorizing committee.

Reconciliation is a fast-track procedure created by the Congressional Budget Act of 1974. It was originally designed to bring spending, revenue, and debt-limit laws into conformity with the budget resolution, and in particular to ease passage of deficit-reduction legislation. Over time it has become a broader vehicle for fiscal legislation—changes in taxing, spending, and debt-limit law—regardless of whether those changes reduce the deficit.

Its importance comes from the expedited procedures, including limited debate, under which reconciliation bills are considered. A unified majority can pass one without first securing the three-fifths vote ordinarily needed to invoke cloture and overcome the filibuster. In plainer terms, reconciliation lets the party in power move major legislation to a final vote with only a bare majority.

That privilege creates an obvious incentive. So long as the filibuster remains in place, Senate majorities will try to put as much as possible into reconciliation bills, especially when they cannot pass the same policies through regular order. If reconciliation is not limited to budgetary matters, it becomes less a budget process than a standing exception to regular order in the Senate. The Senate, therefore, needed a gatekeeping function for deciding what belongs in reconciliation and what does not.

The Senate responded to that pressure by adopting the Byrd Rule, named for Sen. Robert Byrd (D-W.Va.). The rule rests on a simple premise, even if its deeper rationale is contested: Reconciliation gets special treatment because it is supposed to be a budget process. If a provision is not sufficiently budgetary, it is “extraneous” and vulnerable to a point of order. It is the principal mechanism keeping reconciliation from becoming a general-purpose substitute for the Senate’s normal procedures.

The Byrd Rule applies only in the Senate. The House has no equivalent, but must still account for it, since any reconciliation bill has to survive Senate consideration. A provision that passes the House can still be stripped in the Senate if it violates the rule.

Most public fights do not turn on the easy cases. A provision that spends money, raises revenue, reduces direct spending, or changes a tax rate has an obvious budgetary character. A provision that produces no change in outlays or revenues—whether directly or by changing the terms or conditions under which money is spent or collected—is generally out if challenged. The hard questions are found in the middle, where a provision affects spending or revenues but also makes a significant policy change.

That middle ground is governed by the Byrd Rule’s “merely incidental” test—2 U.S.C § 644(b)(1)(D)—which is simultaneously the most important and the most controversial component of the Byrd Rule. The “merely incidental” test makes a provision extraneous if it “produces changes in outlays or revenues which are merely incidental to the nonbudgetary components of the provision.” The question is not whether a provision has some budgetary effect, because almost any serious policy change does. The issue is whether the budgetary effect is substantial enough, and connected closely enough to the provision, that the provision can fairly be treated as budgetary rather than as ordinary policy riding inside a privileged budget vehicle.

In practice, nine principles help draw that line:

• The core inquiry is a balancing of budgetary against nonbudgetary effects. Before the more specific principles come into play, the office weighs a provision’s budgetary effects against its policy effects. The key point is that even very large budgetary effects can be “merely incidental” if the policy effects are significant enough. That is why proposals to grant lawful permanent resident status through reconciliation failed despite their large benefits-related costs, and why the parliamentarian initially rejected outright repeal of the Affordable Care Act’s coverage mandates even though the combined individual and employer mandate repeals were projected to save roughly $147 billion over ten years.
• Direct budgetary effects are stronger than indirect ones. A provision that appropriates money, changes eligibility for federal spending, or alters taxes is on firmer ground than one that changes private conduct and only later produces fiscal consequences. That is why broad policy mandates on private actors, such as a minimum-wage increase, have run into serious Byrd Rule problems even when their budgetary effects are measurable.
• Voluntary provisions are easier to defend than mandates on private parties. Congress has broad room to spend money, adjust tax credits, or attach conditions to federal funds; using reconciliation to command private actors to behave differently is much harder to justify as budget legislation. The distinction is not airtight. Tax provisions are themselves coercive yet routinely permitted, and Congress can sometimes use taxes or subsidies to approximate a mandate, which makes the line easier to work around than it first appears.
• Changes to existing programs are easier to defend than the creation of new ones. While reconciliation is well suited to adjusting the dials of federal taxing and spending, it is less suited to creating or eliminating policy structures and arguing that the budgetary consequences carry the whole thing through on a simple majority. Though the line between “modifying” and “eliminating” is blurry. The parliamentarian advised that outright repeal of the individual mandate was impermissible, but that zeroing out its penalty complied—essentially leaving the speed limit in place, but eliminating the penalty of a ticket for speeding. It is a distinction more of form than of practical effect.
• Targeting matters. A provision that appears designed to benefit or punish a particular entity, or a narrow class of entities, looks less like budget legislation and more like a policy judgment using reconciliation as a delivery mechanism. The narrower the target, the harder it is to defend.
• Conditional spending is permitted, and marks the permissive edge. Congress can attach conditions, even multiple conditions, to funds it appropriates, and a condition that looks like a grafted-on regulatory requirement is generally acceptable. When the Inflation Reduction Act tied its energy tax credits to paying prevailing wages, that requirement was challenged as “merely incidental” but upheld. Reconciliation generally cannot impose a regulatory mandate (i.e.a direct command to private parties), but it can fund programs and attach conditions to that funding. A regulatory requirement attached as a spending condition will usually survive.
• Subject matter still matters. Apart from the rule’s express bar on Social Security changes, there is no comprehensive list of forbidden topics. But some subjects are especially hard to move because their central effect is not budgetary, immigration status and criminal law among them. Pro-life provisions are more complicated: defunding language has appeared in prior reconciliation bills, but it may still face problems if drafted too narrowly rather than as a general budgetary limitation.
• Political controversy causes controversy. In closer cases, a provision’s divisiveness can count against it, even though the rule’s text says nothing about controversy. The parliamentarian’s rejection of Hyde Amendment restrictions is one example. The difficulty is that there is no administrable definition of “controversial,” which exposes the office to charges of arbitrary decision-making.
• Precedent matters. The rule is not applied in a vacuum; past rulings and prior bills shape what later Congresses can plausibly argue. But not all precedents are equal. A formal Senate vote or ruling from the chair carries more weight than informal guidance, and Byrd bath and staff-level guidance are not the same as formal precedent. The mere fact that similar language appeared in a prior bill does not prove it is permissible, especially if no senator raised a point of order and the provision was never actually tested.

That is why restraint matters even when the immediate policy goal is appealing. Policymakers must remember that anything that can be done through reconciliation can be undone through it. A majority that stretches the process today may be writing the procedural playbook for a future majority it does not control.

That institutional responsibility ultimately belongs to senators, not to the parliamentarian. The parliamentarian is often treated as the ultimate arbiter. However, the parliamentarian is not a judge, as judges have independent authority to enforce the rules.

The Byrd Rule is not self-enforcing. A senator must raise a point of order, the parliamentarian advises the chair on how Senate rules and precedents apply, the presiding officer rules, and, if necessary, the full Senate decides whether to uphold or overturn that ruling on appeal.

Senators cannot outsource responsibility for reconciliation to the parliamentarian. The parliamentarian’s advice is important because the Senate has chosen to treat precedent and procedural consistency as valuable. But the Senate itself owns the process. Senators can waive the Byrd Rule with the required supermajority, or they can choose to ignore institutional limits and bear the consequences.

The question, then, is not whether the application of reconciliation can be stretched. It can be. And both parties have incentives to stretch it whenever they hold power. The real question is whether senators want reconciliation to remain a limited budget process or become the latest workaround for a Senate that no longer wants to do the harder work of legislating.