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This proposed rule would update existing regulations to address a loophole in a regulatory statistical test applied to State proposals for Medicaid tax waivers. The test is designed to ensure, as required by statute, that non-uniform or non-broad based health care-related taxes, authorized under a waiver, are generally redistributive. Some States have exploited this loophole to establish tax schemes that generate significant State budget windfalls from Federal Medicaid funds, often without providing additional Medicaid services, increasing quality of care, or improving health outcomes. Nearly all of these existing loophole taxes are associated with managed care organizations, and have been increasing in recent years. The proposed updates would better implement the statutory requirements and strengthen the fiscal integrity of the Medicaid program by adding additional safeguards to ensure that tax waivers that exploit the loophole are not approvable. These changes, if finalized, would end current tax loophole schemes, resulting in significant savings to the federal government.