No official summary available for this bill.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6900 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 6900
To amend the Internal Revenue Code of 1986 to address the nation's
cost-of-living crisis.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 18, 2025
Mr. Thompson of California (for himself, Mr. Larson of Connecticut, Mr.
Davis of Illinois, Ms. Sanchez, Ms. Sewell, Ms. DelBene, Ms. Chu, Ms.
Moore of Wisconsin, Mr. Boyle of Pennsylvania, Mr. Beyer, Mr. Evans of
Pennsylvania, Mr. Schneider, Mr. Panetta, Mr. Gomez, Mr. Horsford, Ms.
Plaskett, Mr. Suozzi, Mr. Bell, Ms. Craig, Ms. DeLauro, Mr. Garamendi,
Mr. Goldman of New York, Ms. Johnson of Texas, Mr. Kennedy of New York,
Ms. Matsui, Ms. McBride, Ms. McDonald Rivet, Mr. McGarvey, Mr. Mrvan,
Mr. Quigley, Ms. Salinas, Ms. Titus, and Ms. Scholten) introduced the
following bill; which was referred to the Committee on Ways and Means,
and in addition to the Committees on Education and Workforce, and
Energy and Commerce, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to address the nation's
cost-of-living crisis.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``American
Affordability Act of 2025''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment is expressed in terms of an
amendment to a section or other provision, the reference shall be
considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--HOUSING AND MUNICIPAL INFRASTRUCTURE
Subtitle A--Low-income Housing Credit
Part 1--Reform of State Allocation Formulas
Sec. 11101. Increases in State allocations.
Part 2--Reforms Relating to Tenant Eligibility
Sec. 11201. Average income test applicability to exempt facility bonds.
Sec. 11202. Codification of rules relating to increased tenant income.
Sec. 11203. Modification of student occupancy rules.
Sec. 11204. Tenant voucher payments taken into account as rent for
certain purposes.
Sec. 11205. Requirement that low-income housing credit-supported
housing protect victims of domestic abuse.
Sec. 11206. Clarification of general public use requirement relating to
veterans, etc.
Part 3--Rules Relating to Credit Eligibility and Determination
Sec. 11301. Reconstruction or replacement period after casualty loss.
Sec. 11302. Modification of previous ownership rules; limitation on
acquisition basis.
Sec. 11303. Certain relocation costs taken into account as
rehabilitation expenditures.
Sec. 11304. Repeal of qualified census tract population cap.
Sec. 11305. Determination of community revitalization plan to be made
by housing credit agency.
Sec. 11306. Prohibition of local approval and contribution
requirements.
Sec. 11307. Increase in credit for certain projects designated to serve
extremely low-income households.
Sec. 11308. Increase in credit for bond-financed projects designated by
State agency.
Sec. 11309. Elimination of basis reduction for low-income housing
properties energy efficient commercial
building deduction.
Sec. 11310. Restriction of planned foreclosures.
Sec. 11311. Increase of population cap for difficult development areas.
Sec. 11312. Increased cost oversight and accountability.
Part 4--Reforms Relating to Native American Assistance
Sec. 11401. Selection criteria under qualified allocation plans.
Sec. 11402. Inclusion of Indian areas as difficult development areas
for purposes of certain buildings.
Part 5--Reforms Relating to Rural Assistance
Sec. 11501. Inclusion of rural areas as difficult development areas.
Sec. 11502. Uniform income eligibility for rural projects.
Part 6--Exempt Facility Bonds
Sec. 11601. Revision and clarification of the treatment of refunding
issues.
Part 7--Reforms Relating to Disabled Veterans
Sec. 11701. Treatment of veteran disability compensation or pension
payments for purposes of low income housing
tax credit and residential rental project
bonds.
Part 8--Reforms Relating to Certain Other Populations
Sec. 11801. Additional housing credit allocations for certain
populations who face unique barriers to
affordable housing.
Part 9--Qualified Contracts and Right of First Refusal
Sec. 11901. Repeal of qualified contract option.
Sec. 11902. Modification and clarification of rights relating to
building purchase.
Subtitle B--Additional Housing Incentives
Sec. 12001. Investment credit for conversion of non-residential
buildings to affordable housing.
Sec. 12002. Neighborhood homes credit.
Sec. 12003. Modification of historic rehabilitation tax credit.
Sec. 12004. Increase of exclusion of gain from sale of principal
residence.
Sec. 12005. Middle-income housing tax credit.
Subtitle C--Affording the American Dream
Sec. 13001. First-time homebuyer refundable tax credit.
Sec. 13002. Refundable credit for rent paid for principal residence.
TITLE II--LOWERING ENERGY COSTS
Subtitle A--Lowering Costs Through an All-of-the-above Energy Policy
Sec. 21001. Clean energy production credit.
Sec. 21002. Clean electricity investment credit.
Sec. 21003. Advanced manufacturing production credit.
Sec. 21004. Repeal of restriction on the extension of advance energy
project credit program.
Sec. 21005. Reversion of construction date for clean hydrogen
production credit.
Sec. 21006. Reversion of termination for residential clean energy
credit.
Sec. 21007. Reinstatement of special rate for sustainable aviation
fuel.
Subtitle B--Lowering Costs Through Energy Efficiency
Sec. 22001. Energy efficient home improvement credit.
Sec. 22002. New energy efficient home credit.
Sec. 22003. Repeal of termination of new energy efficient commercial
buildings deduction.
Sec. 22004. Restoration of cost recovery for energy property.
Subtitle C--Lowering Costs for Electric Vehicles and Charging
Infrastructure
Sec. 23001. Reversion of termination date for previously-owned vehicle
credit.
Sec. 23002. Reversion of termination date for clean vehicle credit.
Sec. 23003. Qualified commercial clean vehicles credit.
Sec. 23004. Reversion of termination date for alternative fuel vehicle
refueling property credit.
Sec. 23005. Credit for certain new electric bicycles.
Subtitle D--Lowering Costs of Clean Infrastructure and Resiliency
Sec. 24001. Qualifying water reuse project credit.
Sec. 24002. Recycling property investment credit.
Sec. 24003. Exclusion of amounts received from State-based catastrophe
loss mitigation programs.
Sec. 24004. Exclusion from gross income of certain emergency
agricultural assistance.
Sec. 24005. Credit for disaster mitigation expenditures.
Sec. 24006. Establishment of electric power transmission line credit.
Sec. 24007. Qualifying advanced battery project credit.
TITLE III--CHILD AND DEPENDENT CARE
Subtitle A--Child Tax Credit
Sec. 31001. Establishment of refundable child tax credit with monthly
advance payment.
Subtitle B--Child and Dependent Care
Sec. 32001. Enhancement of Child and Dependent Care Tax Credit.
Sec. 32002. Increased maximum contribution to dependent care assistance
programs.
Sec. 32003. Credit for working family caregivers.
Sec. 32004. Licensed family child care credit.
Subtitle C--Ensuring Affordable Adoptions
Sec. 33001. Refundable adoption tax credit.
TITLE IV--EDUCATION AND WORKFORCE TRAINING
Subtitle A--Ensuring Affordable Higher Education
Sec. 41001. American opportunity credit expanded to 6 years, made
temporarily fully refundable.
Sec. 41002. Expansion of Pell Grant exclusion from gross income.
Sec. 41003. Expansion of American Opportunity and Lifetime Learning
Credits.
Sec. 41004. Elimination of denial of American Opportunity Tax Credit
for students convicted of a felony drug
offense.
Sec. 41005. Modification of treatment of student loan forgiveness.
Sec. 41006. Student loan interest deduction limitation applied
separately to each spouse.
Subtitle B--Supporting Our Workforce
Sec. 42001. Educator expense deduction to include early childhood
educators.
Sec. 42002. Allowance of deduction for certain expenses of the trade or
business of being an employee.
Sec. 42003. Modification of deduction for cash tips.
Sec. 42004. Deduction for certain overtime compensation.
Sec. 42005. Above-the-line deduction of expenses of performing artists.
Sec. 42006. Permanent extension of earned income credit rules for
individuals without qualifying children.
Sec. 42007. Application of earned income credit to possessions of the
United States.
Sec. 42008. Election to use prior year earned income for earned income
tax credit.
TITLE V--HEALTHCARE
Sec. 50001. Increase in eligibility for health insurance premium
assistance tax credit.
Sec. 50002. Filling the coverage gap.
Sec. 50003. Freeze of premium adjustment percentage increase.
Sec. 50004. Requiring coverage of certain immunizations recommended by
the Advisory Committee on Immunization
Practices.
TITLE I--HOUSING AND MUNICIPAL INFRASTRUCTURE
Subtitle A--Low-income Housing Credit
PART 1--REFORM OF STATE ALLOCATION FORMULAS
SEC. 11101. INCREASES IN STATE ALLOCATIONS.
(a) In General.--Clause (ii) of section 42(h)(3)(C) of the Internal
Revenue Code of 1986 is amended--
(1) in subclause (I), by striking ``$1.75'' and inserting
``the per capita amount'', and
(2) in subclause (II), by striking ``$2,000,000'' and
inserting ``the minimum amount''.
(b) Per Capita Amount; Minimum Amount.--Section 42(h)(3) of the
Internal Revenue Code of 1986 is amended by striking subparagraphs (H)
and (I) and inserting the following:
``(H) Per capita amount.--For purposes of
subparagraph (C)(ii)(I), the per capita amount shall be
determined as follows:
``(i) Calendar year 2026.--For calendar
year 2026, the per capita amount is $4.25.
``(ii) Calendar year 2027.--For calendar
year 2027, the per capita amount is the product
of--
``(I) 1.25, and
``(II) the dollar amount under
clause (i) increased by an amount equal
to--
``(aa) such dollar amount,
multiplied by
``(bb) the cost-of-living
adjustment determined under
section 1(f)(3) for such
calendar year, determined by
substituting `calendar year
2025' for `calendar year 2016'
in subparagraph (A)(ii)
thereof.
If the amount determined after
application of the preceding sentence
is not a multiple of $5,000, such
amount shall be rounded to the next
lowest multiple of $5,000.
``(iii) Calendar years after 2027.--In the
case of any calendar year after 2027, the per
capita amount is the dollar amount determined
under clause (ii) increased by an amount equal
to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for such calendar year,
determined by substituting `calendar
year 2026' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
Any amount increased under the preceding
sentence which is not a multiple of 5 cents
shall be rounded to the next lowest multiple of
5 cents.
``(I) Minimum amount.--For purposes of subparagraph
(C)(ii)(II), the minimum amount shall be determined as
follows:
``(i) Calendar year 2026.--For calendar
year 2026, the minimum amount is $4,876,000.
``(ii) Calendar year 2027.--For calendar
year 2027, the minimum amount is the product
of--
``(I) 1.25, and
``(II) the dollar amount under
clause (i) increased by an amount equal
to--
``(aa) such dollar amount,
multiplied by
``(bb) the cost-of-living
adjustment determined under
section 1(f)(3) for such
calendar year, determined by
substituting `calendar year
2025' for `calendar year 2016'
in subparagraph (A)(ii)
thereof.
If the amount determined after
application of the preceding sentence
is not a multiple of 5 cents, such
amount shall be rounded to the next
lowest multiple of 5 cents.
``(iii) Calendar years after 2027.--In the
case of any calendar year after 2027, the
minimum amount is the dollar amount determined
under clause (ii) increased by an amount equal
to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for such calendar year,
determined by substituting `calendar
year 2026' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
Any amount increased under the preceding
sentence which is not a multiple of $5,000
shall be rounded to the next lowest multiple of
$5,000.''.
(c) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2025.
PART 2--REFORMS RELATING TO TENANT ELIGIBILITY
SEC. 11201. AVERAGE INCOME TEST APPLICABILITY TO EXEMPT FACILITY BONDS.
(a) In General.--Paragraph (1) of section 142(d) is amended--
(1) by striking ``(A) or (B)'' and inserting ``(A), (B), or
(C)'', and
(2) by inserting after subparagraph (B) the following new
subparagraph:
``(C) Average income test.--A project meets the
requirements of this subparagraph if it meets the
minimum requirements of section 42(g)(1)(C).''.
(b) Effective Date.--The amendments made by this section shall
apply to elections made under section 142(d)(1) of the Internal Revenue
Code of 1986 after March 23, 2018.
SEC. 11202. CODIFICATION OF RULES RELATING TO INCREASED TENANT INCOME.
(a) In General.--Clause (i) of section 42(g)(2)(D) is amended by
striking ``clauses (ii), (iii), and (iv)'' and all that follows and
inserting ``clauses (ii), (iii), (iv), and (vi), notwithstanding an
increase in the income of the occupants above the income limitation
applicable under paragraph (1)--
``(I) a low-income unit shall
continue to be treated as a low-income
unit if the income of such occupants
initially was 60 percent or less of
area median gross income and such unit
continues to be rent-restricted, and
``(II) a unit to which, at the time
of initial occupancy by such occupants,
any Federal, State, or local government
income restriction applied, and which
subsequently becomes part of a building
with respect to which rehabilitation
expenditures are taken into account
under subsection (e), shall be treated
as a low-income unit if the income of
such occupants initially was 60 percent
or less of area median gross income and
does not exceed 120 percent of area
median gross income as of the date of
acquisition of the property by the
taxpayer.''.
(b) Exception.--Subparagraph (D) of section 42(g)(2) is amended by
adding at the end the following new clause:
``(vi) Exception to rule relating to
increased tenant income.--In the case of an
occupant of a low-income unit who initially
qualified to occupy such unit by reason of
paragraph (1)(C) with an income in excess of 60
percent of area median gross income but not in
excess of 80 percent of area median gross
income, clause (i) shall be applied for
substituting `80 percent' for `60 percent' each
place it appears.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 11203. MODIFICATION OF STUDENT OCCUPANCY RULES.
(a) In General.--Subparagraph (D) of section 42(i)(3) is amended to
read as follows:
``(D) Rules relating to students.--
``(i) In general.--A unit occupied solely
by individuals who--
``(I) have not attained age 24, and
``(II) are enrolled in a full-time
course of study at an institution of
higher education (as defined in section
3304(f)),
shall not be treated as a low-income unit.
``(ii) Exception for certain federal
programs.--In the case of a federally-assisted
building (as defined in subsection
(d)(6)(C)(i)), clause (i) shall not apply to a
unit all of the occupants of which meet all
applicable requirements under the housing
program described in such subsection through
which the building is assisted, financed, or
operated.
``(iii) Other exceptions.--An individual
shall not be treated as described in clause (i)
if the individual meets the income limitation
applicable under subsection (g)(1) to the
project of which the building is a part and--
``(I) is married,
``(II) is a person with
disabilities (as defined in section
3(b)(3)(E) of the United States Housing
Act of 1937),
``(III) is a veteran (as defined in
section 101(2) of title 38, United
States Code),
``(IV) has 1 or more qualifying
children (as defined in section
152(c)),
``(V) is or has been a victim or
threatened victim of domestic violence,
dating violence, sexual assault, or
stalking (as defined in section 40002
of the Violence Against Women Act of
1994),
``(VI) is or has been a victim of
any form of human trafficking, or
``(VII) is, or was prior to
attaining the age of majority--
``(aa) an emancipated minor
or in legal guardianship as
determined by a court of
competent jurisdiction in the
individual's State of legal
residence,
``(bb) under the care and
placement responsibility of the
State agency responsible for
administering a plan under part
B or part E of title IV of the
Social Security Act, or
``(cc) an unaccompanied
youth (within the meaning of
section 725(6) of the McKinney-
Vento Homeless Assistance Act
(42 U.S.C. 11434a(6))) or a
homeless child or youth (within
the meaning of section 725(2)
of such Act (42 U.S.C.
11434a(2))).
For purposes of subclause (VI), an
individual is or has been a victim of
human trafficking if such individual
was subjected to an act or practice
described in paragraph (11) or (12) of
section 103 of the Trafficking Victims
Protection Act of 2000.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
SEC. 11204. TENANT VOUCHER PAYMENTS TAKEN INTO ACCOUNT AS RENT FOR
CERTAIN PURPOSES.
(a) In General.--Subparagraph (B) of section 42(g)(2) is amended by
adding at the end the following new sentence: ``In the case of a
project with respect to which the taxpayer elects the requirements of
subparagraph (C) of paragraph (1), or the portion of a project to which
subsection (d)(5)(C) applies, clause (i) shall not apply with respect
to any tenant-based assistance (as defined in section 8(f)(7) of the
United States Housing Act of 1937 (42 U.S.C. 1437f(f)(7))).''.
(b) Effective Date.--The amendments made by this section shall
apply to rent paid in taxable years beginning after December 31, 2025.
SEC. 11205. REQUIREMENT THAT LOW-INCOME HOUSING CREDIT-SUPPORTED
HOUSING PROTECT VICTIMS OF DOMESTIC ABUSE.
(a) In General.--Subparagraph (B) of section 42(h)(6) is amended by
striking ``and'' at the end of clause (v), by striking the period at
the end of clause (vi) and inserting ``, and'', and by adding at the
end the following new clause:
``(vii) which--
``(I) prohibits the refusal to
lease to, or termination of a lease by,
a person solely on the basis of
criminal activity directly relating to
domestic violence, dating violence,
sexual assault, or stalking that is
engaged in by a member of the household
of the tenant or any guest or other
person under the control of the tenant,
if the tenant or an affiliated
individual of the tenant is the victim
or threatened victim of such domestic
violence, dating violence, sexual
assault, or stalking, and
``(II) allows prospective, present,
or former occupants of the building the
right to enforce in any State court the
prohibition of subclause (I).''.
(b) Bifurcation.--
(1) In general.--Subparagraph (B) of section 42(h)(6), as
amended by subsection (a), is further amended by adding at the
end the following new flush sentence:
``For purposes of clause (vii)(I), rules similar to the
rules of section 41411(b)(3)(B) of the Violence Against
Women Act of 1994 shall apply with respect to the owner
or manager of a building.''.
(2) Effect of bifurcation.--Paragraph (2) of section 42(g)
is amended by adding at the end the following new subparagraph:
``(F) Treatment of bifurcation in cases of domestic
violence.--In any case in which--
``(i) an occupant is evicted or removed
from a low-income unit because such occupant
has engaged in criminal activity directly
relating to domestic violence, dating violence,
sexual assault, or stalking against an
affiliated individual or other individual on
the basis of criminal activity directly
relating to domestic violence, dating violence,
sexual assault, or stalking, and
``(ii) the lease on such unit is bifurcated
as provided in the last sentence of subsection
(h)(6)(B),
then the remaining occupants of such low-income unit
shall not be treated as a new tenant for purposes of
this section.''.
(c) Clarification of General Public Use Requirement.--Paragraph (9)
of section 42(g) is amended by striking ``or'' at the end of
subparagraph (B), by striking the period at the end of subparagraph (C)
and inserting ``, or'', and by adding at the end the following new
subparagraph:
``(D) who are victims or threatened victims of
criminal activity directly relating to domestic
violence, dating violence, sexual assault, or
stalking.''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to agreements
executed or modified on or after the date that is 30 days after
the date of the enactment of this Act.
(2) Public use requirement.--The amendments made by
subsection (c) shall apply to buildings placed in service
before, on, or after the date of the enactment of this Act.
SEC. 11206. CLARIFICATION OF GENERAL PUBLIC USE REQUIREMENT RELATING TO
VETERANS, ETC.
(a) In General.--Paragraph (9) of section 42(g), as amended by
section 11205, is further amended by adding at the end the following
flush language:
``Any veteran of the Armed Forces shall be treated as a member
of a specified group under a Federal program for purposes of
subparagraph (B).''.
(b) Qualified Residential Rental Projects.--Paragraph (2) of
section 142(d) is amended by adding at the end the following new
subparagraph:
``(F) Clarification of general public use
requirement.--A unit shall not fail to meet the general
public use requirement solely because of occupancy
restrictions or preferences, if such restrictions or
preferences meet the general public use requirement of
section 42.''.
(c) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply to buildings placed in service before, on, or after the
date of the enactment of this Act.
(2) Qualified residential rental projects.--The amendment
made by subsection (b) shall apply to bonds issued before, on,
or after the date of the enactment of this Act.
PART 3--RULES RELATING TO CREDIT ELIGIBILITY AND DETERMINATION
SEC. 11301. RECONSTRUCTION OR REPLACEMENT PERIOD AFTER CASUALTY LOSS.
(a) No Recapture Following Casualty Loss.--Subparagraph (E) of
section 42(j)(4) is amended to read as follows:
``(E) No recapture by reason of casualty loss.--
``(i) In general.--The increase in tax
under this subsection shall not apply to a
reduction in qualified basis by reason of a
casualty loss to the extent such loss is
restored by reconstruction or replacement
within a reasonable period established by the
applicable housing credit agency, not to exceed
25 months from the date on which the qualified
casualty loss arises.
``(ii) Qualified casualty losses.--In the
case of a qualified casualty loss, the period
described in clause (i) may be extended, but
not in excess of 12 months, if the applicable
housing credit agency determines the qualified
casualty arose by reason of an event which was
not discrete to the building and which made a
reconstruction or replacement within 25 months
impractical. In the event the applicable
housing credit agency determines a period in
excess of 25 months is necessary for such
reconstruction or replacement, the compliance
period shall be increased by any such
additional time.
``(iii) Application.--The determination
under paragraph (1) shall not be made with
respect to a property the basis of which is
affected by a qualified casualty loss until the
period described in clause (i) (as modified by
clause (ii), if applicable) with respect to
such property has expired.
``(iv) Qualified casualty loss.--For
purposes of this subparagraph, the term
`qualified casualty loss' means a casualty loss
that is the result of a federally declared
disaster (as defined in section 165(i)(5)).''.
(b) Qualified Basis Following Casualty Loss.--Paragraph (1) of
section 42(c) is amended by adding at the end the following new
subparagraph:
``(F) Qualified basis following casualty loss.--If
a casualty causes the qualified basis of a building in
any year to be less than the qualified basis in the
immediately preceding year then, in the year of such
casualty and each succeeding year until such building
or the units affected by the casualty are reconstructed
or replaced (but only through the last year of the
period permitted for reconstruction or replacement
under subsection (j)(4)(E))--
``(i) the qualified basis of such building
shall be equal to the qualified basis of such
building as of the last day of the year
preceding the year in which such casualty
occurred,
``(ii) if such building is not
reconstructed or replaced by the expiration of
the applicable period for such reconstruction
or replacement under subsection (j)(4), then
the recapture amount provided for in subsection
(j)(1) shall include the amount of any credit
claimed under this section by reason of the
application of clause (i), and
``(iii) a building which was a qualified
low-income building as of the last day of the
year preceding the year in which such casualty
occurred shall not cease to be a qualified low-
income building solely because of such
casualty.''.
(c) Effective Date.--The amendments made by this section shall
apply to casualties occurring after December 31, 2025.
SEC. 11302. MODIFICATION OF PREVIOUS OWNERSHIP RULES; LIMITATION ON
ACQUISITION BASIS.
(a) In General.--Clause (ii) of section 42(d)(2)(B) is amended by
inserting ``, or the taxpayer elects the application of subparagraph
(C)(ii)'' after ``service''.
(b) Limitation on Acquisition Basis.--Subparagraph (C) of section
42(d)(2) is amended--
(1) by striking ``For purposes of subparagraph (A), the
adjusted basis'' and inserting ``For purposes of subparagraph
(A)--
``(i) In general.--The adjusted basis'',
and
(2) by adding at the end the following new clauses:
``(ii) Buildings in service within previous
10 years.--If the period between the date of
acquisition of the building by the taxpayer and
the date the building was last placed in
service is less than 10 years, the taxpayer's
basis attributable to the acquisition of the
building which is taken into account in
determining the adjusted basis shall not exceed
the sum of--
``(I) the lowest amount paid for
acquisition of the building by any
person during the 10 years preceding
the date of the acquisition of the
building by the taxpayer, adjusted as
provided in clause (iii), and
``(II) the value of any capital
improvements made by the person who
sells the building to the taxpayer
which are reflected in such seller's
basis.
``(iii) Adjustment.--With respect to a
basis determination made in any taxable year,
the amount described in clause (ii)(I) shall be
increased by an amount equal to--
``(I) such amount, multiplied by
``(II) a cost-of-living adjustment,
determined in the same manner as under
section 1(f)(3) for the calendar year
in which the taxable year begins by
taking into account the acquisition
year in lieu of calendar year 1992.
For purposes of the preceding sentence, the
acquisition year is the calendar year in which
the lowest amount referenced in clause (ii)(I)
was paid for the acquisition of the
building.''.
(c) Conforming Amendments.--Clause (i) of section 42(d)(2)(D) is
amended--
(1) by striking ``for subparagraph (b)'' in the heading,
and
(2) by striking ``subparagraph (B)(ii)'' in the matter
preceding subclause (I) and inserting ``subparagraph (B)(ii) or
(C)(ii)''.
(d) Modification of Placed in Service Rule.--Clause (iii) of
section 42(d)(2)(B) is amended to read as follows:
``(iii) the building was not owned by the
taxpayer or by any person related (as of the
date of acquisition by the taxpayer) to the
taxpayer at any time during the 5-year period
ending on the date of acquisition by the
taxpayer, and''.
(e) Effective Date.--The amendments made by this section shall
apply to buildings placed in service after December 31, 2025.
SEC. 11303. CERTAIN RELOCATION COSTS TAKEN INTO ACCOUNT AS
REHABILITATION EXPENDITURES.
(a) In General.--Paragraph (2) of section 42(e) is amended by
adding at the end the following new subparagraph:
``(C) Certain relocation costs.--In the case of a
rehabilitation of a building to which section 280B does
not apply, costs relating to the relocation of
occupants, including--
``(i) amounts paid to occupants,
``(ii) amounts paid to third parties for
services relating to such relocation, and
``(iii) amounts paid for temporary housing
for occupants,
shall be treated as chargeable to capital account and
taken into account as rehabilitation expenditures.''.
(b) Effective Date.--The amendment made by this section shall apply
to expenditures paid or incurred after December 31, 2025.
(c) No Inference.--Nothing in the amendment made by this section
shall be construed to create any inference with respect to the
treatment of relocation costs paid or incurred before January 1, 2026.
SEC. 11304. REPEAL OF QUALIFIED CENSUS TRACT POPULATION CAP.
(a) In General.--Clause (ii) of section 42(d)(5)(B) is amended--
(1) by striking subclauses (II) and (III), and
(2) by striking ``Qualified census tract.--
``(I) In general.--The term'',
and inserting ``Qualified census tract.--The term''.
(b) Effective Date.--The amendments made by this section shall
apply to designations of qualified census tracts under section
42(d)(5)(B)(ii) of the Internal Revenue Code of 1986 after December 31,
2025.
SEC. 11305. DETERMINATION OF COMMUNITY REVITALIZATION PLAN TO BE MADE
BY HOUSING CREDIT AGENCY.
(a) In General.--Subclause (III) of section 42(m)(1)(B)(ii) is
amended by inserting ``, as determined by the housing credit agency
according to criteria established by such agency,'' after
``(d)(5)(B)(ii)) and''.
(b) Criteria.--Paragraph (1) of section 42(m) is amended by adding
at the end the following new subparagraph:
``(E) Criteria for determination relating to
concerted community revitalization plan.--For purposes
of subparagraph (B)(ii)(III), the criteria which shall
be established by a housing credit agency for
determining whether the development of a project
contributes to a concerted community development plan
shall take into account any factors the agency deems
appropriate, including the extent to which the proposed
plan--
``(i) is geographically specific,
``(ii) outlines a clear plan for
implementation and goals for outcomes,
``(iii) includes a strategy for applying
for or obtaining commitments of public or
private investment (or both) in nonhousing
infrastructure, amenities, or services, and
``(iv) demonstrates the need for community
revitalization.''.
(c) Effective Date.--The amendments made by this section shall
apply to allocations of housing credit dollar amounts made under
qualified allocation plans (as defined in section 42(m)(1)(B) of the
Internal Revenue Code of 1986) adopted after December 31, 2025.
SEC. 11306. PROHIBITION OF LOCAL APPROVAL AND CONTRIBUTION
REQUIREMENTS.
(a) In General.--Paragraph (1) of section 42(m), as amended by
section 11305, is further amended--
(1) by striking clause (ii) of subparagraph (A) and by
redesignating clauses (iii) and (iv) thereof as clauses (ii)
and (iii), and
(2) by adding at the end the following new subparagraph:
``(F) Local approval or contribution not taken into
account.--The selection criteria under a qualified
allocation plan shall not include consideration of--
``(i) any support or opposition with
respect to the project from local or elected
officials, or
``(ii) any local government contribution to
the project, except to the extent such
contribution is taken into account as part of a
broader consideration of the project's ability
to leverage outside funding sources, and is not
prioritized over any other source of outside
funding.''.
(b) Effective Date.--The amendments made by this section shall
apply to allocations of housing credit dollar amounts made under
qualified allocation plans (as defined in section 42(m)(1)(B) of the
Internal Revenue Code of 1986) adopted after December 31, 2025.
SEC. 11307. INCREASE IN CREDIT FOR CERTAIN PROJECTS DESIGNATED TO SERVE
EXTREMELY LOW-INCOME HOUSEHOLDS.
(a) In General.--Paragraph (5) of section 42(d) is amended by
adding at the end the following new subparagraph:
``(C) Increase in credit for projects designated to
serve extremely low-income households.--In the case of
any building--
``(i) 20 percent or more of the residential
units (determined as if the imputed income
limitation applicable to such units were 30
percent of area median gross income) in which
are designated by the taxpayer for occupancy by
households the aggregate household income of
which does not exceed the greater of--
``(I) 30 percent of area median
gross income, or
``(II) 100 percent of an amount
equal to the Federal poverty line
(within the meaning of section
36B(d)(3)), and
``(ii) which is designated by the housing
credit agency as requiring the increase in
credit under this subparagraph in order for
such building to be financially feasible as
part of a qualified low-income housing project,
subparagraph (B) shall not apply to the portion of such
building which is comprised of such units (determined
in a manner similar to the unit fraction under
subsection (c)(1)(C)), and the eligible basis of such
portion of the building shall be 150 percent of such
basis determined without regard to this
subparagraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to buildings which receive allocations of housing credit dollar amount
after the date of enactment of this Act, or in the case of buildings
that are described in section 42(h)(4)(B) of the Internal Revenue Code
of 1986, for obligations that are part of an issue the issue date of
which is after December 31, 2025.
SEC. 11308. INCREASE IN CREDIT FOR BOND-FINANCED PROJECTS DESIGNATED BY
STATE AGENCY.
(a) In General.--Clause (v) of section 42(d)(5)(B) is amended by
striking the second sentence.
(b) Technical Amendment.--Clause (v) of section 42(d)(5)(B), as
amended by subsection (a), is further amended--
(1) by striking ``State'' in the heading, and
(2) by striking ``State housing credit agency'' and
inserting ``housing credit agency''.
(c) Effective Date.--The amendments made by this section shall
apply to buildings that are described in section 42(h)(4)(B) of the
Internal Revenue Code of 1986, taking into account only obligations
that are part of an issue the issue date of which is after December 31,
2025.
SEC. 11309. ELIMINATION OF BASIS REDUCTION FOR LOW-INCOME HOUSING
PROPERTIES ENERGY EFFICIENT COMMERCIAL BUILDING
DEDUCTION.
(a) Energy Efficient Commercial Buildings Deduction.--Subsection
(e) of section 179D is amended--
(1) by striking ``Reduction.--For purposes'' and inserting
``Reduction.--
``(1) In general.--For purposes'', and
(2) by adding at the end the following new paragraph:
``(2) Exception for affordable housing properties.--
Paragraph (1) shall not apply for purposes of determining
eligible basis under section 42.''.
(b) Effective Date.--The amendments made by this section shall
apply to buildings which receive allocations of housing credit dollar
amount after the date of the enactment of this Act and to buildings
that are described in section 42(h)(4)(B) of the Internal Revenue Code
of 1986 taking into account only obligations that are part of an issue
the issue date of which is after December 31, 2025.
SEC. 11310. RESTRICTION OF PLANNED FORECLOSURES.
(a) In General.--Subclause (I) of section 42(h)(6)(E)(i) is amended
to read as follows:
``(I) on the 61st day after the
taxpayer (or a successor in interest)
provides notice to the Secretary and
the housing credit agency that the
building has been acquired by
foreclosure (or instrument in lieu of
foreclosure) and that the taxpayer
intends the termination of such period,
unless, before such date, the Secretary
or the housing credit agency determines
that such acquisition is part of an
arrangement with the taxpayer a purpose
of which is to terminate such period,
or''.
(b) Conforming Amendment.--The second sentence of clause (i) of
section 42(h)(6)(E) is amended by striking ``Subclause (II)'' and
inserting ``Subclauses (I) and (II)''.
(c) Effective Date.--The amendments made by this section shall
apply to acquisitions by foreclosure (or instrument in lieu of
foreclosure) after December 31, 2025.
SEC. 11311. INCREASE OF POPULATION CAP FOR DIFFICULT DEVELOPMENT AREAS.
(a) In General.--Subclause (II) of section 42(d)(5)(B)(iii) is
amended by striking ``20 percent'' and inserting ``30 percent''.
(b) Effective Date.--The amendment made by this section shall apply
to designations made under section 42(d)(5)(B)(iii) of the Internal
Revenue Code of 1986 after December 31, 2025.
SEC. 11312. INCREASED COST OVERSIGHT AND ACCOUNTABILITY.
(a) In General.--Subparagraph (C) of section 42(m)(1) is amended by
striking ``and'' at the end of clause (ix), by striking the period at
the end of clause (x) and inserting ``, and'', and by adding at the end
the following new clause:
``(xi) the reasonableness of the
development costs of the project.''.
(b) Effective Date.--The amendments made by this section shall
apply to allocations of credits under section 42 of the Internal
Revenue Code of 1986 made after December 31, 2025.
PART 4--REFORMS RELATING TO NATIVE AMERICAN ASSISTANCE
SEC. 11401. SELECTION CRITERIA UNDER QUALIFIED ALLOCATION PLANS.
(a) In General.--Subparagraph (C) of section 42(m)(1), as amended
by section 11312, is further amended by striking ``and'' at the end of
clause (x), by striking the period at the end of clause (xi) and
inserting ``, and'', and by adding at the end the following new clause:
``(xii) the affordable housing needs of
individuals in the State who are--
``(I) enrolled members of a tribe
with respect to an Indian tribal
government (including any agencies or
instrumentalities of an Indian tribal
government and any Alaska Native
regional or village corporation, as
defined in, or established pursuant to,
the Alaska Native Claims Settlement Act
(43 U.S.C. 1601 et seq.)), or
``(II) described in section 801(9)
of the Native American Housing
Assistance and Self-Determination Act
of 1996 (25 U.S.C. 4221(9)).''.
(b) Effective Date.--The amendments made by this section shall
apply to allocations of credits under section 42 of the Internal
Revenue Code of 1986 made after December 31, 2025.
SEC. 11402. INCLUSION OF INDIAN AREAS AS DIFFICULT DEVELOPMENT AREAS
FOR PURPOSES OF CERTAIN BUILDINGS.
(a) In General.--Subclause (I) of section 42(d)(5)(B)(iii) is
amended by inserting before the period the following: ``, and any
Indian area''.
(b) Indian Area.--Clause (iii) of section 42(d)(5)(B) is amended by
redesignating subclause (II) as subclause (III) and by inserting after
subclause (I) the following new subclause:
``(II) Indian area.--For purposes
of subclause (I), the term `Indian
area' means any Indian area (as defined
in section 4(11) of the Native American
Housing Assistance and Self
Determination Act of 1996 (25 U.S.C.
4103(11))) and any housing area (as
defined in section 801(5) of such Act
(25 U.S.C. 4221(5))).''.
(c) Eligible Buildings.--Clause (iii) of section 42(d)(5)(B), as
amended by subsection (b), is further amended by adding at the end the
following new subclause:
``(IV) Special rule for buildings
in indian areas.--In the case of an
area which is a difficult development
area solely because it is an Indian
area, a building shall not be treated
as located in such area unless such
building is assisted or financed under
the Native American Housing Assistance
and Self Determination Act of 1996 (25
U.S.C. 4101 et seq.) or the project
sponsor is an Indian tribe (as defined
in section 45A(c)(6)), a tribally
designated housing entity (as defined
in section 4(22) of such Act (25 U.S.C.
4103(22))), or wholly owned or
controlled by such an Indian tribe or
tribally designated housing entity.''.
(d) Effective Date.--The amendments made by this section shall
apply to buildings placed in service after December 31, 2025.
PART 5--REFORMS RELATING TO RURAL ASSISTANCE
SEC. 11501. INCLUSION OF RURAL AREAS AS DIFFICULT DEVELOPMENT AREAS.
(a) In General.--Subclause (I) of section 42(d)(5)(B)(iii), as
amended by section 11402, is further amended by inserting ``, any rural
area'' after ``median gross income''.
(b) Rural Area.--Clause (iii) of section 42(d)(5)(B), as amended by
section 11402, is further amended by redesignating subclause (III) as
subclause (IV) and by inserting after subclause (II) the following new
subclause:
``(III) Rural area.--For purposes
of subclause (I), the term `rural area'
means any non-metropolitan area, or any
rural area as defined by section 520 of
the Housing Act of 1949, which is
identified by the qualified allocation
plan under subsection (m)(1)(B).''.
(c) Effective Date.--The amendments made by this section shall
apply to buildings placed in service after December 31, 2025.
SEC. 11502. UNIFORM INCOME ELIGIBILITY FOR RURAL PROJECTS.
(a) In General.--Paragraph (8) of section 42(i) is amended by
striking the second sentence.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
PART 6--EXEMPT FACILITY BONDS
SEC. 11601. REVISION AND CLARIFICATION OF THE TREATMENT OF REFUNDING
ISSUES.
(a) In General.--Subparagraph (A) of section 146(i)(6) is amended
to read as follows:
``(A) In general.--During the 12-month period
beginning on the date of a repayment of a loan financed
by an issue 95 percent or more of the net proceeds of
which are used to provide projects described in section
142(d), if such repayment is used to provide a new loan
for any project described in section 142(a)(7) or for
any purpose described in subsection (a)(2)(A) or (b) of
section 143, any bond which is issued to refinance such
issue shall be treated as a refunding issue. Any issue
treated as a refunding issue by reason of the preceding
sentence shall be so treated only to the extent the
principal amount of such refunding issue does not
exceed the principal amount of the bonds refunded.''.
(b) Removal of One-Refunding Limit.--Subparagraph (B) of section
146(i)(6) is amended--
(1) by striking ``4 years'' in clause (i) and inserting
``10 years'',
(2) by striking ``was issued'' in clause (ii) and inserting
``is issued'',
(3) by redesignating clauses (i) (as so amended), (ii) (as
so amended), and (iii) as subclauses (I), (II), and (III),
respectively, and by moving such subclauses 2 ems to the right,
(4) by striking ``Limitations.--Subparagraph (A) shall
apply to only one refunding of the original issue and'' and
inserting ``Limitations.--
``(i) In general.--Subparagraph (A) shall
apply to a bond'', and
(5) by adding at the end the following new clause:
``(ii) Source of loan repayment.--
Subparagraph (A) shall not apply to any
repayment of a loan which is--
``(I) made by a repayment of
another loan, or
``(II) financed by an issue treated
as a refunding issue under subparagraph
(A).''.
(c) Conforming Amendment.--The heading of paragraph (6) of section
146(i) is amended by striking ``residential rental project bonds as
refunding bonds irrespective of obligor'' and inserting ``bonds as
refunding bonds''.
(d) Effective Dates.--
(1) In general.--The amendments made by subsections (a) and
(c) shall apply to refunding issues described in section
146(i)(6)(A) of the Internal Revenue Code of 1986 issued on or
after the date of the enactment of this Act.
(2) Removal of one-refunding limit.--The amendments made by
subsection (b) shall apply to repayments of loans received
after July 30, 2008.
PART 7--REFORMS RELATING TO DISABLED VETERANS
SEC. 11701. TREATMENT OF VETERAN DISABILITY COMPENSATION OR PENSION
PAYMENTS FOR PURPOSES OF LOW INCOME HOUSING TAX CREDIT
AND RESIDENTIAL RENTAL PROJECT BONDS.
(a) In General.--Section 142(d)(2)(B) is amended by adding at the
end the following new clause:
``(v) Veteran disability compensation or
pension.--For purposes of determining income
under this subparagraph, payments of disability
compensation or pension under chapter 11 or 15
of title 38, United States Code, shall be
disregarded.''.
(b) Effective Date.--The amendments made by this section shall
apply to determinations made after the date of the enactment of this
Act.
PART 8--REFORMS RELATING TO CERTAIN OTHER POPULATIONS
SEC. 11801. ADDITIONAL HOUSING CREDIT ALLOCATIONS FOR CERTAIN
POPULATIONS WHO FACE UNIQUE BARRIERS TO AFFORDABLE
HOUSING.
(a) In General.--Section 42 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Additional Allocation for Units for Certain Populations Who
Face Unique Barriers to Affordable Housing.--
``(1) In general.--A housing credit agency may allocate, in
any calendar year, an amount equal to 5 percent of the amount
such housing credit agency may allocate under subsection
(h)(3)(C) to projects which contain a unit described in
paragraph (2).
``(2) Unit described.--A unit is described in this
paragraph if--
``(A) such unit is part of a low-income housing
project,
``(B) the housing credit agency and the owner of
such unit, not later than the first day of the second
year of the credit period of such project, execute a
compliance agreement,
``(C) the taxpayer prioritizes populations who face
unique barriers to affordable housing for occupancy of
such units, and
``(D) the taxpayer, in consultation with covered
service providers, makes available to any resident of
such unit appropriate supportive services during the
compliance period.
``(3) Compliance agreement.--For purposes of paragraph
(2)(B), the term `compliance agreement' means an agreement
which--
``(A) requires the owner of a unit to submit to the
housing credit agency for approval a supportive service
plan for each calendar year during the compliance
period,
``(B) requires the approval of the housing credit
agency with respect to any agreement between such owner
and any covered service provider relating to services
provided pursuant to this subsection, and
``(C) allows the housing credit agency to monitor
compliance with such agreement and with the
requirements of this subsection.
``(4) Populations who face unique barriers to affordable
housing.--For purposes of this subsection, the term
`populations who face unique barriers to affordable housing'
means individuals who are--
``(A) formerly justice-involved individuals,
``(B) current or former foster youths, or
``(C) kinship caregivers.
``(5) Covered service provider.--For purposes of this
subsection, the term `covered service provider' means any
entity with demonstrated experience providing supportive
services to populations who face unique barriers to affordable
housing.
``(6) Formerly justice-involved individual.--For purposes
of this paragraph, the term `formerly justice-involved
individual' means an individual who faces barriers to obtaining
housing as a result of being arrested, charged, or convicted of
any criminal offense.
``(7) Current or former foster youth.--The term `current or
former foster youth' means an individual who was eligible at
any time to receive services under section 477(a) of the Social
Security Act.
``(8) Not included in aggregate housing credit dollar
amount.--An amount allocated under paragraph (1) shall not be
included in the aggregate housing credit dollar amount for any
calendar year of the State which made such allocation.
``(9) Enforcement.--The Secretary shall, in consultation
with housing credit agencies, establish such mechanisms
(including penalties) as the Secretary determines appropriate
to ensure that--
``(A) each unit with respect to which a credit is
allowed under paragraph (1) meets the requirements
described in paragraph (2), and
``(B) each housing credit agency which makes an
allocation under paragraph (1) is taking appropriate
steps to enforce each compliance agreement to which
such housing credit agency is a party under paragraph
(3).''.
(b) Allocations Allowed in Addition to State Ceiling.--Section
42(h)(1) of such Code is amended by striking ``the housing credit
dollar amount allocated to such building under this subsection'' and
inserting ``the sum of the housing credit dollar amounts allocated to
such building under this subsection and subsection (n)''.
(c) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after 2026.
PART 9--QUALIFIED CONTRACTS AND RIGHT OF FIRST REFUSAL
SEC. 11901. REPEAL OF QUALIFIED CONTRACT OPTION.
(a) Termination of Option for Certain Buildings.--
(1) In general.--Subclause (II) of section 42(h)(6)(E)(i)
is amended by inserting ``in the case of a building described
in clause (iii),'' before ``on the last day''.
(2) Buildings described.--Subparagraph (E) of section
42(h)(6) is amended by adding at the end the following new
clause:
``(iii) Buildings described.--A building
described in this clause is a building--
``(I) which received its allocation
of housing credit dollar amount before
January 1, 2026, or
``(II) in the case of a building
any portion of which is financed as
described in paragraph (4), and which
received before January 1, 2026, under
the rules of paragraphs (1) and (2) of
subsection (m), a determination from
the issuer of the tax-exempt bonds or
the housing credit agency that the
building would be eligible under the
qualified allocation plan to receive an
allocation of housing credit dollar
amount or that the credits to be earned
are necessary for financial feasibility
of the project and its viability as a
qualified low-income housing project
throughout the credit period.''.
(b) Rules Relating to Existing Projects.--Subparagraph (F) of
section 42(h)(6) is amended by striking ``the nonlow-income portion''
and all that follows and inserting ``the nonlow-income portion and the
low-income portion of the building for fair market value (determined by
the housing credit agency by taking into account the rent restrictions
required for the low-income portion of the building to continue to meet
the standards of paragraphs (1) and (2) of subsection (g)). The
Secretary shall prescribe such regulations as may be necessary or
appropriate to carry out this paragraph.''.
(c) Conforming Amendments.--
(1) Paragraph (6) of section 42(h) is amended by striking
subparagraph (G) and by redesignating subparagraphs (H), (I),
(J), and (K) as subparagraphs (G), (H), (I), and (J),
respectively.
(2) Subclause (II) of section 42(h)(6)(E)(i) is amended by
striking ``subparagraph (I)'' and inserting ``subparagraph
(H)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on the date
of the enactment of this Act.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to buildings with respect to which a written
request described in section 42(h)(6)(H) of the Internal
Revenue Code of 1986, as redesignated by subsection (c), is
submitted after the date of the enactment of this Act.
SEC. 11902. MODIFICATION AND CLARIFICATION OF RIGHTS RELATING TO
BUILDING PURCHASE.
(a) Modification of Right of First Refusal.--
(1) In general.--Subparagraph (A) of section 42(i)(7) is
amended by striking ``a right of 1st refusal'' and inserting
``an option''.
(2) Conforming amendment.--The heading of paragraph (7) of
section 42(i) is amended by striking ``right of 1st refusal''
and inserting ``option''.
(b) Clarification With Respect to Right of First Refusal and
Purchase Options.--
(1) Purchase of partnership interest.--
(A) In general.--Subparagraph (A) of section
42(i)(7), as amended by subsection (a), is amended by
striking ``the property'' and inserting ``the property
or all of the partnership interests (other than
interests of the person exercising such option or a
related party thereto (within the meaning of section
267(b) or 707(b)(1))) relating to the property''.
(B) Application to S corporations and other pass-
through entities.--Subparagraph (A) of section 42(i)(7)
is amended by adding at the end the following: ``Except
as provided by the Secretary, the rules of this
paragraph shall apply to S corporations and other pass-
through entities in the same manner as such rules apply
to partnerships.''.
(C) Conforming amendment.--Subparagraph (B) of
section 42(i)(7) is amended by adding at the end the
following: ``In the case of a purchase of all of the
partnership interests, the minimum purchase price under
this subparagraph shall be an amount not less than the
sum of the interests' shares of the amount which would
be determined with respect to the property under this
subparagraph without regard to this sentence.''.
(2) Property includes assets relating to the building.--
Paragraph (7) of section 42(i) is amended by adding at the end
the following new subparagraph:
``(C) Property.--For purposes of subparagraph (A),
the term `property' may include all or any of the
assets held for the development, operation, or
maintenance of a building.''.
(3) Exercise of right of first refusal and purchase
options.--Subparagraph (A) of section 42(i)(7), as amended by
subsection (a) and paragraph (1)(A), is amended by adding at
the end the following: ``For purposes of determining whether an
option, including a right of first refusal, to purchase
property or all of the partnership interests holding (directly
or indirectly) such property is described in the preceding
sentence--
``(i) such option or right of first refusal
shall be exercisable with or without the
approval of any owner of the project (including
any partner, member, or affiliated organization
of such an owner), and
``(ii) a right of first refusal shall be
exercisable in response to any offer to
purchase the property or all of the partnership
interests, including an offer by a related
party.''.
(c) Other Conforming Amendment.--Subparagraph (B) of section
42(i)(7), as amended by subsection (b), is amended by striking ``the
sum of'' and all that follows through ``application of clause (ii).''
and inserting the following: ``the principal amount of outstanding
indebtedness secured by the building (other than indebtedness incurred
within the 5-year period ending on the date of the sale to the
tenants).''.
(d) Effective Dates.--
(1) Modification of right of first refusal.--The amendments
made by subsections (a) and (c) shall apply to agreements
entered into or amended after the date of the enactment of this
Act.
(2) Clarification.--The amendments made by subsection (b)
shall apply to agreements among the owners of the project
(including partners, members, and their affiliated
organizations) and persons described in section 42(i)(7)(A) of
the Internal Revenue Code of 1986 entered into before, on, or
after the date of the enactment of this Act.
(3) No effect on agreements.--None of the amendments made
by this section is intended to supersede express language in
any agreement with respect to the terms of a right of first
refusal or option permitted by section 42(i)(7) of the Internal
Revenue Code of 1986 in effect on the date of the enactment of
this Act.
Subtitle B--Additional Housing Incentives
SEC. 12001. INVESTMENT CREDIT FOR CONVERSION OF NON-RESIDENTIAL
BUILDINGS TO AFFORDABLE HOUSING.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
is amended by inserting after section 48E the following new section:
``SEC. 48F. AFFORDABLE HOUSING CONVERSION CREDIT.
``(a) Allowance of Credit.--For purposes of section 46, the
affordable housing conversion credit for any taxable year is an amount
equal to 20 percent of the qualified conversion expenditures of the
taxpayer with respect to a qualified affordable housing building placed
in service by the taxpayer during the taxable year.
``(b) Qualified Conversion Expenditures.--For purposes of this
section--
``(1) In general.--The term `qualified conversion
expenditures' means, with respect to any qualified affordable
housing building, any amount properly chargeable to capital
account--
``(A) for property for which depreciation is
allowable under section 168, and
``(B) in connection with the qualified conversion
of a qualified affordable housing building.
``(2) Certain expenditures not included.--The term
`qualified conversion expenditures' does not include--
``(A) Limitation on period of conversion.--Except
as provided in subsection (f), any amount paid or
incurred other than during the 2-year period ending on
the date on which the taxpayer places the qualified
affordable housing building in service.
``(B) Cost of acquisition.--The cost of acquiring
any building or interest therein.
``(3) Special rule for brownfields.--Paragraph (1)(A) shall
not apply with respect to any expenditure for clean up of
qualifying brownfield property (as defined in section
512(b)(19)).
``(4) Coordination with rehabilitation credit.--In the case
of any qualified conversion expenditures which are taken into
account for purposes of determining the rehabilitation credit
under section 47, the amount of such expenditures taken into
account under this section (determined without regard to this
paragraph) shall be reduced by 50 percent.
``(c) Qualified Conversion.--For purposes of this section--
``(1) In general.--The term `qualified conversion' means
the conversion of an eligible commercial building into a
qualified affordable housing building if the qualified
conversion expenditures of the taxpayer with respect to such
conversion exceed the greater of--
``(A) an amount equal to 50 percent of the adjusted
basis of such building (determined immediately prior to
such conversion), or
``(B) $100,000.
``(2) Eligible commercial building.--The term `eligible
commercial building' means any building which, with respect to
any conversion--
``(A) was originally placed in service not less
than 20 years before the date on which such conversion
begins, and
``(B) immediately prior to such conversion, was
nonresidential real property (as defined in section
168).
``(d) Qualified Affordable Housing Building.--For purposes of this
section--
``(1) In general.--The term `qualified affordable housing
building' means any residential building if during the 30-year
period beginning on the date on which such building is placed
in service by the taxpayer, not less than 20 percent of the
residential units in the building are both rent-restricted and
reserved for individuals whose income is 80 percent or less of
the area median income.
``(2) Rent and income limitation.--For purposes of this
subsection, rules similar to the rules of subsection (g) of
section 42 shall apply to determine whether a unit is rent-
restricted, treatment of units occupied by individuals whose
incomes rise above the limit, and the treatment of units where
Federal rental assistance is reduced as tenant's income
increases.
``(e) Limitation on Aggregate Credit Allowable.--
``(1) Credit may not exceed credit amount allocated to
building.--
``(A) In general.--The amount of the credit
determined under this section with respect to any
building shall not exceed the qualified conversion
credit dollar amount allocated to such building under
this subsection by the housing credit agency of the
State in which such building is located.
``(B) Time for making allocation.--Except in the
case of an allocation which meets the requirements of
subparagraph (C), an allocation shall be taken into
account under subparagraph (A) only if it is made not
later than the close of the calendar year in which the
building is placed in service.
``(C) Exception where binding commitment.--An
allocation meets the requirements of this subparagraph
if there is a binding commitment (not later than the
close of the calendar year in which the building is
placed in service) by the housing credit agency to
allocate a specified housing credit dollar amount to
such building beginning in a later taxable year.
``(2) State limitation.--
``(A) In general.--The aggregate qualified
conversion credit dollar amount which a housing credit
agency of any State may allocate is the sum of--
``(i) the amount which bears the same ratio
to the national qualified conversion credit
limitation as--
``(I) the population of such State,
bears to
``(II) the population of all
States, plus
``(ii) the sum of any amounts determined
under subparagraph (C).
``(B) National qualified conversion credit
limitation.--The national qualified conversion credit
limitation is $12,000,000,000.
``(C) Additional amounts provided for certain
buildings in economically distressed areas.--
``(i) In general.--For purposes of
subparagraph (A)(ii), in any case in which--
``(I) the housing credit agency of
a State allocates an amount to a
building which is located in an
economically distressed area, and
``(II) the Secretary subsequently
designates such amount for purposes of
this paragraph,
the amount determined under this paragraph with
respect to such building shall be the amount
originally allocated by the housing credit
agency of the State under clause (i).
``(ii) Limitation.--The aggregate amount
which the Secretary may designate under clause
(i)(II) shall not exceed $3,000,000,000.
``(iii) Manner of designation.--Not later
than 120 days after the date of the enactment
of this section, the Secretary shall establish
a program for determining the designation of
amounts that may be designated under this
subparagraph.
``(D) Reallocation of certain amounts.--
``(i) In general.--Notwithstanding
subparagraph (A)--
``(I) no amount may be allocated
under paragraph (1) by a housing credit
agency of an undersubscribed State
after December 31, 2028, and
``(II) the dollar amount determined
under subparagraph (A) with respect to
any oversubscribed State after such
date shall be increased by such State's
share of the reallocation amount.
``(ii) State share.--For purposes of clause
(i), an oversubscribed State's share of the
reallocation amount is the amount which bears
the same ratio to the reallocation amount as--
``(I) the population of such State,
bears to
``(II) the population of all
oversubscribed States.
``(iii) Definitions.--For purposes of this
subparagraph--
``(I) Undersubscribed state.--The
term `undersubscribed State' means any
State that is not an oversubscribed
State.
``(II) Oversubscribed state.--The
term `oversubscribed State' means any
State the housing credit agency of
which has allocated all of the
qualified conversion credit dollar
amount which may be allocated by it
before the date described in clause
(i)(I).
``(III) Reallocation amount.--The
term `reallocation amount' means the
sum of the amounts described in
subparagraph (A) which have not been
allocated by undersubscribed States
before the date described in clause
(i)(I).
``(3) Manner of allocation.--
``(A) Plan for allocation.--
``(i) In general.--Notwithstanding any
other provision of this section, the qualified
conversion credit dollar amount with respect to
any building shall be zero unless such amount
was allocated pursuant to a conversion credit
allocation plan of the housing credit agency
which is approved by the governmental unit (in
accordance with rules similar to the rules of
section 147(f)(2) (other than subparagraph
(B)(ii) thereof)) of which such agency is a
part.
``(ii) Conversion credit allocation plan.--
For purposes of this subparagraph, the term
`conversion credit allocation plan' means a
plan--
``(I) which sets selection criteria
for allocations, taking into account--
``(aa) whether the credit
is needed to assure the
financial feasibility of the
conversion,
``(bb) the extent to which
the conversion results in the
creation of affordable housing,
``(cc) the extent to which
the conversion results in the
creation of housing near
transportation, employment, and
commercial opportunities,
``(dd) the extent to which
the conversion will support
small businesses and economic
revitalization in the
surrounding area,
``(ee) the degree of local
government support for the
conversion, and
``(ff) the readiness of the
building for a qualified
conversion, and
``(II) which provides a procedure
that the agency (or an agent or other
private contractor of such agency) will
follow in monitoring for noncompliance
with the requirements of subsection (d)
and in notifying the Internal Revenue
Service of such noncompliance.
``(B) Binding allocation agreements; reporting.--In
making allocations of qualified conversion credit
dollar amounts, each housing credit agency shall--
``(i) enter into binding agreements with
taxpayers for the allocation of qualified
conversion credit dollar amounts, which
agreements shall specify the amount of
qualified conversion credit dollar amount
allocated to the building and the terms for any
modifications or withdrawal of such allocation,
and
``(ii) report to the Secretary, at such
time and in such manner as the Secretary may
require, the amount of allocations made with
respect to any building.
``(C) State extended use requirements permitted
past 30 years.--For purposes of this paragraph, a
housing credit agency's plan shall not fail to be
treated as a conversion credit allocation plan merely
because it includes, and nothing in this section shall
be construed to limit a binding allocation agreement
from including, affordability or rent restriction
requirements with respect to the building that apply
for a longer period than the 30-year period described
in subsections (d) and (g)(1)(B).
``(4) Definitions and other rules.--
``(A) Housing credit agency.--The term `housing
credit agency' means, with respect to any State, the
housing credit agency authorized under section 42(h)(8)
or such other agency as authorized by the State for
purposes of this section.
``(B) Economically distressed area.--The term
`economically distressed area' means any area which--
``(i) has been designated as a qualified
census tract under section 42(d)(5)(B)(ii) or
as a difficult development area under section
42(d)(5)(B)(iii), or
``(ii) meets the requirement of section
301(a)(3) of the Public Works and Economic
Development Act of 1965.
``(C) State.--The term `State' includes a
possession of the United States.
``(D) Other rules.--Rules similar to the rules of
subparagraphs (A) and (B) of section 42(h)(7) shall
apply for purposes of this section.
``(f) Progress Expenditures.--If the Secretary determines, on the
basis of architectural plans and specifications that a qualified
conversion is reasonably expected to exceed 2 years, rules similar to
the rules of section 47(d) shall apply with respect to such conversion
for purposes of this section.
``(g) Special Rules for Certain Areas.--
``(1) Qualified census tracts and difficult development
areas.--In the case of a qualified affordable housing
building--
``(A) which is located in any area which is
designated as a qualified census tract under section
42(d)(5)(B)(ii) or as a difficult development area
under section 42(d)(5)(B)(iii), and
``(B) with respect to which during 30-year period
beginning on the date on which such building is placed
in service by the taxpayer, not less than 20 percent of
the residential units in the building are both rent-
restricted and reserved for individuals whose income is
60 percent or less of the area median income,
subsection (a) shall be applied by substituting `30 percent'
for `20 percent'.
``(2) Historic preservation in rural areas.--
``(A) In general.--In the case of a qualified
affordable housing building which is in a rural area
and is part of an historic preservation project, the
taxpayer may elect to substitute `35 percent' for `20
percent' under subsection (a) with respect to such
portion of the aggregate qualified conversion
expenditures taken into account under such subsection
as does not exceed $2,000,000.
``(B) Definitions.--For purposes of this
paragraph--
``(i) Rural area.--The term `rural area'
shall have the meaning given such term under
section 1393(a)(2).
``(ii) Historic preservation project.--The
term `historic preservation project' means a
qualified conversion which involves the
certified rehabilitation of a certified
historic structure. Whether conversion of a
certified historic structure involves certified
rehabilitation shall be determined under rules
similar to the rules of section 47(c)(2)(C).
``(h) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or other guidance--
``(1) providing for the recapture of the credit determined
under subsection (a) if the qualified affordable housing
building ceases to be a qualified affordable housing building
during the 30-year period beginning on the date that such
building is placed in service by the taxpayer,
``(2) detailing any certifications required from the
taxpayer or any housing credit agency of a State,
``(3) with respect to the application of subsection (b)(4),
``(4) with respect to information reporting on allocations
of qualified conversion credit dollar amounts,
``(5) providing rules for making a determination as to
whether an area is described in subsection (e)(4)(B), and
``(6) which encourages housing credit agencies to allocate,
to the extent practicable, qualified conversion credit dollar
amounts to non-metropolitan counties within a State in
proportion to the non-metropolitan population of the State, but
only to the extent it is demonstrated within such non-
metropolitan counties that there are sufficient qualified
conversion expenditures to warrant such allocations.''.
(b) Transferability of Credit.--Section 6418(f)(1)(A) is amended by
adding at the end the following new clause:
``(xiii) The affordable housing conversion
credit determined under section 48F.''.
(c) Conforming Amendments.--
(1) Section 46 is amended in paragraph (6) by striking
``and'' at the end, in paragraph (7) by striking the period at
the end and inserting ``, and'', and by adding at the end the
following new paragraph:
``(8) the affordable housing conversion credit.''.
(2) Section 49(a)(1)(C) is amended by striking ``and'' at
the end of clause (vii), in clause (viii) by striking the
period at the end and inserting ``, and'', and by adding at the
end the follow new clause:
``(ix) the basis of any property which is
being converted as part of a qualified
conversion under section 48F.''.
(3) Section 50(a)(2)(E) is amended by striking ``or
48E(e)'' and inserting ``48E(e), or 48F(f)''.
(4) The table of sections for subpart E of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 48F. Affordable housing conversion credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to qualified affordable housing buildings (as defined in section
48F of the Internal Revenue Code of 1986, as added by this section)
placed in service after the date of the enactment of this Act.
SEC. 12002. NEIGHBORHOOD HOMES CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
is amended by inserting after section 42 the following new section:
``SEC. 42A. NEIGHBORHOOD HOMES CREDIT.
``(a) Allowance of Credit.--For purposes of section 38, the
neighborhood homes credit determined under this section for the taxable
year is, with respect to each qualified residence sold by the taxpayer
during such taxable year in an affordable sale, the lesser of--
``(1) an amount equal to--
``(A) the excess (if any) of--
``(i) the reasonable development costs paid
or incurred by the taxpayer with respect to
such qualified residence, over
``(ii) the sale price of such qualified
residence (reduced by any reasonable expenses
paid or incurred by the taxpayer in connection
with such sale), or
``(B) if the neighborhood homes credit agency
determines it is necessary to ensure financial
feasibility, an amount not to exceed 120 percent of the
amount under subparagraph (A),
``(2) 40 percent of the eligible development costs paid or
incurred by the taxpayer with respect to such qualified
residence, or
``(3) 32 percent of the national median sale price for new
homes (as determined pursuant to the most recent census data
available as of the date on which the neighborhood homes credit
agency makes an allocation for the qualified project).
``(b) Development Costs.--For purposes of this section--
``(1) Reasonable development costs.--
``(A) In general.--The term `reasonable development
costs' means amounts paid or incurred for the
acquisition of buildings and land, construction,
substantial rehabilitation, demolition of structures,
or environmental remediation, to the extent that the
neighborhood homes credit agency determines that such
amounts meet the standards specified pursuant to
subsection (f)(1)(D) (as of the date on which
construction or substantial rehabilitation is
substantially complete, as determined by such agency)
and are necessary to ensure the financial feasibility
of such qualified residence.
``(B) Considerations in making determination.--In
making the determination under subparagraph (A), the
neighborhood homes credit agency shall consider--
``(i) the sources and uses of funds and the
total financing,
``(ii) any proceeds or receipts generated
or expected to be generated by reason of tax
benefits, and
``(iii) the reasonableness of the
developmental costs and fees.
``(2) Eligible development costs.--The term `eligible
development costs' means the amount which would be reasonable
development costs if the amounts taken into account as paid or
incurred for the acquisition of buildings and land did not
exceed 75 percent of such costs determined without regard to
any amount paid or incurred for the acquisition of buildings
and land.
``(3) Substantial rehabilitation.--The term `substantial
rehabilitation' means amounts paid or incurred for
rehabilitation of a qualified residence if such amounts exceed
the greater of--
``(A) $25,000, or
``(B) 20 percent of the amounts paid or incurred by
the taxpayer for the acquisition of buildings and land
with respect to such qualified residence.
``(4) Construction and rehabilitation only after allocation
taken into account.--
``(A) In general.--The terms `reasonable
development costs' and `eligible development costs'
shall not include any amount paid or incurred before
the date on which an allocation is made to the taxpayer
under subsection (e) with respect to the qualified
project of which the qualified residence is part unless
such amount is paid or incurred for the acquisition of
buildings or land.
``(B) Land and building acquisition costs.--Amounts
paid or incurred for the acquisition of buildings or
land shall be included under paragraph (A) only if paid
or incurred not more than 3 years before the date on
which the allocation referred to in subparagraph (A) is
made. If the taxpayer acquired any building or land
from an entity (or any related party to such entity)
that holds an ownership interest in the taxpayer, then
such entity must also have acquired such property
within such 3-year period, and the acquisition cost
included under subparagraph (A) with respect to the
taxpayer shall not exceed the amount such entity paid
or incurred to acquire such property.
``(c) Qualified Residence.--For purposes of this section--
``(1) In general.--The term `qualified residence' means a
residence that--
``(A) is real property (constructed on-site or
manufactured off-site) affixed on a permanent
foundation,
``(B) is--
``(i) a house which is comprised of 4 or
fewer residential units,
``(ii) a condominium unit, or
``(iii) a house or an apartment owned by a
cooperative housing corporation (as defined in
section 216(b)),
``(C) is part of a qualified project with respect
to which the neighborhood homes credit agency has made
an allocation under subsection (e), and
``(D) is located in a qualified census tract
(determined as of the date of such allocation).
``(2) Qualified census tract.--
``(A) In general.--The term `qualified census
tract' means a census tract--
``(i) which--
``(I) has a median family income
which does not exceed 80 percent of the
median family income for the applicable
area,
``(II) has a poverty rate that is
not less than 130 percent of the
poverty rate of the applicable area,
and
``(III) has a median value for
owner-occupied homes that does not
exceed the median value for owner-
occupied homes in the applicable area,
``(ii) which--
``(I) is located in a city which
has a population of not less than
50,000 and such city has a poverty rate
that is not less than 150 percent of
the poverty rate of the applicable
area,
``(II) has a median family income
which does not exceed the median family
income for the applicable area, and
``(III) has a median value for
owner-occupied homes that does not
exceed 80 percent of the median value
for owner-occupied homes in the
applicable area,
``(iii) which--
``(I) is located in a
nonmetropolitan county,
``(II) has a median family income
which does not exceed the median family
income for the applicable area, and
``(III) has been designated by a
neighborhood homes credit agency under
this clause,
``(iv) which is not otherwise a qualified
census tract and is located in a disaster area
(as defined in section 7508A(d)(3)), but only
with respect to credits allocated in any period
during which the President of the United States
has determined that such area warrants
individual or individual and public assistance
by the Federal Government under the Robert T.
Stafford Disaster Relief and Emergency
Assistance Act, or
``(v) which is not otherwise a qualified
census tract and is identified by the
neighborhood homes credit agency, through
methodologies detailed in the qualified
allocation plan, as having a shortage of
affordable owner-occupied homes.
``(B) Applicable area.--The term `applicable area'
means--
``(i) in the case of a metropolitan census
tract, the metropolitan area in which such
census tract is located, and
``(ii) in the case of a census tract other
than a census tract described in clause (i),
the State.
``(d) Affordable Sale.--For purposes of this section--
``(1) In general.--The term `affordable sale' means a sale
to a qualified homeowner of a qualified residence that the
neighborhood homes credit agency certifies as meeting the
standards promulgated under subsection (f)(1)(D) for a price
that does not exceed--
``(A) in the case of any qualified residence not
described in subparagraph (B), (C), or (D), the amount
equal to the product of 4 multiplied by the median
family income for the applicable area (as determined
pursuant to the most recent census data available as of
the date of the contract for such sale),
``(B) in the case of a house comprised of 2
residential units, 125 percent of the amount described
in subparagraph (A),
``(C) in the case of a house comprised of 3
residential units, 150 percent of the amount described
in subparagraph (A), or
``(D) in the case of a house comprised of 4
residential units, 175 percent of the amount described
in subparagraph (A).
``(2) Qualified homeowner.--The term `qualified homeowner'
means, with respect to a qualified residence, an individual--
``(A) who owns and uses such qualified residence as
the principal residence of such individual, and
``(B) whose family income (determined as of the
date that a binding contract for the affordable sale of
such residence is entered into) is 140 percent or less
of the median family income for the applicable area in
which the qualified residence is located.
``(e) Credit Ceiling and Allocations.--
``(1) Credit limited based on allocations to qualified
projects.--
``(A) In general.--The credit allowed under
subsection (a) to any taxpayer for any taxable year
with respect to one or more qualified residences which
are part of the same qualified project shall not exceed
the excess (if any) of--
``(i) the amount allocated by the
neighborhood homes credit agency under this
paragraph to such taxpayer with respect to such
qualified project, over
``(ii) the aggregate amount of credit
allowed under subsection (a) to such taxpayer
with respect to qualified residences which are
a part of such qualified project for all prior
taxable years.
``(B) Deadline for completion.--No credit shall be
allowed under subsection (a) with respect to any
qualified residence unless the affordable sale of such
residence is during the 5-year period beginning on the
date of the allocation to the qualified project of
which such residence is a part (or, in the case of a
qualified residence to which subsection (i) applies,
the rehabilitation of such residence is completed
during such 5-year period).
``(2) Limitations on allocations to qualified projects.--
``(A) Allocations limited by state neighborhood
homes credit ceiling.--The aggregate amount allocated
to taxpayers with respect to qualified projects by the
neighborhood homes credit agency of any State for any
calendar year shall not exceed the State neighborhood
homes credit amount of such State for such calendar
year.
``(B) Set-aside for certain projects involving
qualified nonprofit organizations.--Rules similar to
the rules of section 42(h)(5) shall apply for purposes
of this section.
``(3) Determination of state neighborhood homes credit
ceiling.--
``(A) In general.--The State neighborhood homes
credit amount for a State for a calendar year is an
amount equal to the sum of--
``(i) the greater of--
``(I) the product of $9, multiplied
by the State population (determined in
accordance with section 146(j)), or
``(II) $12,000,000, and
``(ii) any amount previously allocated to
any taxpayer with respect to any qualified
project by the neighborhood homes credit agency
of such State which can no longer be allocated
to any qualified residence because the 5-year
period described in paragraph (1)(B) expires
during calendar year.
``(B) 3-year carryforward of unused limitation.--
The State neighborhood homes credit amount for a State
for a calendar year shall be increased by the excess
(if any) of the State neighborhood homes credit amount
for such State for the preceding calendar year over the
aggregate amount allocated by the neighborhood homes
credit agency of such State during such preceding
calendar year. Any amount carried forward under the
preceding sentence shall not be carried past the third
calendar year after the calendar year in which such
credit amount originally arose, determined on a first-
in, first-out basis.
``(f) Responsibilities of Neighborhood Homes Credit Agencies.--
``(1) In general.--Notwithstanding subsection (e), the
State neighborhood homes credit dollar amount shall be zero for
a calendar year unless the neighborhood homes credit agency of
the State--
``(A) allocates such amount pursuant to a qualified
allocation plan of the neighborhood homes credit
agency,
``(B) subject to paragraph (2), allocates not more
than 20 percent of amounts allocated in the previous
year (or for allocations made in the first allocation
year under this section, not more than 20 percent of
the neighborhood homes credit ceiling for such year) to
projects with respect to qualified residences which--
``(i) are located in census tracts
described in subsection (c)(2)(A)(iii),
(c)(2)(A)(iv), (i)(5), or
``(ii) are not located in a qualified
census tract but meet the requirements of
subsection (i)(8),
``(C) subject to paragraph (2), in addition to any
allocation described in subparagraph (B), allocates not
more than 20 percent of amounts allocated in the
previous year (or for allocations made in the first
allocation year under this section, not more than 20
percent of the neighborhood homes credit ceiling for
such year) to projects with respect to qualified
residences which are located in any census tract
described in subsection (c)(2)(A)(v), except that, with
respect to any qualified residence located within such
census tract which is sold to a qualified homeowner,
subsection (d)(2) shall be applied by substituting `120
percent' for `140 percent',
``(D) promulgates standards with respect to
reasonable qualified development costs and fees,
``(E) promulgates standards with respect to
construction quality which are consistent with building
codes or other standards required by the State or local
jurisdiction in which the project is located,
``(F) in the case of any neighborhood homes credit
agency which makes an allocation to a qualified project
which includes any qualified residence to which
subsection (i) applies, promulgates standards with
respect to protecting the owners of such residences,
including the capacity of such owners to pay
rehabilitation costs not covered by the credit provided
by this section and providing for the disclosure to
such owners of their rights and responsibilities with
respect to the rehabilitation of such residences,
``(G) submits to the Secretary (at such time and in
such manner as the Secretary may prescribe) an annual
report specifying--
``(i) the amount of the neighborhood homes
credits allocated to each qualified project for
the previous year,
``(ii) with respect to each qualified
residence completed in the preceding calendar
year--
``(I) the census tract in which
such qualified residence is located,
``(II) with respect to the
qualified project that includes such
qualified residence, the year in which
such project received an allocation
under this section,
``(III) whether such qualified
residence was new, substantially
rehabilitated and sold to a qualified
homeowner, or substantially
rehabilitated pursuant to subsection
(i),
``(IV) the eligible development
costs of such qualified residence,
``(V) the amount of the
neighborhood homes credit with respect
to such qualified residence,
``(VI) the sales price of such
qualified residence, if applicable, and
``(VII) the family income of the
qualified homeowner (expressed as a
percentage of the applicable area
median family income for the location
of the qualified residence), and
``(iii) such other information as the
Secretary may require,
``(H) makes available to the general public a
written explanation for any allocation of a
neighborhood homes credit dollar amount which is not
made in accordance with established priorities and
selection criteria of the neighborhood homes credit
agency, and
``(I) provide educational outreach on application
and compliance requirements, including for small
residential builders and remodelers.
``(2) Alternative for certain states.--
``(A) In general.--In the case of any State which,
for a calendar year, is an applicable State (as defined
in subparagraph (B)), in lieu of the requirements under
subparagraphs (B) and (C) of paragraph (1), the
neighborhood homes credit agency of the State may elect
to allocate not more than 40 percent of amounts
allocated in the previous year (or for allocations made
in the first allocation year under this section, not
more than 40 percent of the neighborhood homes credit
ceiling for such year) to projects with respect to
qualified residences which are described in either
subparagraph (B) or (C) of paragraph (1).
``(B) Applicable state.--For purposes of this
paragraph, the term `applicable State' means a State
which, for purposes of the determining the amount under
subsection (e)(3)(A)(i) for the calendar year with
respect to such State, received the amount described in
subclause (II) of such subsection.
``(3) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any plan
which--
``(A) sets forth the selection criteria to be used
to prioritize qualified projects for allocations of
State neighborhood homes credit dollar amounts,
including--
``(i) the need for new or substantially
rehabilitated owner-occupied homes in the area
addressed by the project,
``(ii) the expected contribution of the
project to neighborhood stability and
revitalization, including the impact on
neighborhood residents,
``(iii) the capability and prior
performance of the project sponsor, and
``(iv) the likelihood the project will
result in long-term homeownership,
``(B) has been made available for public comment,
``(C) as determined by the neighborhood homes
credit agency, is likely to result in the selection of
highly qualified applicants while also minimizing, to
the extent practicable, application costs and barriers
to entry for small residential builders and re-
modelers, and
``(D) provides a procedure that the neighborhood
homes credit agency (or any agent or contractor of such
agency) shall follow for purposes of--
``(i) identifying noncompliance with any
provisions of this section, and
``(ii) notifying the Internal Revenue
Service of any such noncompliance of which the
agency becomes aware.
``(g) Repayment.--
``(1) In general.--
``(A) Sold during 5-year period.--If a qualified
residence is sold during the 5-year period beginning
immediately after the affordable sale of such qualified
residence referred to in subsection (a), the seller
shall transfer an amount equal to the repayment amount
to the relevant neighborhood homes credit agency.
``(B) Use of repayments.--A neighborhood homes
credit agency shall use any amount received pursuant to
subparagraph (A) only for purposes of qualified
projects.
``(2) Repayment amount.--For purposes of paragraph (1)(A)--
``(A) In general.--The repayment amount is an
amount equal to the applicable percentage of the gain
from the sale to which the repayment relates.
``(B) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage is 50
percent, reduced by 10 percentage points for each year
of the 5-year period referred to in paragraph (1)(A)
which ends before the date of such sale.
``(3) Lien for repayment amount.--A neighborhood homes
credit agency receiving an allocation under this section shall
place a lien on each qualified residence that is built or
rehabilitated as part of a qualified project for an amount such
agency deems necessary to ensure potential repayment pursuant
to paragraph (1)(A).
``(4) Waiver.--
``(A) In general.--The neighborhood homes credit
agency may waive the repayment required under paragraph
(1)(A) if the agency determines that making a repayment
would constitute a hardship to the seller.
``(B) Hardship.--For purposes of subparagraph (A),
with respect to the seller, a hardship may include--
``(i) divorce,
``(ii) disability,
``(iii) illness, or
``(iv) any other hardship identified by the
neighborhood homes credit agency for purposes
of this paragraph.
``(h) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Neighborhood homes credit agency.--The term
`neighborhood homes credit agency' means the agency designated
by the governor of a State as the neighborhood homes credit
agency of the State.
``(2) Qualified project.--The term `qualified project'
means a project that a neighborhood homes credit agency
certifies will build or substantially rehabilitate one or more
qualified residences.
``(3) Determinations of family income.--Rules similar to
the rules of section 143(f)(2) shall apply for purposes of this
section.
``(4) Possessions treated as states.--The term `State'
includes the District of Columbia and the possessions of the
United States.
``(5) Special rules related to condominiums and cooperative
housing corporations.--
``(A) Determination of development costs.--In the
case of a qualified residence described in clause (ii)
or (iii) of subsection (c)(1)(A), the reasonable
development costs and eligible development costs of
such qualified residence shall be an amount equal to
such costs, respectively, of the entire condominium or
cooperative housing property in which such qualified
residence is located, multiplied by a fraction--
``(i) the numerator of which is the total
floor space of such qualified residence, and
``(ii) the denominator of which is the
total floor space of all residences within such
property.
``(B) Tenant-stockholders of cooperative housing
corporations treated as owners.--In the case of a
cooperative housing corporation (as such term is
defined in section 216(b)), a tenant-stockholder shall
be treated as owning the house or apartment which such
person is entitled to occupy.
``(6) Related party sales not treated as affordable
sales.--
``(A) In general.--A sale between related persons
shall not be treated as an affordable sale.
``(B) Related persons.--For purposes of this
paragraph, a person (in this subparagraph referred to
as the `related person') is related to any person if
the related person bears a relationship to such person
specified in section 267(b) or 707(b)(1), or the
related person and such person are engaged in trades or
businesses under common control (within the meaning of
subsections (a) and (b) of section 52). For purposes of
the preceding sentence, in applying section 267(b) or
707(b)(1), `10 percent' shall be substituted for `50
percent'.
``(7) Inflation adjustment.--
``(A) In general.--In the case of a calendar year
after 2026, the dollar amounts in subsections
(b)(3)(A), (e)(3)(A)(i)(I), (e)(3)(A)(i)(II), and
(i)(2)(C) shall each be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for such
calendar year by substituting `calendar year
2025' for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--
``(i) In the case of the dollar amounts in
subsections (b)(3)(A) and (i)(2)(C), any
increase under paragraph (1) which is not a
multiple of $1,000 shall be rounded to the
nearest multiple of $1,000.
``(ii) In the case of the dollar amount in
subsection (e)(3)(A)(i)(I), any increase under
paragraph (1) which is not a multiple of $0.01
shall be rounded to the nearest multiple of
$0.01.
``(iii) In the case of the dollar amount in
subsection (e)(3)(A)(i)(II), any increase under
paragraph (1) which is not a multiple of
$100,000 shall be rounded to the nearest
multiple of $100,000.
``(8) Report.--
``(A) In general.--The Secretary shall annually
issue a report, to be made available to the public,
which contains the information submitted pursuant to
subsection (f)(1)(G).
``(B) De-identification.--The Secretary shall
ensure that any information made public pursuant to
subparagraph (A) excludes any information that would
allow for the identification of qualified homeowners.
``(9) List of qualified census tracts.--The Secretary of
Housing and Urban Development shall, for each year, make
publicly available a list of qualified census tracts under--
``(A) on a combined basis, clauses (i) and (ii) of
subsection (c)(2)(A),
``(B) clause (iii) of such subsection, and
``(C) subsection (i)(5)(A).
``(10) Denial of deductions if converted to rental
housing.--If, during the 5-year period beginning immediately
after the affordable sale of a qualified residence referred to
in subsection (a), an individual who owns a qualified residence
(whether or not such individual was the purchaser in such
affordable sale) fails to use such qualified residence as such
individual's principal residence for any period of time, no
deduction shall be allowed for expenses paid or incurred by
such individual with respect to renting, during such period of
time, such qualified residence.
``(i) Application of Credit With Respect to Owner-Occupied
Rehabilitations.--
``(1) In general.--In the case of a qualified
rehabilitation by the taxpayer of any qualified residence which
is owned (as of the date that the written binding contract
referred to in paragraph (3) is entered into) by a specified
homeowner, the rules of paragraphs (2) through (7) shall apply.
``(2) Alternative credit determination.--In the case of any
qualified residence described in paragraph (1), the
neighborhood homes credit determined under subsection (a) with
respect to such residence shall (in lieu of any credit
otherwise determined under subsection (a) with respect to such
residence) be allowed in the taxable year during which the
qualified rehabilitation is completed (as determined by the
neighborhood homes credit agency) and shall be equal to the
least of--
``(A) the excess (if any) of--
``(i) the amounts paid or incurred by the
taxpayer for the qualified rehabilitation of
the qualified residence to the extent that such
amounts are certified by the neighborhood homes
credit agency (at the time of the completion of
such rehabilitation) as meeting the standards
specified pursuant to subsection (f)(1)(D),
over
``(ii) any amounts paid to such taxpayer
for such rehabilitation,
``(B) 50 percent of the amounts described in
subparagraph (A)(i), or
``(C) $50,000.
``(3) Qualified rehabilitation.--
``(A) In general.--For purposes of this subsection,
the term `qualified rehabilitation' means a
rehabilitation or reconstruction performed pursuant to
a written binding contract between the taxpayer and the
specified homeowner if the amount paid or incurred by
the taxpayer in the performance of such rehabilitation
or reconstruction exceeds the dollar amount in effect
under subsection (b)(3)(A).
``(B) Application of limitation to expenses paid or
incurred after allocation.--A rule similar to the rule
of section (b)(4) shall apply for purposes of this
subsection.
``(4) Specified homeowner.--For purposes of this
subsection, the term `specified homeowner' means, with respect
to a qualified residence, an individual--
``(A) who owns and uses such qualified residence as
the principal residence of such individual as of the
date that the written binding contract referred to in
paragraph (3) is entered into, and
``(B) whose family income (determined as of such
date) does not exceed the median family income for the
applicable area (with respect to the census tract in
which the qualified residence is located).
``(5) Additional census tracts in which owner-occupied
residences may be located.--In the case of any qualified
residence described in paragraph (1), the term `qualified
census tract' includes any census tract which--
``(A) meets the requirements of subsection
(c)(2)(A)(i) without regard to subclause (III) thereof,
and
``(B) is designated by the neighborhood homes
credit agency for purposes of this paragraph.
``(6) Modification of repayment requirement.--In the case
of any qualified residence described in paragraph (1),
subsection (g) shall be applied by beginning the 5-year period
otherwise described therein on the date on which the qualified
homeowner acquired such residence.
``(7) Related parties.--Paragraph (1) shall not apply if
the taxpayer is the owner of the qualified residence described
in paragraph (1) or is related (within the meaning of
subsection (h)(6)(B)) to such owner.
``(8) Pyrrhotite remediation.--The requirement of
subsection (c)(1)(D) shall not apply to a qualified
rehabilitation under this subsection of a qualified residence
that is documented by an engineer's report and core testing to
have a foundation that is adversely impacted by pyrrhotite or
other iron sulfide minerals.
``(j) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including regulations that prevent avoidance of the rules, and
abuse of the purposes, of this section.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) is amended by striking ``plus'' at the end of paragraph (40), by
striking the period at the end of paragraph (41) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(42) the neighborhood homes credit determined under
section 42A(a).''.
(c) Credit Allowed Against Alternative Minimum Tax.--Section
38(c)(4)(B) is amended by redesignating clauses (iv) through (xii) as
clauses (v) through (xiii), respectively, and by inserting after clause
(iii) the following new clause:
``(iv) the credit determined under section
42A,''.
(d) Basis Adjustments.--
(1) Energy efficient home improvement credit.--Section
25C(g) is amended by adding after the first sentence the
following new sentence: ``This subsection shall not apply for
purposes of determining the eligible development costs or
adjusted basis of any building under section 42A.''.
(2) Residential clean energy credit.--Section 25D(f) is
amended by adding after the first sentence the following new
sentence: ``This subsection shall not apply for purposes of
determining the eligible development costs or adjusted basis of
any building under section 42A.''.
(3) New energy efficient home credit.--Section 45L(e) is
amended by inserting ``or for purposes of determining the
eligible development costs or adjusted basis of any building
under section 42A'' after ``section 42''.
(e) Exclusion From Gross Income.--Part III of subchapter B of
chapter 1 is amended by inserting before section 140 the following new
section:
``SEC. 139M. STATE ENERGY SUBSIDIES FOR QUALIFIED RESIDENCES.
``(a) Exclusion From Gross Income.--Gross income shall not include
the value of any subsidy provided to a taxpayer (whether directly or
indirectly) by any State energy office (as defined in section 124(a) of
the Energy Policy Act of 2005 (42 U.S.C. 15821(a))) for purposes of any
energy improvements made to a qualified residence (as defined in
section 42A(c)(1)).''.
(f) Conforming Amendments.--
(1) Subsections (i)(3)(C), (i)(6)(B)(i), and (k)(1) of
section 469 are each amended by inserting ``or 42A'' after
``section 42''.
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 42 the following new item:
``Sec. 42A. Neighborhood homes credit.''.
(3) The table of sections for part III of subchapter B of
chapter 1 is amended by inserting before the item relating to
section 140 the following new item:
``Sec. 139M. State energy subsidies for qualified residences.''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 12003. MODIFICATION OF HISTORIC REHABILITATION TAX CREDIT.
(a) Full Credit Allowed in the Year Building Placed in Service.--
Section 47(a) is amended to read as follows:
``(a) General Rule.--For purposes of section 46, the rehabilitation
credit for any taxable year is 20 percent of the qualified
rehabilitation expenditures.''.
(b) Increase in the Rehabilitation Credit for Certain Small
Projects.--Section 47 is amended by adding at the end the following new
subsection:
``(e) Special Rule Regarding Certain Small Projects.--
``(1) In general.--In the case of any qualifying small
project with respect to which there is an election in effect
under this subsection--
``(A) the total qualified rehabilitation
expenditures taken into account for purposes of this
section with respect to the rehabilitation shall not
exceed $3,750,000,
``(B) subsection (a) shall be applied by
substituting `30 percent' for `20 percent', and
``(C) subject to paragraph (4) and such regulations
or other guidance as the Secretary may provide, the
taxpayer may transfer all or a portion of the credit
determined under this section with respect to such
qualifying small project.
``(2) Qualifying small project.--For purposes of this
subsection, the term `qualifying small project' means any
qualified rehabilitated building or portion thereof if--
``(A) such building is placed in service after the
date of the enactment of this subsection, and
``(B) no credit was allowed under this section
(other than a credits allowed by reason of subsection
(d)) for either of the two immediately preceding
taxable years with respect to such building.
``(3) Special rule for rural projects.--
``(A) In general.--In the case of any qualifying
small project in a rural area, paragraph (1)(A) shall
be applied by substituting `$5,000,000' for
`$3,750,000'.
``(B) Rural area.--For purposes of this
subparagraph, the term `rural area' means any area
other than--
``(i) a city or town that has a population
of greater than 50,000 inhabitants, or
``(ii) the urbanized area contiguous and
adjacent to a city or town described in clause
(i), as defined by the Bureau of the Census
based on the latest decennial census of the
United States.
``(4) Transfer of credit for qualifying small projects.--
``(A) Certification.--
``(i) In general.--A transfer under
paragraph (1)(C) shall be accompanied by a
certificate which includes--
``(I) the certification for the
certified historic structure referred
to in subsection (c)(3),
``(II) the taxpayer's name,
address, tax identification number,
date of project completion, and the
amount of credit being transferred,
``(III) the transferee's name,
address, tax identification number, and
the amount of credit being transferred,
and
``(IV) such other information as
may be required by the Secretary.
``(ii) Transferability of certificate.--A
certificate issued under this subsection to a
taxpayer shall be transferable to any other
taxpayer.
``(B) Tax treatment relating to certificate.--
``(i) Disallowance of deduction.--No
deduction shall be allowed for the amount of
consideration paid or incurred by the
transferee.
``(ii) Allowance of credit.--The amount of
credit transferred under paragraph (1)(C)--
``(I) shall not be allowed to the
transferor for any taxable year, and
``(II) shall be allowable to the
transferee as a credit determined under
this section for the taxable year of
the transferee in which such credit is
transferred.
``(iii) Exclusion.--Gross income shall not
include any amount received in connection with
the transfer of the certificate.
``(C) Recapture and other special rules.--The
taxpayer who claims a credit determined under this
section by reason of a transfer of an amount of credit
under paragraph (1)(A) with respect to an applicable
rural project shall be treated as the taxpayer with
respect to such project for purposes of section 50.
``(D) Information reporting.--The transferor and
the transferee shall each make such reports regarding
the transfer of an amount of credit under paragraph
(1)(C) and containing such information as the Secretary
may require. The reports required by this subparagraph
shall be filed at such time and in such manner as may
be required by the Secretary.
``(E) Regulations.--The Secretary shall prescribe
regulations or other guidance to carry out paragraph
(1)(C) and this paragraph in a manner which is
consistent with applicable requirements with respect to
transfer of credits under section 6418.
``(5) Election.--An election under this subsection shall be
made at such time and in such manner as the Secretary may by
regulations prescribe.''.
(c) Increasing the Type of Buildings Eligible for Rehabilitation.--
Section 47(c)(1)(B)(i)(I) is amended by inserting ``50 percent of''
before ``the adjusted basis''.
(d) Elimination of Rehabilitation Credit Basis Adjustment.--
(1) In general.--Section 50(c) is amended by adding at the
end the following new paragraph:
``(6) Exception for rehabilitation credit.--In the case of
the rehabilitation credit, paragraph (1) shall not apply.''.
(2) Treatment in case of credit allowed to lessee.--Section
50(d) is amended by adding at the end the following: ``In the
case of the rehabilitation credit, paragraph (5)(B) of the
section 48(d) referred to in paragraph (5) of this subsection
shall not apply.''.
(e) Modifications Regarding Certain Tax-Exempt Use Property.--
Section 47(c)(2)(B)(v) is amended by adding at the end the following
new subclause:
``(III) Disqualified lease rules to
apply only in case of government
entity.--For purposes of subclause (I),
except in the case of a tax-exempt
entity described in section
168(h)(2)(A)(i), the determination of
whether property is tax-exempt use
property shall be made under section
168(h) without regard to whether the
property is leased in a disqualified
lease (as defined in section
168(h)(1)(B)(ii)).''.
(f) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
property placed in service after the date of the enactment of
this Act.
(2) Full credit allowed in the year building placed in
service.--The amendment made by subsection (a) shall apply to
property placed in service after December 31, 2025.
SEC. 12004. INCREASE OF EXCLUSION OF GAIN FROM SALE OF PRINCIPAL
RESIDENCE.
(a) In General.--Section 121(b) is amended--
(1) by striking ``$250,000'' and inserting ``$500,000''
each place it appears,
(2) by striking ``500,000'' and inserting ``$1,000,000''
each place it appears,
(3) in paragraph (2)(A), in the heading, by striking
``$500,000'' and inserting ``$1,000,000'', and
(4) by adding at the end the following new paragraph:
``(5) Adjustment for inflation.--In the case of a taxable
year beginning after 2026, the $500,000 and $1,000,000 amounts
in paragraphs (1), (2), and (4) shall be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`2025' for `2016' in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of $100,
such increase shall be rounded to the next lowest multiple of
$100.''.
(b) Effective Date.--The amendments made by this section shall
apply to sales and exchanges after December 31, 2025.
SEC. 12005. MIDDLE-INCOME HOUSING TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
is amended by inserting after section 42 the following new section:
``SEC. 42A. MIDDLE-INCOME HOUSING CREDIT.
``(a) In General.--For purposes of section 38, the amount of the
middle-income housing credit determined under this section for any
taxable year in the credit period shall be an amount equal to--
``(1) the applicable percentage, of
``(2) the qualified basis of each qualified middle-income
building.
``(b) Applicable Percentage.--
``(1) Determination of applicable percentage.--For purposes
of this section--
``(A) In general.--The term `applicable percentage'
means, with respect to any building, the appropriate
percentage prescribed by the Secretary for the earlier
of--
``(i) the month in which such building is
placed in service, or
``(ii) at the election of the taxpayer, the
month in which the taxpayer and the housing
credit agency enter into an agreement with
respect to such building (which is binding on
such agency, the taxpayer, and all successors
in interest) as to the housing credit dollar
amount to be allocated to such building.
A month may be elected under clause (ii) only if the
election is made not later than the 5th day after the
close of such month. Such an election, once made, shall
be irrevocable.
``(B) Method of prescribing percentages.--The
percentages prescribed by the Secretary for any month
shall be percentages which will yield over a 15-year
period amounts of credit under subsection (a) which
have a present value equal to--
``(i) 50 percent of the qualified basis of
a new building which is not Federally
subsidized for the taxable year, and
``(ii) 20 percent of the qualified basis of
a building not described in clause (i).
``(C) Method of discounting.--The present value
under subparagraph (B) shall be determined--
``(i) as of the last day of the 1st year of
the 15-year period referred to in subparagraph
(B),
``(ii) by using a discount rate equal to 72
percent of the average of the annual Federal
mid-term rate and the annual Federal long-term
rate applicable under section 1274(d)(1) to the
month applicable under clause (i) or (ii) of
subparagraph (A) and compounded annually, and
``(iii) by assuming that the credit
allowable under this section for any year is
received on the last day of such year.
``(2) Minimum credit rate.--
``(A) In general.--The applicable percentage for
any building which is not Federally subsidized for the
taxable year shall not be less than 5 percent.
``(B) Minimum credit rate for federally subsidized
buildings.--In the case of any building to which
subparagraph (A) does not apply, except as provided in
paragraph (3), the applicable percentage shall not be
less than 2 percent.
``(3) Exception for certain federally subsidized
buildings.--In the case of any building to which paragraph
(2)(A) does not apply, the applicable percentage is zero
unless--
``(A) a credit is allowed under section 42 with
respect to such building for the taxable year, and
``(B) such building is financed by tax-exempt bonds
as described in section 42(h)(4).
``(4) Cross references.--
``(A) For treatment of certain rehabilitation
expenditures as separate new buildings, see subsection
(e).
``(B) For determination of applicable percentage
for increases in qualified basis after the 1st year of
the credit period, see subsection (f)(3).
``(C) For authority of housing credit agency to
limit applicable percentage and qualified basis which
may be taken into account under this section with
respect to any building, see subsection (h)(6).
``(c) Qualified Basis; Qualified Middle-Income Building.--For
purposes of this section--
``(1) Qualified basis.--
``(A) Determination.--The qualified basis of any
qualified middle-income building for any taxable year
is an amount equal to--
``(i) the applicable fraction (determined
as of the close of such taxable year) of
``(ii) the eligible basis of such building
(determined under subsection (d)).
``(B) Applicable fraction.--For purposes of
subparagraph (A), the term `applicable fraction' means
the smaller of the unit fraction or the floor space
fraction.
``(C) Unit fraction.--For purposes of subparagraph
(B), the term `unit fraction' means the fraction--
``(i) the numerator of which is the number
of middle-income units in the building, and
``(ii) the denominator of which is the
number of residential rental units (whether or
not occupied) in such building.
``(D) Floor space fraction.--For purposes of
subparagraph (B), the term `floor space fraction' means
the fraction--
``(i) the numerator of which is the total
floor space of the middle-income units in such
building, and
``(ii) the denominator of which is the
total floor space of the residential rental
units (whether or not occupied) in such
building.
``(2) Qualified middle-income building.--The term
`qualified middle-income building' means any building which is
part of a qualified middle-income housing project at all times
during the period--
``(A) beginning on the 1st day in the credit period
on which such building is part of such a project, and
``(B) ending on the last day of the credit period
with respect to such building.
``(d) Eligible Basis.--For purposes of this section--
``(1) New buildings.--The eligible basis of a new building
is its adjusted basis as of the close of the 1st taxable year
of the credit period.
``(2) Existing buildings.--
``(A) In general.--The eligible basis of an
existing building is--
``(i) in the case of a building which meets
the requirements of subparagraph (B), its
adjusted basis as of the close of the 1st
taxable year of the credit period, and
``(ii) zero in any other case.
``(B) Requirements.--A building meets the
requirements of this subparagraph if--
``(i) the building is acquired by purchase
(as defined in section 179(d)(2)),
``(ii) there is a period of at least 10
years between the date of its acquisition by
the taxpayer and the date the building was last
placed in service,
``(iii) the building was not previously
placed in service by the taxpayer or by any
person who was a related person with respect to
the taxpayer as of the time previously placed
in service, and
``(iv) except as provided in subsection
(f)(5), a credit is allowable under subsection
(a) by reason of subsection (e) with respect to
the building.
``(C) Adjusted basis.--For purposes of subparagraph
(A), the adjusted basis of any building shall not
include so much of the basis of such building as is
determined by reference to the basis of other property
held at any time by the person acquiring the building.
``(D) Special rules.--
``(i) Special rules for certain
transfers.--For purposes of determining under
subparagraph (B)(ii) when a building was last
placed in service, there shall not be taken
into account any placement in service--
``(I) in connection with the
acquisition of the building in a
transaction in which the basis of the
building in the hands of the person
acquiring it is determined in whole or
in part by reference to the adjusted
basis of such building in the hands of
the person from whom acquired,
``(II) by a person whose basis in
such building is determined under
section 1014(a) (relating to property
acquired from a decedent),
``(III) by any governmental unit or
qualified nonprofit organization if the
requirements of subparagraph (B)(ii)
are met with respect to the placement
in service by such unit or organization
and all the income from such property
is exempt from Federal income taxation,
``(IV) by any person who acquired
such building by foreclosure (or by
instrument in lieu of foreclosure) of
any purchase-money security interest
held by such person if the requirements
of subparagraph (B)(ii) are met with
respect to the placement in service by
such person and such building is resold
within 12 months after the date such
building is placed in service by such
person after such foreclosure, or
``(V) of a single-family residence
by any individual who owned and used
such residence for no other purpose
than as his principal residence.
``(ii) Related person.--For purposes of
subparagraph (B)(iii), a person (hereinafter in
this subclause referred to as the `related
person') is related to any person if the
related person bears a relationship to such
person specified in section 267(b) or
707(b)(1), or the related person and such
person are engaged in trades or businesses
under common control (within the meaning of
subsections (a) and (b) of section 52).
``(3) Special rules relating to determination of adjusted
basis.--For purposes of this subsection--
``(A) In general.--Except as provided in
subparagraph (B), the adjusted basis of any building
shall be determined without regard to the adjusted
basis of any property which is not residential rental
property.
``(B) Basis of property in common areas, etc.,
included.--
``(i) In general.--Except as provided in
clause (ii), the adjusted basis of any building
shall be determined by taking into account the
adjusted basis of property (of a character
subject to the allowance for depreciation) used
in common areas or provided as comparable
amenities to all residential rental units in
such building.
``(ii) Special rule.--In the case of any
building for which the low-income housing tax
credit is allowable under section 42, the
adjusted basis of the building under this
section shall be determined without regard to
property used in common areas or provided as
comparable amenities to all residential rental
units in such building.
``(C) No reduction for depreciation.--The adjusted
basis of any building shall be determined without
regard to paragraphs (2) and (3) of section 1016(a).
``(4) Special rules for determining eligible basis.--
``(A) Federal grants not taken into account in
determining eligible basis.--The eligible basis of a
building shall not include any costs financed with the
proceeds of a Federally funded grant.
``(B) Increase in credit for buildings in high cost
areas.--
``(i) In general.--In the case of any
building located in a difficult development
area which is designated for purposes of this
subparagraph--
``(I) in the case of a new
building, the eligible basis of such
building shall be 130 percent of such
basis determined without regard to this
subparagraph, and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be 130 percent of
such expenditures determined without
regard to this subparagraph.
``(ii) Limitation.--Clause (i) shall not
apply to any building if paragraph (1) of
subsection (h) does not apply to any portion of
the eligible basis of such building by reason
of paragraph (9) of such subsection.
``(iii) Difficult development areas.--
``(I) In general.--The term
`difficult development areas' means any
area designated by the Secretary of
Housing and Urban Development as an
area which has high construction, land,
or utility costs relative to area
median gross income, any rural area,
and any Indian area.
``(II) Rural area.--For purposes of
subclause (I), the term `rural area'
means any non-metropolitan area, or any
rural area as defined by section 520 of
the Housing Act of 1949, which is
identified by the qualified allocation
plan under subsection (m)(1)(B).
``(III) Indian area.--For purposes
of subclause (I), the term `Indian
area' means any Indian area (as defined
in section 4(11) of the Native American
Housing Assistance and Self
Determination Act of 1996 (25 U.S.C.
4103(11))).
``(IV) Special rule for buildings
in indian areas.--In the case of an
area which is a difficult development
area solely because it is an Indian
area, a building shall not be treated
as located in such area unless such
building is assisted or financed under
the Native American Housing Assistance
and Self Determination Act of 1996 (25
U.S.C. 4101 et seq.) or the project
sponsor is an Indian tribe (as defined
in section 45A(c)(6)), a tribally
designated housing entity (as defined
in section 4(22) of such Act (25 U.S.C.
4103(22))), or wholly owned or
controlled by such an Indian tribe or
tribally designated housing entity.
``(V) Limit on areas designated.--
The portions of metropolitan
statistical areas which may be
designated for purposes of this
subparagraph shall not exceed an
aggregate area having 20 percent of the
population of such metropolitan
statistical areas. A comparable rule
shall apply to nonmetropolitan areas.
``(iv) Special rules and definitions.--For
purposes of this subparagraph--
``(I) population shall be
determined on the basis of the most
recent decennial census for which data
are available,
``(II) area median gross income
shall be determined in accordance with
subsection (g)(4),
``(III) the term `metropolitan
statistical area' has the same meaning
as when used in section 143(k)(2)(B),
and
``(IV) the term `nonmetropolitan
area' means any county (or portion
thereof) which is not within a
metropolitan statistical area.
``(v) Buildings designated by state housing
credit agency.--Any building which is
designated by the State housing credit agency
as requiring the increase in credit under this
subparagraph in order for such building to be
financially feasible as part of a qualified
middle-income housing project shall be treated
for purposes of this subparagraph as located in
a difficult development area which is
designated for purposes of this subparagraph.
``(5) Credit allowable for certain buildings acquired
during 10-year period.--On application by the taxpayer, the
Secretary may waive paragraph (2)(B)(ii) with respect to any
building acquired from an insured depository institution in
default (as defined in section 3 of the Federal Deposit
Insurance Act) or from a receiver or conservator of such an
institution.
``(6) Acquisition of building before end of prior credit
period.--
``(A) In general.--Under regulations prescribed by
the Secretary, in the case of a building described in
subparagraph (B) (or interest therein) which is
acquired by the taxpayer--
``(i) paragraph (2)(B) shall not apply, but
``(ii) the credit allowable by reason of
subsection (a) to the taxpayer for any period
after such acquisition shall be equal to the
amount of credit which would have been
allowable under subsection (a) for such period
to the prior owner referred to in subparagraph
(B) had such owner not disposed of the
building.
``(B) Description of building.--A building is
described in this subparagraph if--
``(i) a credit was allowed by reason of
subsection (a) to any prior owner of such
building, and
``(ii) the taxpayer acquired such building
before the end of the credit period for such
building with respect to such prior owner
(determined without regard to any disposition
by such prior owner).
``(e) Rehabilitation Expenditures Treated as Separate New
Building.--
``(1) In general.--Rehabilitation expenditures paid or
incurred by the taxpayer with respect to any building shall be
treated for purposes of this section as a separate new
building.
``(2) Rehabilitation expenditures.--For purposes of
paragraph (1)--
``(A) In general.--The term `rehabilitation
expenditures' means amounts chargeable to capital
account and incurred for property (or additions or
improvements to property) of a character subject to the
allowance for depreciation in connection with the
rehabilitation of a building.
``(B) Cost of acquisition, etc., not included.--
Such term does not include the cost of acquiring any
building (or interest therein) or any amount not
permitted to be taken into account under paragraph (3)
of subsection (d).
``(C) Certain relocation costs.--In the case of a
rehabilitation of a building to which section 280B does
not apply, costs relating to the relocation of
occupants, including--
``(i) amounts paid to occupants,
``(ii) amounts paid to third parties for
services relating to such relocation, and
``(iii) amounts paid for temporary housing
for occupants,
shall be treated as chargeable to capital account and
taken into account as rehabilitation expenditures.
``(3) Minimum expenditures to qualify.--
``(A) In general.--Paragraph (1) shall apply to
rehabilitation expenditures with respect to any
building only if--
``(i) the expenditures are allocable to 1
or more middle-income units or substantially
benefit such units, and
``(ii) the amount of such expenditures
during any 24-month period meets the
requirements of whichever of the following
subclauses requires the greater amount of such
expenditures:
``(I) The requirement of this
subclause is met if such amount is not
less than 20 percent of the adjusted
basis of the building (determined as of
the 1st day of such period and without
regard to paragraphs (2) and (3) of
section 1016(a)).
``(II) The requirement of this
subclause is met if the qualified basis
attributable to such amount, when
divided by the number of middle-income
units in the building, is equal to or
greater than the dollar amount in
effect under section
42(e)(3)(A)(ii)(II) for the calendar
year in which such expenditures are
treated as placed in service under
paragraph (4).
``(B) Date of determination.--The determination
under subparagraph (A) shall be made as of the close of
the 1st taxable year in the credit period with respect
to such expenditures.
``(4) Special rules.--For purposes of applying this section
with respect to expenditures which are treated as a separate
building by reason of this subsection--
``(A) such expenditures shall be treated as placed
in service at the close of the 24-month period referred
to in paragraph (3)(A), and
``(B) the applicable fraction under subsection
(c)(1) shall be the applicable fraction for the
building (without regard to paragraph (1)) with respect
to which the expenditures were incurred.
Nothing in subsection (d)(2) shall prevent a credit from being
allowed by reason of this subsection.
``(5) No double counting.--Rehabilitation expenditures may,
at the election of the taxpayer, be taken into account under
this subsection or subsection (d)(2)(A)(i) but not under both
such subsections.
``(6) Regulations to apply subsection with respect to group
of units in building.--The Secretary may prescribe regulations,
consistent with the purposes of this subsection, treating a
group of units with respect to which rehabilitation
expenditures are incurred as a separate new building.
``(f) Definition and Special Rules Relating to Credit Period.--
``(1) Credit period defined.--For purposes of this section,
the term `credit period' means, with respect to any building,
the period of 15 taxable years beginning with--
``(A) the taxable year in which the building is
placed in service, or
``(B) at the election of the taxpayer, the
succeeding taxable year,
but only if the building is a qualified middle-income building
as of the close of the 1st year of such period. The election
under subparagraph (B), once made, shall be irrevocable.
``(2) Special rule for 1st year of credit period.--
``(A) In general.--The credit allowable under
subsection (a) with respect to any building for the 1st
taxable year of the credit period shall be determined
by substituting for the applicable fraction under
subsection (c)(1) the fraction--
``(i) the numerator of which is the sum of
the applicable fractions determined under
subsection (c)(1) as of the close of each full
month of such year during which such building
was in service, and
``(ii) the denominator of which is 12.
``(B) Disallowed 1st-year credit allowed in 16th
year.--Any reduction by reason of subparagraph (A) in
the credit allowable (without regard to subparagraph
(A)) for the 1st taxable year of the credit period
shall be allowable under subsection (a) for the 1st
taxable year following the credit period.
``(3) Determination of applicable percentage with respect
to increases in qualified basis after 1st year of credit
period.--
``(A) In general.--In the case of any building
which was a qualified middle-income building as of the
close of the 1st year of the credit period, if--
``(i) as of the close of any taxable year
in the credit period (after the 1st year of
such period) the qualified basis of such
building, exceeds
``(ii) the qualified basis of such building
as of the close of the 1st year of the credit
period,
the applicable percentage which shall apply under
subsection (a) for the taxable year to such excess
shall be the percentage equal to \2/3\ of the
applicable percentage which (after the application of
subsection (h)) would but for this paragraph apply to
such basis.
``(B) 1st year computation applies.--A rule similar
to the rule of paragraph (2)(A) shall apply to any
increase in qualified basis to which subparagraph (A)
applies for the 1st year of such increase.
``(4) Dispositions of property.--If a building (or an
interest therein) is disposed of during any year for which
credit is allowable under subsection (a), such credit shall be
allocated between the parties on the basis of the number of
days during such year the building (or interest) was held by
each.
``(5) Credit period for existing buildings not to begin
before rehabilitation credit allowed.--
``(A) In general.--The credit period for an
existing building shall not begin before the 1st
taxable year of the credit period for rehabilitation
expenditures with respect to the building.
``(B) Acquisition credit allowed for certain
buildings not allowed a rehabilitation credit.--
``(i) In general.--In the case of a
building described in clause (ii)--
``(I) subsection (d)(2)(B)(iv)
shall not apply, and
``(II) the credit period for such
building shall not begin before the
taxable year which would be the 1st
taxable year of the credit period for
rehabilitation expenditures with
respect to the building under the
modifications described in clause
(ii)(II).
``(ii) Building described.--A building is
described in this clause if--
``(I) a waiver is granted under
subsection (d)(4) with respect to the
acquisition of the building, and
``(II) a credit would be allowed
for rehabilitation expenditures with
respect to such building if subsection
(e)(3)(A)(ii)(I) did not apply and if
the dollar amount in effect under
subsection (e)(3)(A)(ii)(II) were two-
thirds of such amount.
``(g) Qualified Middle-Income Housing Project.--For purposes of
this section--
``(1) In general.--The term `qualified middle-income
housing project' means any project for residential rental
property if--
``(A) 60 percent or more of the residential units
in such project are both rent-restricted and occupied
by individuals whose income is 100 percent or less of
area median gross income, and
``(B) not less than 20 percent of the residential
units in such project are units which--
``(i) are described in subparagraph (A),
and
``(ii) are not residential units which are
taken into account under section 42.
``(2) Rent-restricted units.--
``(A) In general.--For purposes of paragraph (1), a
residential unit is rent-restricted if the gross rent
with respect to such unit does not exceed 30 percent of
the imputed income limitation applicable to such unit.
For purposes of the preceding sentence, the amount of
the income limitation under paragraph (1) applicable
for any period shall not be less than such limitation
applicable for the earliest period the building (which
contains the unit) was included in the determination of
whether the project is a qualified middle-income
housing project.
``(B) Gross rent.--For purposes of subparagraph
(A), gross rent--
``(i) includes any utility allowance
determined by the Secretary after taking into
account such determinations under section 8 of
the United States Housing Act of 1937,
``(ii) does not include any fee for a
supportive service which is paid to the owner
of the unit (on the basis of the middle-income
status of the tenant of the unit) by any
governmental program of assistance (or by an
organization described in section 501(c)(3) and
exempt from tax under section 501(a)) if such
program (or organization) provides assistance
for rent and the amount of assistance provided
for rent is not separable from the amount of
assistance provided for supportive services,
and
``(iii) does not include any rental payment
to the owner of the unit to the extent such
owner pays an equivalent amount to the Farmers'
Home Administration under section 515 of the
Housing Act of 1949.
For purposes of clause (ii), the term `supportive
service' means any service provided under a planned
program of services designed to enable residents of a
residential rental property to remain independent and
avoid placement in a hospital, nursing home, or
intermediate care facility for the mentally or
physically handicapped.
``(C) Imputed income limitation applicable to
unit.--For purposes of this paragraph, the imputed
income limitation applicable to a unit is the income
limitation which would apply under paragraph (1) to
individuals occupying the unit if the number of
individuals occupying the unit were as follows:
``(i) In the case of a unit which does not
have a separate bedroom, 1 individual.
``(ii) In the case of a unit which has 1 or
more separate bedrooms, 1.5 individuals for
each separate bedroom.
In the case of a project with respect to which a credit
is allowable by reason of this section and for which
financing is provided by a bond described in section
142(a)(7), the imputed income limitation shall apply in
lieu of the otherwise applicable income limitation for
purposes of applying section 142(d)(4)(B)(ii).
``(D) Treatment of units occupied by individuals
whose incomes rise above limit.--
``(i) In general.--Except as provided in
clause (ii), notwithstanding an increase in the
income of the occupants of a middle-income unit
above the income limitation applicable under
paragraph (1), such unit shall continue to be
treated as a middle-income unit if the income
of such occupants initially met such income
limitation and such unit continues to be rent-
restricted.
``(ii) Next available unit must be rented
to middle-income tenant if income rises above
140 percent of income limit.--If the income of
the occupants of the unit increases above 140
percent of the income limitation applicable
under paragraph (1), clause (i) shall cease to
apply to such unit if any residential rental
unit in the building (of a size comparable to,
or smaller than, such unit) is occupied by a
new resident whose income exceeds such income
limitation.
``(3) Date for meeting requirements.--
``(A) In general.--Except as otherwise provided in
this paragraph, a building shall be treated as a
qualified middle-income building only if the project
(of which such building is a part) meets the
requirements of paragraph (1) not later than the close
of the 1st year of the credit period for such building.
``(B) Buildings which rely on later buildings for
qualification.--
``(i) In general.--In determining whether a
building (hereinafter in this subparagraph
referred to as the `prior building') is a
qualified middle-income building, the taxpayer
may take into account 1 or more additional
buildings placed in service during the 12-month
period described in subparagraph (A) with
respect to the prior building only if the
taxpayer elects to apply clause (ii) with
respect to each additional building taken into
account.
``(ii) Treatment of elected buildings.--In
the case of a building which the taxpayer
elects to take into account under clause (i),
the period under subparagraph (A) for such
building shall end at the close of the 12-month
period applicable to the prior building.
``(iii) Date prior building is treated as
placed in service.--For purposes of determining
the credit period for the prior building, the
prior building shall be treated for purposes of
this section as placed in service on the most
recent date any additional building elected by
the taxpayer (with respect to such prior
building) was placed in service.
``(C) Special rule.--A building--
``(i) other than the 1st building placed in
service as part of a project, and
``(ii) other than a building which is
placed in service during the 12-month period
described in subparagraph (A) with respect to a
prior building which becomes a qualified
middle-income building,
shall in no event be treated as a qualified middle-
income building unless the project is a qualified
middle-income housing project (without regard to such
building) on the date such building is placed in
service.
``(D) Projects with more than 1 building must be
identified.--For purposes of this section, a project
shall be treated as consisting of only 1 building
unless, before the close of the 1st calendar year in
the project period (as defined in subsection
(h)(1)(F)(ii)), each building which is (or will be)
part of such project is identified in such form and
manner as the Secretary may provide.
``(4) Certain rules made applicable.--Paragraphs (2) (other
than subparagraph (A) thereof), (3), and (7) of section 142(d),
and section 6652(j), shall apply for purposes of determining
whether any project is a qualified middle-income housing
project and whether any unit is a middle-income unit; except
that, in applying such provisions for such purposes--
``(A) the term `gross rent' shall have the meaning
given such term by paragraph (2)(B) of this subsection,
and
``(B) the term `applicable income limit' means the
limitation under paragraph (1) of this subsection.
``(5) Election to treat building after credit period as not
part of a project.--For purposes of this section, the taxpayer
may elect to treat any building as not part of a qualified
middle-income housing project for any period beginning after
the credit period for such building.
``(6) Special rule where de minimis equity contribution.--
Property shall not be treated as failing to be residential
rental property for purposes of this section merely because the
occupant of a residential unit in the project pays (on a
voluntary basis) to the lessor a de minimis amount to be held
toward the purchase by such occupant of a residential unit in
such project if--
``(A) all amounts so paid are refunded to the
occupant on the cessation of his occupancy of a unit in
the project, and
``(B) the purchase of the unit is not permitted
until after the close of the credit period with respect
to the building in which the unit is located.
Any amount paid to the lessor as described in the preceding
sentence shall be included in gross rent under paragraph (2)
for purposes of determining whether the unit is rent-
restricted.
``(7) Scattered site projects.--Buildings which would (but
for their lack of proximity) be treated as a project for
purposes of this section shall be so treated if all of the
dwelling units in each of the buildings are rent-restricted
(within the meaning of paragraph (2)) residential rental units.
``(8) Waiver of certain recertifications.--On application
by the taxpayer, the Secretary may waive any annual
recertification of tenant income for purposes of this
subsection, if the entire building is occupied by middle-income
tenants.
``(9) Clarification of general public use requirement.--A
project does not fail to meet the general public use
requirement solely because of occupancy restrictions or
preferences that favor tenants--
``(A) with special needs, or
``(B) who are members of a specified group under a
Federal program or State program or policy that
supports housing for such a specified group.
``(h) Limitation on Aggregate Credit Allowable With Respect to
Projects Located in a State.--
``(1) Credit may not exceed credit amount allocated to
building.--
``(A) In general.--The amount of the credit
determined under this section for any taxable year with
respect to any building shall not exceed the housing
credit dollar amount allocated to such building under
this subsection.
``(B) Time for making allocation.--Except in the
case of an allocation which meets the requirements of
subparagraph (C), (D), (E), or (F), an allocation shall
be taken into account under subparagraph (A) only if it
is made not later than the close of the calendar year
in which the building is placed in service.
``(C) Exception where binding commitment.--An
allocation meets the requirements of this subparagraph
if there is a binding commitment (not later than the
close of the calendar year in which the building is
placed in service) by the housing credit agency to
allocate a specified housing credit dollar amount to
such building beginning in a specified later taxable
year.
``(D) Exception where increase in qualified
basis.--
``(i) In general.--An allocation meets the
requirements of this subparagraph if such
allocation is made not later than the close of
the calendar year in which ends the taxable
year to which it will 1st apply but only to the
extent the amount of such allocation does not
exceed the limitation under clause (ii).
``(ii) Limitation.--The limitation under
this clause is the amount of credit allowable
under this section (without regard to this
subsection) for a taxable year with respect to
an increase in the qualified basis of the
building equal to the excess of--
``(I) the qualified basis of such
building as of the close of the 1st
taxable year to which such allocation
will apply, over
``(II) the qualified basis of such
building as of the close of the 1st
taxable year to which the most recent
prior housing credit allocation with
respect to such building applied.
``(iii) Housing credit dollar amount
reduced by full allocation.--Notwithstanding
clause (i), the full amount of the allocation
shall be taken into account under paragraph
(2).
``(E) Exception where 10 percent of cost
incurred.--
``(i) In general.--An allocation meets the
requirements of this subparagraph if such
allocation is made with respect to a qualified
building which is placed in service not later
than the close of the second calendar year
following the calendar year in which the
allocation is made.
``(ii) Qualified building.--For purposes of
clause (i), the term `qualified building' means
any building which is part of a project if the
taxpayer's basis in such project (as of the
date which is 1 year after the date that the
allocation was made) is more than 10 percent of
the taxpayer's reasonably expected basis in
such project (as of the close of the second
calendar year referred to in clause (i)). Such
term does not include any existing building
unless a credit is allowable under subsection
(e) for rehabilitation expenditures paid or
incurred by the taxpayer with respect to such
building for a taxable year ending during the
second calendar year referred to in clause (i)
or the prior taxable year.
``(F) Allocation of credit on a project basis.--
``(i) In general.--In the case of a project
which includes (or will include) more than 1
building, an allocation meets the requirements
of this subparagraph if--
``(I) the allocation is made to the
project for a calendar year during the
project period,
``(II) the allocation only applies
to buildings placed in service during
or after the calendar year for which
the allocation is made, and
``(III) the portion of such
allocation which is allocated to any
building in such project is specified
not later than the close of the
calendar year in which the building is
placed in service.
``(ii) Project period.--For purposes of
clause (i), the term `project period' means the
period--
``(I) beginning with the 1st
calendar year for which an allocation
may be made for the 1st building placed
in service as part of such project, and
``(II) ending with the calendar
year the last building is placed in
service as part of such project.
``(2) Allocated credit amount to apply to all taxable years
ending during or after credit allocation year.--Any housing
credit dollar amount allocated to any building for any calendar
year--
``(A) shall apply to such building for all taxable
years in the credit period ending during or after such
calendar year, and
``(B) shall reduce the aggregate housing credit
dollar amount of the allocating agency only for such
calendar year.
``(3) Housing credit dollar amount for agencies.--
``(A) In general.--The aggregate housing credit
dollar amount which a housing credit agency may
allocate for any calendar year is the portion of the
State housing credit ceiling allocated under this
paragraph for such calendar year to such agency.
``(B) State ceiling initially allocated to state
housing credit agencies.--Except as provided in
subparagraph (D), the State housing credit ceiling for
each calendar year shall be allocated to the housing
credit agency of such State. If there is more than 1
housing credit agency of a State, all such agencies
shall be treated as a single agency.
``(C) State housing credit ceiling.--The State
housing credit ceiling applicable to any State for any
calendar year shall be an amount equal to the sum of--
``(i) the unused State housing credit
ceiling (if any) of such State for the
preceding calendar year,
``(ii) the greater of--
``(I) $1.00 multiplied by the State
population, or
``(II) $1,500,000, plus
``(iii) the amount of State housing credit
ceiling returned in the calendar year.
For purposes of clause (i), the unused State housing
credit ceiling for any calendar year is the excess (if
any) of the sum of the amounts described in clauses
(ii) (reduced by the aggregate amounts described in
paragraph (10)(A)(i) with respect to all elections made
for such calendar year) and (iii) over the aggregate
housing credit dollar amount allocated for such year.
For purposes of clause (iii), the amount of State
housing credit ceiling returned in the calendar year
equals the housing credit dollar amount previously
allocated within the State to any project which fails
to meet the 10 percent test under paragraph (1)(E)(ii)
on a date after the close of the calendar year in which
the allocation was made or which does not become a
qualified middle-income housing project within the
period required by this section or the terms of the
allocation or to any project with respect to which an
allocation is cancelled by mutual consent of the
housing credit agency and the allocation recipient.
``(D) State may provide for different allocation.--
Rules similar to the rules of section 146(e) (other
than paragraph (2)(B) thereof) shall apply for purposes
of this paragraph.
``(E) Population.--For purposes of this paragraph,
population shall be determined in accordance with
section 146(j).
``(F) Cost-of-living adjustment.--
``(i) In general.--In the case of a
calendar year after 2026, the $1,500,000 and
$1.00 amounts in subparagraph (C) shall each be
increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for such calendar year by
substituting `calendar year 2025' for
`calendar year 2016' in subparagraph
(A)(ii) thereof.
``(ii) Rounding.--
``(I) In the case of the $1,140,000
amount, any increase under clause (i)
which is not a multiple of $5,000 shall
be rounded to the next lowest multiple
of $5,000.
``(II) In the case of the $1.00
amount, any increase under clause (i)
which is not a multiple of 5 cents
shall be rounded to the next lowest
multiple of 5 cents.
``(4) Portion of state ceiling set-aside for certain
projects involving qualified nonprofit organizations.--
``(A) In general.--Not more than 90 percent of the
State housing credit ceiling (determined without regard
to paragraph (7)) for any State for any calendar year
shall be allocated to projects other than qualified
middle-income housing projects described in
subparagraph (B).
``(B) Projects involving qualified nonprofit
organizations.--For purposes of subparagraph (A), a
qualified middle-income housing project is described in
this subparagraph if a qualified nonprofit organization
is to own an interest in the project (directly or
through a partnership) and materially participate
(within the meaning of section 469(h)) in the
development and operation of the project throughout the
credit period.
``(C) Qualified nonprofit organization.--For
purposes of this paragraph, the term `qualified
nonprofit organization' means any organization if--
``(i) such organization is described in
paragraph (3) or (4) of section 501(c) and is
exempt from tax under section 501(a),
``(ii) such organization is determined by
the State housing credit agency not to be
affiliated with or controlled by a for-profit
organization, and
``(iii) one of the exempt purposes of such
organization includes the fostering of middle-
income housing.
``(D) Treatment of certain subsidiaries.--
``(i) In general.--For purposes of this
paragraph, a qualified nonprofit organization
shall be treated as satisfying the ownership
and material participation test of subparagraph
(B) if any qualified corporation in which such
organization holds stock satisfies such test.
``(ii) Qualified corporation.--For purposes
of clause (i), the term `qualified corporation'
means any corporation if 100 percent of the
stock of such corporation is held by 1 or more
qualified nonprofit organizations at all times
during the period such corporation is in
existence.
``(E) State may not override set-aside.--Nothing in
subparagraph (E) of paragraph (3) shall be construed to
permit a State not to comply with subparagraph (A) of
this paragraph.
``(5) Buildings eligible for credit only if minimum long-
term commitment to middle-income housing.--
``(A) In general.--No credit shall be allowed by
reason of this section with respect to any building for
the taxable year unless an extended middle-income
housing commitment is in effect as of the end of such
taxable year.
``(B) Extended middle-income housing commitment.--
For purposes of this paragraph, the term `extended
middle-income housing commitment' means any agreement
between the taxpayer and the housing credit agency--
``(i) which requires that the applicable
fraction (as defined in subsection (c)(1)) for
the building for each taxable year in the
extended use period will not be less than the
applicable fraction specified in such agreement
and which prohibits the actions described in
subclauses (I) and (II) of subparagraph
(E)(ii),
``(ii) which allows individuals who meet
the income limitation applicable to the
building under subsection (g) (whether
prospective, present, or former occupants of
the building) the right to enforce in any State
court the requirement and prohibitions of
clause (i),
``(iii) which prohibits the disposition to
any person of any portion of the building to
which such agreement applies unless all of the
building to which such agreement applies is
disposed of to such person,
``(iv) which prohibits the refusal to lease
to a holder of a voucher or certificate of
eligibility under section 8 of the United
States Housing Act of 1937 because of the
status of the prospective tenant as such a
holder,
``(v) which is binding on all successors of
the taxpayer, and
``(vi) which, with respect to the property,
is recorded pursuant to State law as a
restrictive covenant.
``(C) Allocation of credit may not exceed amount
necessary to support commitment.--The housing credit
dollar amount allocated to any building may not exceed
the amount necessary to support the applicable fraction
specified in the extended middle-income housing
commitment for such building, including any increase in
such fraction pursuant to the application of subsection
(f)(3) if such increase is reflected in an amended
middle-income housing commitment.
``(D) Extended use period.--For purposes of this
paragraph, the term `extended use period' means the
period--
``(i) beginning on the 1st day in the
credit period on which such building is part of
a qualified middle-income housing project, and
``(ii) ending on the later of--
``(I) the date specified by such
agency in such agreement, or
``(II) the date which is 15 years
after the close of the credit period.
``(E) Exceptions if foreclosure or if no buyer
willing to maintain middle-income status.--
``(i) In general.--The extended use period
for any building shall terminate on the 61st
day after the taxpayer (or a successor in
interest) provides notice to the Secretary and
the housing credit agency that the building has
been acquired by foreclosure (or instrument in
lieu of foreclosure) and that the taxpayer
intends the termination of such period, unless,
before such date, the Secretary or the housing
credit agency determines that such acquisition
is part of an arrangement with the taxpayer a
purpose of which is to terminate such period.
``(ii) Eviction, etc., of existing middle-
income tenants not permitted.--The termination
of an extended use period under clause (i)
shall not be construed to permit before the
close of the 3-year period following such
termination--
``(I) the eviction or the
termination of tenancy (other than for
good cause) of an existing tenant of
any middle-income unit, or
``(II) any increase in the gross
rent with respect to such unit not
otherwise permitted under this section.
``(F) Effect of noncompliance.--If, during a
taxable year, there is a determination that an extended
middle-income housing agreement was not in effect as of
the beginning of such year, such determination shall
not apply to any period before such year and
subparagraph (A) shall be applied without regard to
such determination if the failure is corrected within 1
year from the date of the determination.
``(G) Projects which consist of more than 1
building.--The application of this paragraph to
projects which consist of more than 1 building shall be
made under regulations prescribed by the Secretary.
``(6) Special rules.--
``(A) Building must be located within jurisdiction
of credit agency.--A housing credit agency may allocate
its aggregate housing credit dollar amount only to
buildings located in the jurisdiction of the
governmental unit of which such agency is a part.
``(B) Agency allocations in excess of limit.--If
the aggregate housing credit dollar amounts allocated
by a housing credit agency for any calendar year exceed
the portion of the State housing credit ceiling
allocated to such agency for such calendar year, the
housing credit dollar amounts so allocated shall be
reduced (to the extent of such excess) for buildings in
the reverse of the order in which the allocations of
such amounts were made.
``(C) Credit reduced if allocated credit dollar
amount is less than credit which would be allowable
without regard to placed in service convention, etc.--
``(i) In general.--The amount of the credit
determined under this section with respect to
any building shall not exceed the clause (ii)
percentage of the amount of the credit which
would (but for this subparagraph) be determined
under this section with respect to such
building.
``(ii) Determination of percentage.--For
purposes of clause (i), the clause (ii)
percentage with respect to any building is the
percentage which--
``(I) the housing credit dollar
amount allocated to such building,
bears to
``(II) the credit amount determined
in accordance with clause (iii).
``(iii) Determination of credit amount.--
The credit amount determined in accordance with
this clause is the amount of the credit which
would (but for this subparagraph) be determined
under this section with respect to the building
if--
``(I) this section were applied
without regard to paragraphs (2)(A) and
(3)(B) of subsection (f), and
``(II) subsection (f)(3)(A) were
applied without regard to `the
percentage equal to \2/3\ of'.
``(D) Housing credit agency to specify applicable
percentage and maximum qualified basis.--In allocating
a housing credit dollar amount to any building, the
housing credit agency shall specify the applicable
percentage and the maximum qualified basis which may be
taken into account under this section with respect to
such building. The applicable percentage and maximum
qualified basis so specified shall not exceed the
applicable percentage and qualified basis determined
under this section without regard to this subsection.
``(7) Increase in state ceiling dedicated to certain rural
development projects.--
``(A) In general.--The State housing credit ceiling
for any calendar year shall be increased by an amount
equal to 5 percent of the amount determined under
paragraph (3)(C)(ii).
``(B) Use of increased amount.--
``(i) In general.--The amount of the
increase under subparagraph (A) for any
calendar year may only be allocated to
buildings located in a rural area.
``(ii) Rural area.--For purposes of clause
(i), the term `rural area' means any non-
metropolitan area, or any rural area as defined
by section 520 of the Housing Act of 1949,
which is identified by the qualified allocation
plan under subsection (l)(1)(B).
``(8) Other definitions.--For purposes of this subsection--
``(A) Housing credit agency.--The term `housing
credit agency' means any agency authorized to carry out
this subsection.
``(B) Possessions treated as states.--The term
`State' includes a possession of the United States.
``(9) Credit for buildings financed by tax-exempt bonds
subject to volume cap not taken into account.--Rules similar to
the rules of subsections (h)(4), (m)(1)(D), and (m)(2)(D) of
section 42 shall apply for purposes of this subsection.
``(10) Election to transfer state housing credit ceiling
for allocations to low-income buildings.--
``(A) In general.--If a State housing credit agency
makes an election under this paragraph with respect to
a calendar year--
``(i) the State housing credit ceiling for
such calendar year under paragraph (3)
(determined before application of paragraph
(7)) shall be reduced by the amount specified
in such election,
``(ii) the amount determined under
paragraph (7) for such calendar year shall be
reduced by the amount specified in such
election, and
``(iii) the amount determined under section
42(h)(3)(C)(ii) for such calendar year shall be
increased by the sum of the amounts specified
in clauses (i) and (ii), except that any amount
specified under clause (ii)--
``(I) may only be allocated under
such section to qualified low-income
buildings (as defined in section 42)
located in a rural area (as defined in
paragraph (7)), and
``(II) shall not be taken into
account for purposes of determining the
unused housing credit ceiling under the
second sentence of section 42(h)(3)(C).
``(B) Time and manner for making election.--
``(i) In general.--An election under this
paragraph--
``(I) shall be made before the end
of the calendar year with respect to
which such election applies,
``(II) shall be made in such manner
as specified by the Secretary, and
``(III) shall separately specify
the amount of reductions to be made
under paragraph (3) and paragraph (7).
``(ii) Frequency.--A State housing credit
agency may make more than one election under
this section with respect to any calendar year,
and any such election, once made, shall be
revocable only if such revocation is made
before the end of the calendar year with
respect to which such election is made.
``(C) Limitation.--The aggregate amount specified
in elections under this paragraph with respect to any
State housing credit agency for calendar year shall not
exceed the sum of--
``(i) the amount determined under paragraph
(3)(C)(ii) for such calendar year, plus
``(ii) the amount determined under
paragraph (7) for such calendar year.
``(i) Definitions and Special Rules.--For purposes of this
section--
``(1) Middle-income unit.--
``(A) In general.--The term `middle-income unit'
means any unit in a building if--
``(i) such unit is rent-restricted (as
defined in subsection (g)(2)), and
``(ii) the individuals occupying such unit
meet the income limitation applicable under
subsection (g)(1) to the project of which such
building is a part.
``(B) Exceptions.--
``(i) Exclusion of low-income units.--A
unit shall not be treated as a middle-income
unit if such unit is a low-income unit (as
defined under section 42(i)(3)).
``(ii) Unit must be suitable for permanent
occupancy.--
``(I) In general.--A unit shall not
be treated as a middle-income unit
unless the unit is suitable for
occupancy and used other than on a
transient basis.
``(II) Suitability for occupancy.--
For purposes of subclause (I), the
suitability of a unit for occupancy
shall be determined under regulations
prescribed by the Secretary taking into
account local health, safety, and
building codes.
``(III) Single-room occupancy
units.--For purposes of subclause (I),
a single-room occupancy unit shall not
be treated as used on a transient basis
merely because it is rented on a month-
by-month basis.
``(C) Special rule for buildings having 4 or fewer
units.--In the case of any building which has 4 or
fewer residential rental units, no unit in such
building shall be treated as a middle-income unit if
the units in such building are owned by--
``(i) any individual who occupies a
residential unit in such building, or
``(ii) any person who is related (as
defined in subsection (d)(2)(D)(ii)) to such
individual.
``(D) Rules relating to students.--
``(i) In general.--A unit occupied solely
by individuals who--
``(I) have not attained age 24, and
``(II) are enrolled in a full-time
course of study at an institution of
higher education (as defined in section
3304(f)),
shall not be treated as a middle-income unit.
``(ii) Exception for certain federal
programs.--In the case of a Federally-assisted
building (as defined in subsection (d)(6)(C)(i)
of section 42), clause (i) shall not apply to a
unit all of the occupants of which meet all
applicable requirements under the housing
program described in such subsection through
which the building is assisted, financed, or
operated.
``(iii) Other exceptions.--Clause (i) shall
not apply to a unit occupied by an individual
who--
``(I) is married, if such
individual's spouse also occupies the
unit,
``(II) is a person with
disabilities (as defined in section
3(b)(3)(E) of the United States Housing
Act of 1937),
``(III) is a veteran (as defined in
section 101(2) of title 38, United
States Code),
``(IV) has one or more qualifying
children (as defined in section
152(c)), if such children also occupy
the unit, the individual is not a
dependent (as defined in section 152,
determined without regard to
subsections (b)(1), (b)(2), and
(d)(1)(B) thereof) of another
individual, and such children are not
claimed as dependents (as so defined)
of another individual, or
``(V) is, or was immediately prior
to attaining the age of majority--
``(aa) an emancipated minor
or in legal guardianship as
determined by a court of
competent jurisdiction in the
individual's State of legal
residence,
``(bb) under the care and
placement responsibility of the
State agency responsible for
administering a plan under part
B or part E of title IV of the
Social Security Act, or
``(cc) was an unaccompanied
youth (within the meaning of
section 725(6) of the McKinney-
Vento Homeless Assistance Act
(42 U.S.C. 11434a(6))) or a
homeless child or youth (within
the meaning of section 725(2)
of such Act (42 U.S.C.
11434a(2))).
``(E) Owner-occupied buildings having 4 or fewer
units eligible for credit where development plan.--
``(i) In general.--Subparagraph (C) shall
not apply to the acquisition or rehabilitation
of a building pursuant to a development plan of
action sponsored by a State or local government
or a qualified nonprofit organization.
``(ii) Limitation on credit.--In the case
of a building to which clause (i) applies, the
applicable fraction shall not exceed 80 percent
of the unit fraction.
``(iii) Certain unrented units treated as
owner-occupied.--In the case of a building to
which clause (i) applies, any unit which is not
rented for 90 days or more shall be treated as
occupied by the owner of the building as of the
1st day it is not rented.
``(2) New building.--The term `new building' means a
building the original use of which begins with the taxpayer.
``(3) Existing building.--The term `existing building'
means any building which is not a new building.
``(4) Application to estates and trusts.--In the case of an
estate or trust, the amount of the credit determined under
subsection (a) shall be apportioned between the estate or trust
and the beneficiaries on the basis of the income of the estate
or trust allocable to each.
``(5) Impact of tenant's option to acquire property.--
``(A) In general.--No Federal income tax benefit
shall fail to be allowable to the taxpayer with respect
to any qualified middle-income building merely by
reason of an option held by the tenants (in cooperative
form or otherwise) or resident management corporation
of such building or by a qualified nonprofit
organization or government agency to purchase the
property or all of the partnership interests (other
than interests of the person exercising such option or
a related party thereto (within the meaning of section
267(b) or 707(b)(1))) relating to the property after
the close of the credit period for a price which is not
less than the minimum purchase price determined under
subparagraph (B).
``(B) Minimum purchase price.--For purposes of
subparagraph (A), the minimum purchase price under this
subparagraph is an amount equal to the principal amount
of outstanding indebtedness secured by the building
(other than indebtedness incurred within the 5-year
period ending on the date of the sale to the tenants).
In the case of a purchase of a partnership interest,
the minimum purchase price is an amount equal to such
interest's ratable share of the amount determined under
the preceding sentence.
``(6) Treatment of rural projects.--For purposes of this
section, in the case of any project for residential rental
property located in a rural area (as defined in section 520 of
the Housing Act of 1949), any income limitation measured by
reference to area median gross income shall be measured by
reference to the greater of area median gross income or
national non-metropolitan median income.
``(7) Determination of whether building is federally
subsidized.--
``(A) In general.--Except as otherwise provided in
this paragraph, for purposes of this section, a project
shall be treated as Federally subsidized for any
taxable year if, at any time during such taxable year
or any prior taxable year, there is or was outstanding
any obligation the interest on which is exempt from tax
under section 103 the proceeds of which are or were
used (directly or indirectly) with respect to such
project or the operation thereof.
``(B) Special rule for subsidized construction
financing.--Subparagraph (A) shall not apply to any
tax-exempt obligation used to provide construction
financing for any building if--
``(i) such obligation (when issued)
identified the building for which the proceeds
of such obligation would be used, and
``(ii) such obligation is redeemed before
such building is placed in service.
``(8) Reduction in basis.--In the case of any building for
which a credit is allowable under this section and section 42,
the basis of the building shall be reduced by the amount of
such credit allowed under subsection (a).
``(j) Application of At-Risk Rules.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, rules similar to the rules of section 49(a)(1)
(other than subparagraphs (D)(ii)(II) and (D)(iv)(I) thereof),
section 49(a)(2), and section 49(b)(1) shall apply in
determining the qualified basis of any building in the same
manner as such sections apply in determining the credit base of
property.
``(2) Special rules for determining qualified person.--For
purposes of paragraph (1)--
``(A) In general.--If the requirements of
subparagraphs (B), (C), and (D) are met with respect to
any financing borrowed from a qualified nonprofit
organization, the determination of whether such
financing is qualified commercial financing with
respect to any qualified middle-income building shall
be made without regard to whether such organization--
``(i) is actively and regularly engaged in
the business of lending money, or
``(ii) is a person described in section
49(a)(1)(D)(iv)(II).
``(B) Financing secured by property.--The
requirements of this subparagraph are met with respect
to any financing if such financing is secured by the
qualified middle-income building, except that this
subparagraph shall not apply in the case of a federally
assisted building described in section 42(d)(6)(C) if--
``(i) a security interest in such building
is not permitted by a Federal agency holding or
insuring the mortgage secured by such building,
and
``(ii) the proceeds from the financing (if
any) are applied to acquire or improve such
building.
``(C) Portion of building attributable to
financing.--The requirements of this subparagraph are
met with respect to any financing for any taxable year
in the credit period if, as of the close of such
taxable year, not more than 60 percent of the eligible
basis of the qualified middle-income building is
attributable to such financing (reduced by the
principal and interest of any governmental financing
which is part of a wrap-around mortgage involving such
financing).
``(D) Repayment of principal and interest.--The
requirements of this subparagraph are met with respect
to any financing if such financing is fully repaid on
or before the earliest of--
``(i) the date on which such financing
matures,
``(ii) the 90th day after the close of the
credit period with respect to the qualified
middle-income building, or
``(iii) the date of its refinancing or the
sale of the building to which such financing
relates.
In the case of a qualified nonprofit organization which
is not described in section 49(a)(1)(D)(iv)(II) with
respect to a building, clause (ii) of this subparagraph
shall be applied as if the date described therein were
the 90th day after the earlier of the date the building
ceases to be a qualified middle-income building or the
date which is 15 years after the close of a credit
period with respect thereto.
``(3) Present value of financing.--If the rate of interest
on any financing described in paragraph (2)(A) is less than the
rate which is 1 percentage point below the applicable Federal
rate as of the time such financing is incurred, then the
qualified basis (to which such financing relates) of the
qualified middle-income building shall be the present value of
the amount of such financing, using as the discount rate such
applicable Federal rate. For purposes of the preceding
sentence, the rate of interest on any financing shall be
determined by treating interest to the extent of government
subsidies as not payable.
``(4) Failure to fully repay.--
``(A) In general.--To the extent that the
requirements of paragraph (2)(D) are not met, then the
taxpayer's tax under this chapter for the taxable year
in which such failure occurs shall be increased by an
amount equal to the applicable portion of the credit
under this section with respect to such building,
increased by an amount of interest for the period--
``(i) beginning with the due date for the
filing of the return of tax imposed by chapter
1 for the 1st taxable year for which such
credit was allowable, and
``(ii) ending with the due date for the
taxable year in which such failure occurs,
determined by using the underpayment rate and method
under section 6621.
``(B) Applicable portion.--For purposes of
subparagraph (A), the term `applicable portion' means
the aggregate decrease in the credits allowed to a
taxpayer under section 38 for all prior taxable years
which would have resulted if the eligible basis of the
building were reduced by the amount of financing which
does not meet requirements of paragraph (2)(D).
``(C) Certain rules to apply.--Rules similar to the
rules of subparagraphs (A) and (D) of section 42(j)(4)
shall apply for purposes of this subsection.
``(k) Certifications and Other Reports to Secretary.--
``(1) Certification with respect to 1st year of credit
period.--Following the close of the 1st taxable year in the
credit period with respect to any qualified middle-income
building, the taxpayer shall certify to the Secretary (at such
time and in such form and in such manner as the Secretary
prescribes)--
``(A) the taxable year, and calendar year, in which
such building was placed in service,
``(B) the adjusted basis and eligible basis of such
building as of the close of the 1st year of the credit
period,
``(C) the maximum applicable percentage and
qualified basis permitted to be taken into account by
the appropriate housing credit agency under subsection
(h), and
``(D) such other information as the Secretary may
require.
In the case of a failure to make the certification required by
the preceding sentence on the date prescribed therefor, unless
it is shown that such failure is due to reasonable cause and
not to willful neglect, no credit shall be allowable by reason
of subsection (a) with respect to such building for any taxable
year ending before such certification is made.
``(2) Annual reports to the secretary.--The Secretary may
require taxpayers to submit an information return (at such time
and in such form and manner as the Secretary prescribes) for
each taxable year setting forth--
``(A) the qualified basis for the taxable year of
each qualified middle-income building of the taxpayer,
``(B) the information described in paragraph (1)(C)
for the taxable year, and
``(C) such other information as the Secretary may
require.
The penalty under section 6652(j) shall apply to any failure to
submit the return required by the Secretary under the preceding
sentence on the date prescribed therefor.
``(3) Annual reports from housing credit agencies.--Each
agency which allocates any housing credit amount to any
building for any calendar year shall submit to the Secretary
(at such time and in such manner as the Secretary shall
prescribe) an annual report specifying--
``(A) the amount of housing credit amount allocated
to each building for such year,
``(B) sufficient information to identify each such
building and the taxpayer with respect thereto, and
``(C) such other information as the Secretary may
require.
The penalty under section 6652(j) shall apply to any failure to
submit the report required by the preceding sentence on the
date prescribed therefor.
``(l) Responsibilities of Housing Credit Agencies.--
``(1) Plans for allocation of credit among projects.--
``(A) In general.--Notwithstanding any other
provision of this section, the housing credit dollar
amount with respect to any building shall be zero
unless--
``(i) such amount was allocated pursuant to
a qualified allocation plan of the housing
credit agency which is approved by the
governmental unit (in accordance with rules
similar to the rules of section 42(m)(1)) of
which such agency is a part,
``(ii) a comprehensive market study of the
housing needs of middle-income individuals in
the area to be served by the project is
conducted before the credit allocation is made
and at the developer's expense by a
disinterested party who is approved by such
agency, and
``(iii) a written explanation is available
to the general public for any allocation of a
housing credit dollar amount which is not made
in accordance with established priorities and
selection criteria of the housing credit
agency.
``(B) Qualified allocation plan.--For purposes of
this paragraph, the term `qualified allocation plan'
means any plan--
``(i) which sets forth selection criteria
to be used to determine housing priorities of
the housing credit agency which are appropriate
to local conditions,
``(ii) which also gives preference in
allocating housing credit dollar amounts among
selected projects to--
``(I) projects obligated to serve
qualified tenants for the longest
periods,
``(II) projects in areas with
insufficient supply of housing
affordable to median income households,
``(III) projects which target
housing to tenants at a range of
incomes between 60 and 100 percent of
area median gross income, and
``(IV) projects located near
transit hubs, and
``(iii) which provides a procedure that the
agency (or an agent or other private contractor
of such agency) will follow in monitoring for
noncompliance with the provisions of this
section and in notifying the Internal Revenue
Service of such noncompliance which such agency
becomes aware of and in monitoring for
noncompliance with habitability standards
through regular site visits.
``(C) Certain selection criteria must be used.--The
selection criteria set forth in a qualified allocation
plan must include--
``(i) project location,
``(ii) housing needs characteristics,
``(iii) project characteristics, including
whether the project includes the use of
existing housing as part of a community
revitalization plan,
``(iv) sponsor characteristics,
``(v) tenant populations with special
housing needs,
``(vi) tenant populations of individuals
with children,
``(vii) projects intended for eventual
tenant ownership,
``(viii) the energy efficiency of the
project, and
``(ix) the historic nature of the project.
``(D) Certain selection criteria prohibited.--The
selection criteria set forth in a qualified allocation
plan shall not include a requirement of local approval
or local contributions, either as a threshold
qualification requirement or as part of a point system
to be considered for allocations of housing credit
dollar amount.
``(2) Credit allocated to building not to exceed amount
necessary to assure project feasibility.--
``(A) In general.--The housing credit dollar amount
allocated to a project shall not exceed the amount the
housing credit agency determines is necessary for the
financial feasibility of the project and its viability
as a qualified middle-income housing project throughout
the credit period.
``(B) Agency evaluation.--In making the
determination under subparagraph (A), the housing
credit agency shall consider--
``(i) the sources and uses of funds and the
total financing planned for the project,
``(ii) any proceeds or receipts expected to
be generated by reason of tax benefits,
``(iii) the percentage of the housing
credit dollar amount used for project costs
other than the cost of intermediaries, and
``(iv) the reasonableness of the
developmental and operational costs of the
project.
Clause (iii) shall not be applied so as to impede the
development of projects in hard-to-develop areas. Such
a determination shall not be construed to be a
representation or warranty as to the feasibility or
viability of the project.
``(C) Determination made when credit amount applied
for and when building placed in service.--
``(i) In general.--A determination under
subparagraph (A) shall be made as of each of
the following times:
``(I) The application for the
housing credit dollar amount.
``(II) The allocation of the
housing credit dollar amount.
``(III) The date the building is
placed in service.
``(ii) Certification as to amount of other
subsidies.--Prior to each determination under
clause (i), the taxpayer shall certify to the
housing credit agency the full extent of all
Federal, State, and local subsidies which apply
(or which the taxpayer expects to apply) with
respect to the building.
``(m) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including--
``(1) regulations dealing with--
``(A) projects which include more than 1 building
or only a portion of a building, or
``(B) buildings which are placed in service in
portions,
``(2) regulations providing for the application of this
section to short taxable years,
``(3) regulations preventing the avoidance of the rules of
this section,
``(4) regulations providing the opportunity for housing
credit agencies to correct administrative errors and omissions
with respect to allocations and record keeping within a
reasonable period after their discovery, taking into account
the availability of regulations and other administrative
guidance from the Secretary, and
``(5) in consultation with the Secretary of Housing and
Urban Development, regulations or guidance to promote uniform
definitions and to streamline requirements for with respect to
qualified middle-income buildings which receive funding from
programs administrated by the Department of Housing and Urban
Development, including programs authorized by Native American
Housing Assistance and Self-Determination Act of 1996.''.
(b) Treatment as Part of General Business Credit.--Section 38(b),
as amended by the preceding provisions of this Act, is amended by
striking ``plus'' at the end of paragraph (41), by striking the period
at the end of paragraph (42) and inserting ``, plus'', and by adding at
the end the following new paragraph:
``(43) the middle-income housing credit determined under
section 42A(a).''.
(c) Reduction in Basis.--Section 1016(a) is amended by striking
``and'' at the end of paragraph (37), by striking the period at the end
of paragraph (38) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(39) to the extent provided in section 42A(i)(8).''.
(d) Treatment Under Base Erosion Minimum Tax.--Section 59A(b)(4) is
amended by redesignating subparagraphs (B) and (C) as subparagraphs (C)
and (D), respectively, and by inserting after subparagraphs (A) the
following new subparagraph:
``(B) the middle-income housing credit determined
under section 42A(a),''.
(e) Conforming Amendments Relating to Low-Income Housing Tax
Credit.--Section 42(n) is amended--
(1) by striking ``regulations'' in the matter preceding
paragraph (1),
(2) by inserting ``regulations'' before ``dealing with'' in
paragraph (1),
(3) by inserting ``regulations'' before ``providing'' in
paragraphs (2) and (4),
(4) by inserting ``regulations'' before ``preventing'' in
paragraph (3),
(5) by striking ``and'' at the end of paragraph (3),
(6) by striking the period at the end of paragraph (4) and
inserting ``, and'', and
(7) by adding at the end the following new paragraph:
``(5) in consultation with the Secretary of Housing and
Urban Development, regulations or guidance to promote uniform
definitions and to streamline requirements for with respect to
qualified low-income buildings which receive funding from
programs administrated by the Department of Housing and Urban
Development, including programs authorized by Native American
Housing Assistance and Self-Determination Act of 1996.''.
(f) Conforming Amendments.--
(1) Section 45L(e) is amended by inserting ``or 42A'' after
``42''.
(2) Section 50(c)(3)(C) is amended by inserting ``or 42A''
after ``42''.
(3) Section 55(c)(1) is amended by inserting ``42A(j),''
before ``45(e)(11)(C)''.
(4) Subsections (i)(3)(C), (i)(6)(B)(i), and (k)(1) of
section 469 are each amended by inserting ``or 42A'' after
``42''.
(5) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 42 the following new item:
``Sec. 42A. Middle-income housing credit.''.
(g) Effective Date.--The amendments made by this section shall
apply to buildings placed in service after December 31, 2025, in
taxable years ending after such date.
Subtitle C--Affording the American Dream
SEC. 13001. FIRST-TIME HOMEBUYER REFUNDABLE TAX CREDIT.
(a) In General.--Section 36 is amended to read as follows:
``SEC. 36. FIRST-TIME HOMEBUYER CREDIT.
``(a) Allowance of Credit.--In the case of an individual who is a
first-time homebuyer of a principal residence in the United States
during a taxable year, there shall be allowed as a credit against the
tax imposed by this subtitle for such taxable year an amount equal to
10 percent of the purchase price of the residence.
``(b) Limitations.--
``(1) Dollar limitation.--
``(A) In general.--Except as otherwise provided in
this paragraph, the credit allowed under subsection (a)
shall not exceed $15,000.
``(B) Married individuals filing separately.--In
the case of a married individual filing a separate
return, subparagraph (A) shall be applied by
substituting `$7,500' for `$15,000'.
``(C) Other individuals.--If 2 or more individuals
who are not married purchase a principal residence, the
amount of the credit allowed under subsection (a) shall
be allocated among such individuals in such manner as
the Secretary may prescribe, except that the total
amount of the credits allowed to all such individuals
shall not exceed $15,000.
``(2) Phaseout based on area median income.--
``(A) In general.--The amount allowable as a credit
under subsection (a) (determined without regard to this
paragraph) shall be reduced (but not below zero) by the
amount which bears the same ratio to the amount which
is so allowable as--
``(i) the excess (if any) of--
``(I) the modified adjusted gross
income of the taxpayer for the taxable
year, over
``(II) 150 percent of the
applicable Area Medium Income, bears to
``(ii) 20 percent of the applicable Area
Median Income.
``(B) Modified adjusted gross income.--For purposes
of subparagraph (A), the term `modified adjusted gross
income' means the adjusted gross income of the taxpayer
for the taxable year increased by any amount excluded
from gross income under section 911, 931, or 933.
``(C) Applicable area median income.--For purposes
of subparagraph (A), the term `applicable Area Median
Income' means the Area Median Income set by the
Secretary of Housing and Urban Development with respect
to--
``(i) the area in which the principal
residence is located,
``(ii) the size of the household of the
taxpayer, and
``(iii) the calendar year in which the
principal residence is purchased.
``(D) Regulations and guidance.--The Secretary,
after consultation with the Secretary of Housing and
Urban Development, shall issue such regulations and
guidance as are necessary to carry out the purposes of
this subparagraph.
``(3) Limitation based on area median purchase price.--
``(A) In general.--The amount allowable as a credit
under subsection (a) (determined without regard to this
paragraph) shall be reduced (but not below zero) by the
amount which bears the same ratio to the amount which
is so allowable as--
``(i) the excess (if any) of--
``(I) the purchase price of the
principal residence, over
``(II) the amount which is equal to
110 percent of the area median purchase
price, bears to
``(ii) the amount which is equal to 15
percent of the area median purchase price.
``(B) Area median purchase price.--For purposes of
this paragraph, the term `area median purchase price'
means the median purchase price for a home in both the
area and the calendar year in which the purchase of the
principal residence takes place.
``(C) Regulations and guidance.--The Secretary,
after consultation with the Secretary of Housing and
Urban Development, shall promulgate such regulations
and guidance as are necessary to carry out the purposes
of this subparagraph, including for determining the
area median purchase price with respect to different
localities.
``(4) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2026, each of the
dollar amounts in paragraph (1) shall be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2025' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $100.
``(5) Age limitation.--No credit shall be allowed under
subsection (a) with respect to the purchase of any residence
unless the taxpayer has attained age 18 as of the date of such
purchase. In the case of any taxpayer who is married (within
the meaning of section 7703), the taxpayer shall be treated as
meeting the age requirement of the preceding sentence if the
taxpayer or the taxpayer's spouse meets such age requirement.
``(c) Definitions.--For purposes of this section--
``(1) First-time homebuyer.--The term `first-time
homebuyer' means any individual if such individual (and if
married, such individual's spouse)--
``(A) has no present ownership interest in any
residence during the 3-year period ending on the date
of the purchase of the principal residence to which
this section applies, and
``(B) has not taken the credit under this section
in any other taxable year.
``(2) Principal residence.--The term `principal residence'
has the same meaning as when used in section 121.
``(3) Purchase.--
``(A) In general.--The term `purchase' means any
acquisition, but only if--
``(i) the property is not acquired from a
person related to the person acquiring such
property (or, if married, such individual's
spouse),
``(ii) the acquisition is financed through
a federally backed mortgage loan (as defined in
section 4022 of the CARES Act), and
``(iii) the basis of the property in the
hands of the person acquiring such property is
not determined--
``(I) in whole or in part by
reference to the adjusted basis of such
property in the hands of the person
from whom acquired, or
``(II) under section 1014(a)
(relating to property acquired from a
decedent).
``(B) Construction.--A residence which is
constructed by the taxpayer shall be treated as
purchased by the taxpayer on the date the taxpayer
first occupies such residence.
``(4) Purchase price.--The term `purchase price' means the
adjusted basis of the principal residence on the date such
residence is purchased.
``(5) Related persons.--A person shall be treated as
related to another person if the relationship between such
persons would result in the disallowance of losses under
section 267 or 707(b).
``(d) Exceptions.--No credit under subsection (a) shall be allowed
to any taxpayer for any taxable year with respect to the purchase of a
residence if--
``(1) the taxpayer disposes of such residence (or such
residence ceases to be the principal residence of the taxpayer
(and, if married, the taxpayer's spouse)) before the close of
such taxable year,
``(2) a deduction under section 151 with respect to such
taxpayer is allowable to another taxpayer for such taxable
year, or
``(3) the taxpayer fails to attach to the return of tax for
such taxable year a properly executed copy of the settlement
statement used to complete such purchase.
``(e) Reporting.--If the Secretary requires information reporting
under section 6045 by a person described in subsection (e)(2) thereof
to verify the eligibility of taxpayers for the credit allowable by this
section, the exception provided by section 6045(e)(5) shall not apply.
``(f) Recapture of Credit.--
``(1) In general.--Except as otherwise provided in this
subsection, if, during any taxable year before the close of the
recapture period, a taxpayer disposes of the principal
residence with respect to which a credit was allowed under
subsection (a) (or such residence ceases to be the principal
residence of the taxpayer), the tax imposed by this chapter for
such taxable year shall be increased by the recoverable amount
determined in paragraph (2).
``(2) Recoverable amount.--For purposes of paragraph (1),
the recoverable amount is the product of--
``(A) 25 percent of the amount of the credit
allowed under subsection (a), multiplied by
``(B) the number of taxable years remaining in the
recapture period as of the beginning of the taxable
year in which the taxpayer disposes of the principal
residence.
``(3) Limitation based on gain.--In the case of the sale of
the principal residence to a person who is not related to the
taxpayer, the increase in tax determined under paragraph (1)
shall not exceed the amount of gain (if any) on such sale.
Solely for purposes of the preceding sentence, the adjusted
basis of such residence shall be reduced by the amount of the
credit allowed under subsection (a).
``(4) Exceptions.--
``(A) Death of a taxpayer.--Paragraph (1) shall not
apply to any taxable year ending after the date of the
taxpayer's death.
``(B) Involuntary conversion.--Paragraph (1) shall
not apply in the case of a residence which is
compulsorily or involuntarily converted (within the
meaning of section 1033(a)) if the taxpayer acquires a
new principal residence during the 2-year period
beginning on the date of the disposition or cessation
referred to in paragraph (1). Paragraph (1) shall apply
to such new principal residence during the recapture
period in the same manner as if such new principal
residence were the converted residence.
``(C) Transfers between spouses or incident to
divorce.--In the case of a transfer of a residence to
which section 1041(a) applies--
``(i) paragraph (1) shall not apply to such
transfer, and
``(ii) in the case of taxable years ending
after such transfer, paragraph (1) shall apply
to the transferee in the same manner as if such
transferee were the transferor (and shall not
apply to the transferor).
``(D) Special rule for members of the armed forces,
etc.--
``(i) In general.--In the case of the
disposition of a principal residence by an
individual (or a cessation referred to in
paragraph (1)) after the date of the enactment
of this section, in connection with Government
orders received by such individual, or such
individual's spouse, for qualified official
extended duty service, paragraph (1) and
subsection (d)(2) shall not apply to such
disposition (or cessation).
``(ii) Qualified official extended duty
service.--For purposes of this section, the
term `qualified official extended duty service'
means service on qualified official extended
duty as--
``(I) a member of the uniformed
services,
``(II) a member of the Foreign
Service of the United States, or
``(III) an employee of the
intelligence community.
``(iii) Definitions.--Any term used in this
subparagraph which is also used in paragraph
(9) of section 121(d) shall have the same
meaning as when used in such paragraph.
``(E) Disposition of residence in connection with
change of employment.--In the case of the disposition
of a principal residence by an individual (or a
cessation referred to in paragraph (1)) after December
31, 2022, in connection with a change of employment
which meets the conditions described in section 217(c),
paragraph (1) shall not apply to such disposition (or
cessation).
``(5) Joint returns.--In the case of a credit allowed under
subsection (a) with respect to a joint return, half of such
credit shall be treated as having been allowed to each
individual filing such return for purposes of this subsection.
``(6) Return requirement.--If the tax imposed by this
chapter for the taxable year is increased under this
subsection, the taxpayer shall, notwithstanding section 6012,
be required to file a return with respect to the taxes imposed
under this subtitle.
``(7) Recapture period.--For purposes of this subsection,
the term `recapture period' means the 4 taxable years beginning
with the taxable year in which the purchase of the principal
residence for which a credit is allowed under subsection (a)
was made.
``(g) Election To Treat Purchase in Prior Year.--In the case of a
purchase of a principal residence after December 31, 2026, a taxpayer
may elect to treat such purchase as made on December 31 of the calendar
year preceding such purchase for purposes of this section (other than
subsections (b)(4), (c), and (h)).
``(h) Transfer of Credit.--
``(1) In general.--Subject to such regulations and other
guidance as the Secretary determines necessary, a taxpayer may
elect that the credit which would (but for this subsection) be
allowed to such taxpayer with respect to the purchase of a
principal residence shall be allowed to the mortgage lender
with respect to such purchase and not to such taxpayer.
``(2) Eligible entity.--For purposes of this subsection,
the term `eligible entity' means, with respect to the purchase
of the principal residence for which the credit is allowed
under subsection (a), the mortgage lender which provides the
mortgage to the taxpayer and has--
``(A) registered with the Secretary for purposes of
this paragraph, at such time, and in such form and
manner, as the Secretary may prescribe,
``(B) prior to the election described in paragraph
(1) and not later than at the time of such purchase,
disclosed to the taxpayer making such purchase--
``(i) the value of the credit allowed under
subsection (a), and
``(ii) the amount provided by the mortgage
lender to such taxpayer as a condition of the
election described in paragraph (1).
``(C) not later than at the time of such purchase,
made payment to such taxpayer (whether in cash or in
the form of a partial payment or down payment for the
purchase of such principal residence) in an amount
equal to the credit otherwise allowable to such
taxpayer, and
``(D) with respect to any incentive otherwise
available for taking a mortgage for which a credit is
allowed under this section, including any incentive in
the form of a rebate or discount provided by the
mortgage lender, ensured that--
``(i) the availability or use of such
incentive shall not limit the ability of a
taxpayer to make an election described in
paragraph (1), and
``(ii) such election shall not limit the
value or use of such incentive.
``(3) Timing.--An election described in paragraph (1) shall
be made by the taxpayer not later than the date on which the
purchase of the principal residence with respect to which the
credit under subsection (a) is allowed is made.
``(4) Revocation of registration.--Upon determination by
the Secretary that a mortgage lender has failed to comply with
the requirements described in paragraph (2), the Secretary may
revoke the registration (as described in subparagraph (A) of
such paragraph) of such mortgage lender.
``(5) Tax treatment of payments.--With respect to any
payment described in paragraph (2)(C), such payment--
``(A) shall not be includible in the gross income
of the taxpayer, and
``(B) with respect to the mortgage lender, shall
not be deductible under this title.
``(6) Advance payment to mortgage lenders.--
``(A) In general.--The Secretary shall establish a
program to make advance payments to any eligible entity
in an amount equal to the cumulative amount of the
credits allowed under subsection (a) with respect to
any mortgages issued by such entity for which an
election described in paragraph (1) has been made.
``(B) Excessive payments.--Rules similar to the
rules of section 6417(d)(6) shall apply for purposes of
this paragraph.
``(C) Treatment of advance payments.--For purposes
of section 1324 of title 31, United States Code, the
payments under subparagraph (A) shall be treated in the
same manner as a refund due from a credit provision
referred to in subsection (b)(2) of such section.
``(7) Recapture.--In the case of any taxpayer who has made
an election described in paragraph (1) with respect to the
purchase of a principal residence and received a payment
described in paragraph (2)(C) from an eligible entity, such
principal residence shall be treated as a principal residence
with respect to which a credit was allowed under subsection (a)
for purposes of subsection (f).''.
(b) Certain Errors With Respect to First-Time Homebuyer Tax Credit
Treated as Mathematical or Clerical Errors.--Paragraph (2) of section
6213(g), as amended by Public Law 119-21, is amended by striking
``and'' at the end of subparagraph (Z), by striking the period at the
end of subparagraph (AA) and inserting ``, and'', and by inserting
after subparagraph (AA) the following new subparagraph:
``(BB) an entry on a return claiming the credit
under section 36 if--
``(i) the Secretary obtains information
from the person issuing the TIN of the taxpayer
that indicates that the taxpayer does not meet
the age requirement of section 36(b)(4),
``(ii) information provided to the
Secretary by the taxpayer on an income tax
return for at least one of the 2 preceding
taxable years is inconsistent with eligibility
for such credit, or
``(iii) the taxpayer fails to attach to the
return the form described in section
36(d)(3).''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to principal residences purchased after the date of
the enactment of this Act.
SEC. 13002. REFUNDABLE CREDIT FOR RENT PAID FOR PRINCIPAL RESIDENCE.
(a) In General.--Subpart C of part IV of subchapter A of chapter 1
is amended by inserting after section 36B the following new section:
``SEC. 36C. RENTER TAX CREDIT.
``(a) In General.--In the case of an individual who leases the
individual's principal residence (within the meaning of section 121)
during the taxable year and who pays rent with respect to such
residence in excess of 30 percent of the taxpayer's adjusted gross
income for such taxable year, there shall be allowed as a credit
against the tax imposed by this subtitle for such taxable year an
amount equal to the applicable percentage of such excess.
``(b) Credit Limited by 100 Percent of Small Area Fair Market
Rent.--Solely for purposes of determining the amount of the credit
allowed under subsection (a) with respect to a residence for the
taxable year, there shall not be taken into account rent in excess of
an amount equal to 100 percent of the small area fair market rent
(including the utility allowance) applicable to the residence involved
(as most recently published, as of the beginning of the taxable year,
by the Department of Housing and Urban Development).
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable percentage.--The term `applicable
percentage' means the percentage determined in accordance with
the following table:
The applicable
``If the taxpayer's adjusted gross percentage is:
income is:
Not over $25,000............................. 100 percent
Over $25,000, but not over $50,000........... 75 percent
Over $50,000, but not over $75,000........... 50 percent
Over $75,000, but not over $100,000.......... 25 percent
Over $100,000................................ 0 percent.
``(2) Partial year residence.--The Secretary shall
prescribe such rules as are necessary to carry out the purposes
of this section for taxpayers with respect to whom a residence
is a principal residence for only a portion of the taxable
year.
``(3) Rent.--The term `rent' includes any amount paid for
utilities of a type taken into account for purposes of
determining the utility allowance under section
42(g)(2)(B)(ii).
``(4) Married individuals filing separate returns.--In the
case of individuals who are married to each other, have the
same principal residence, and do not file a joint return for
the taxable year, the credit determined under this section with
respect to each such individual shall be 50 percent of the
amount of the credit which would be determined under this
section if such individuals filed a joint return, unless such
individuals agree on a different division of such credit (in
such manner as the Secretary may provide) which does not
aggregate to more 100 percent of such amount.
``(d) Reconciliation of Credit and Advance Payments.--The amount of
the credit allowed under this section for any taxable year shall be
reduced (but not below zero) by the aggregate amount of any advance
payments of such credit under section 7527B for such taxable year.''.
(b) Advance Payment.--Chapter 77 is amended by inserting after
section 7527A the following new section:
``SEC. 7527B. ADVANCE PAYMENT OF RENTER TAX CREDIT.
``(a) In General.--Not later than 6 months after the date of the
enactment of this section, the Secretary shall establish a program for
making advance payments of the credit allowed under section 36C on a
monthly basis to any taxpayer who--
``(1) the Secretary has determined will be allowed such
credit for the taxable year, and
``(2) has made an election under subsection (c).
``(b) Amount of Advance Payment.--
``(1) In general.--For purposes of subsection (a), the
amount of the monthly advance payment of the credit provided to
a taxpayer during the applicable period shall be equal to the
lesser of--
``(A) an amount equal to--
``(i) the amount of the credit which the
Secretary has determined will be allowed to
such taxpayer under section 36C for the taxable
year ending in such applicable period, divided
by
``(ii) 12, or
``(B) such other amount as is elected by the
taxpayer.
``(2) Applicable period.--For purposes of this section, the
term `applicable period' means the 12-month period from the
month of July of the taxable year through the month of June of
the subsequent taxable year.
``(c) Election of Advance Payment.--A taxpayer may elect to receive
an advance payment of the credit allowed under section 36C for any
taxable year by including such election on a timely filed return for
the preceding taxable year.
``(d) Internal Revenue Service Notification.--The Internal Revenue
Service shall take such steps as may be appropriate to ensure that
taxpayers who are eligible to receive the credit under section 36C are
aware of the availability of the advance payment of such credit under
this section.
``(e) Treatment of Payments.--For purposes of section 1324 of title
31, United States Code, the payments under this section shall be
treated in the same manner as a refund due from a credit provision
referred to in subsection (b)(2) of such section.
``(f) Regulations.--The Secretary may prescribe such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes this section.''.
(c) Conforming Amendments.--
(1) Section 6211(b)(4)(A) is amended by inserting ``36C,''
after ``36B,''.
(2) Section 1324(b)(2) of title 31, United States Code, is
amended by inserting ``36C,'' after ``36B,''.
(3) The table of sections for subpart C of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 36B the following new item:
``Sec. 36C. Renter tax credit.''.
(4) The table of sections for chapter 77 is amended by
inserting after the item relating to section 7527A the
following new item:
``Sec. 7527B. Advance payment of renter tax credit.''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to taxable years beginning after December 31, 2025.
(e) Community Outreach.--Immediately upon the enactment of this
Act, in addition to amounts otherwise available, there are appropriated
out of any money in the Treasury not otherwise appropriated $50,000,000
to remain available until 5 years after the enactment of this Act for
necessary expenses for the Internal Revenue Service to support efforts
to increase enrollment of eligible households in the Renter Tax Credit
allowed under section 36C of the Internal Revenue Code of 1986
(including the advance payment of such credit under section 7527B of
such Code), including but not limited to program outreach, costs of
data sharing arrangements, systems changes, forms changes, and related
efforts, and efforts by Federal agencies to facilitate the cross-
enrollment of beneficiaries of other programs in such Renter Tax
Credit, including by establishing intergovernmental cooperative
agreements with States and local governments, tribal governments, and
possessions of the United States: Provided, that such amount shall be
available in addition to any amounts otherwise available: Provided
further, that these funds may be awarded by Federal agencies to State
and local governments, tribal governments, and possessions of the
United States, and private entities, including organizations dedicated
to free tax return preparation.
TITLE II--LOWERING ENERGY COSTS
Subtitle A--Lowering Costs Through an All-of-the-above Energy Policy
SEC. 21001. CLEAN ENERGY PRODUCTION CREDIT.
(a) Restoration of Phase-Out.--Section 45Y(d)(3) is amended by
striking ``calendar year 2032.'' and inserting ``means the later of--
``(A) the calendar year in which the Secretary
determines that the annual greenhouse gas emissions
from the production of electricity in the United States
are equal to or less than 25 percent of the annual
greenhouse gas emissions from the production of
electricity in the United States for calendar year
2022, or
``(B) 2032.''.
(b) Restoration of Credit for Wind and Solar Facilities.--Section
45Y(d) is amended--
(1) in paragraph (1), by striking ``Subject to paragraph
(4), the amount'' and inserting ``The amount'', and
(2) by striking paragraph (4).
(c) Restoration of Credit for Wind and Solar Leasing
Arrangements.--Section 45Y is amended by striking subsection (h).
(d) Repeal of Provision for Existing Studies.--Section 45Y(b)(2)(C)
is amended by striking clause (iii).
(e) Effective Dates.--The amendments made by this section shall
take effect as if included in section 70512 of Public Law 119-21.
SEC. 21002. CLEAN ELECTRICITY INVESTMENT CREDIT.
(a) Repeal of Termination for Wind and Solar Facilities.--Section
48E(e) is amended--
(1) in paragraph (1), by striking ``Subject to paragraph
(4), the amount'' and inserting ``The amount'', and
(2) by striking paragraph (4).
(b) Restoration of Credit for Expenditures for Wind and Solar
Leasing Arrangements.--
(1) In general.--Section 48E is amended by striking
subsection (i) and by redesignating subsections (j) and (k) as
subsections (i) and (j), respectively.
(2) Conforming rule repeal.--Section 50 is amended by
striking subsection (e).
(c) Restoration of Credit for Certain Energy Property.--Section
48(a)(2)(A)(ii) is amended by striking ``0 percent'' and inserting ``2
percent''.
(d) Effective Dates.--The amendments made by this section shall
take effect as if included in section 70513 of Public Law 119-21.
SEC. 21003. ADVANCED MANUFACTURING PRODUCTION CREDIT.
(a) Repeal of Inclusion of Metallurgical Coal as an Applicable
Critical Mineral.--Section 45X(c)(6) is amended by striking
subparagraph (R) and by redesignating subparagraphs (S) through (AA) as
subparagraphs (R) through (ZZ), respectively.
(b) Repeal of Termination for Wind Energy Components.--Section
45X(b)(3) is amended by striking subparagraph (D).
(c) Conforming Amendments.--
(1) Section 45X(b)(1)(M) is amended by striking ``(2.5
percent in the case of metallurgical coal)''.
(2) The heading of section 45X(b)(3) is amended by striking
``and termination''.
(3) Section 45X(b)(3)(A) is amended by striking
``subparagraphs (C) and (D)'' and inserting ``subparagraph
(C)''.
(4) The heading of section 45X(b)(3)(C) is amended by
striking ``other than metallurgical coal''.
(5) The heading of section 45X(b)(3)(C)(ii) is amended by
striking ``other than metallurgical coal''.
(6) Section 45X(b)(3) is amended by striking subparagraph
(E).
(d) Effective Date.--The amendments made by this section shall take
effect as if included in section 70514 of Public Law 119-21.
SEC. 21004. REPEAL OF RESTRICTION ON THE EXTENSION OF ADVANCE ENERGY
PROJECT CREDIT PROGRAM.
(a) In General.--Section 48C(e)(3)(C) is amended by striking
``shall not be increased'' and inserting ``shall be increased''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70515 of Public Law 119-21.
SEC. 21005. REVERSION OF CONSTRUCTION DATE FOR CLEAN HYDROGEN
PRODUCTION CREDIT.
(a) In General.--Section 45V(c)(3)(C) is amended by striking
``January 1, 2028'' and inserting ``January 1, 2033''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70511 of Public Law 119-21.
SEC. 21006. REVERSION OF TERMINATION FOR RESIDENTIAL CLEAN ENERGY
CREDIT.
(a) In General.--Section 25D(h) is amended by striking ``with
respect to any expenditures made after December 31, 2025'' and
inserting ``to property placed in service after December 31, 2034''.
(b) Conforming Amendment.--Section 25D(g) is amended by striking
``and'' at the end of paragraph (2), by striking ``30 percent.'' at the
end of paragraph (3) and inserting ``and before January 1, 2033, 30
percent,'' and by adding at the end the following new paragraphs:
``(4) in the case of property placed in service after
December 31, 2032, and before January 1, 2034, 26 percent, and
``(5) in the case of property placed in service after
December 31, 2033, and before January 1, 2035, 22 percent.''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in section 70506 of Public Law 119-21.
SEC. 21007. REINSTATEMENT OF SPECIAL RATE FOR SUSTAINABLE AVIATION
FUEL.
(a) In General.--Section 45Z(a)(3) is amended to read as follows:
``(3) Special rate for sustainable aviation fuel.--
``(A) In general.--In the case of a transportation
fuel which is sustainable aviation fuel, paragraph (2)
shall be applied--
``(i) in the case of fuel produced at a
qualified facility described in paragraph
(2)(A), by substituting `35 cents' for `20
cents', and
``(ii) in the case of fuel produced at a
qualified facility described in paragraph
(2)(B), by substituting `$1.75' for `$1.00'.
``(B) Sustainable aviation fuel.--For purposes of
subparagraph (A), the term `sustainable aviation fuel'
means liquid fuel, the portion of which is not
kerosene, which is sold for use in an aircraft and
which--
``(i) meets the requirements of--
``(I) ASTM International Standard
D7566, or
``(II) the Fischer Tropsch
provisions of ASTM International
Standard D1655, Annex A1, and
``(ii) is not derived from palm fatty acid
distillates or petroleum.''.
(b) Conforming Amendment.--Section 45Z(c)(1) is amended by striking
``and the $1.00 amount in subsection (a)(2)(B)'' and inserting ``the
$1.00 amount in subsection (a)(2)(B), the 35 cent amount in subsection
(a)(3)(A)(i), and the $1.75 amount in subsection (a)(3)(A)(ii)''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in section 70521 of Public Law 119-21.
Subtitle B--Lowering Costs Through Energy Efficiency
SEC. 22001. ENERGY EFFICIENT HOME IMPROVEMENT CREDIT.
(a) Restoring Product Identification Number Requirement.--Section
25C(h) is amended to read as follows:
``(h) Product Identification Number Requirement.--
``(1) In general.--No credit shall be allowed under
subsection (a) with respect to any item of specified property
placed in service after December 31, 2025, unless--
``(A) such item is produced by a qualified
manufacturer, and
``(B) the taxpayer includes the qualified product
identification number of such item on the return of tax
for the taxable year.
``(2) Qualified product identification number.--For
purposes of this section, the term `qualified product
identification number' means, with respect to any item of
specified property, the product identification number assigned
to such item by the qualified manufacturer pursuant to the
methodology referred to in paragraph (3).
``(3) Qualified manufacturer.--For purposes of this
section, the term `qualified manufacturer' means any
manufacturer of specified property which enters into an
agreement with the Secretary which provides that such
manufacturer will--
``(A) assign a product identification number to
each item of specified property produced by such
manufacturer utilizing a methodology that will ensure
that such number (including any alphanumeric) is unique
to each such item (by utilizing numbers or letters
which are unique to such manufacturer or by such other
method as the Secretary may provide),
``(B) label such item with such number in such
manner as the Secretary may provide, and
``(C) make periodic written reports to the
Secretary (at such times and in such manner as the
Secretary may provide) of the product identification
numbers so assigned and including such information as
the Secretary may require with respect to the item of
specified property to which such number was so
assigned.
``(4) Specified property.--For purposes of this subsection,
the term `specified property' means any qualified energy
property and any property described in subparagraph (B) or (C)
of subsection (c)(3).''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in the enactment of section 70505 of Public Law
119-21.
SEC. 22002. NEW ENERGY EFFICIENT HOME CREDIT.
(a) In General.--Section 45L(h) is amended by striking ``acquired
after June 30, 2026'' and inserting ``acquired after December 31,
2032''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70508 of Public Law 119-21.
SEC. 22003. REPEAL OF TERMINATION OF NEW ENERGY EFFICIENT COMMERCIAL
BUILDINGS DEDUCTION.
(a) In General.--Section 179D is amended by striking subsection
(i).
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70507 of Public Law 119-21.
SEC. 22004. RESTORATION OF COST RECOVERY FOR ENERGY PROPERTY.
(a) In General.--Section 168(e)(3)(B)(vi) is amended--
(1) by redesignating subclauses (I) and (II) as subclauses
(II) and (III), respectively, and
(2) by inserting before subclause (II) (as so redesignated)
the following subclause:
``(I) is described in subparagraph
(A) of section 48(a)(3) (or would be so
described if `solar or wind energy'
were substituted for `solar energy' in
clause (i) thereof and the last
sentence of such section did not apply
to such subparagraph),''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70509 of Public Law 119-21.
Subtitle C--Lowering Costs for Electric Vehicles and Charging
Infrastructure
SEC. 23001. REVERSION OF TERMINATION DATE FOR PREVIOUSLY-OWNED VEHICLE
CREDIT.
(a) In General.--Section 25E(g) is amended by striking ``acquired
after September 30, 2025'' and inserting ``acquired after December 31,
2032''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70501 of Public Law 119-21.
SEC. 23002. REVERSION OF TERMINATION DATE FOR CLEAN VEHICLE CREDIT.
(a) In General.--Section 30D(h) is amended by striking ``acquired
after September 30, 2025'' and inserting ``placed in service after
December 31, 2032''.
(b) Conforming Amendments.--
(1) Section 30D(e)(1)(B) is amended by striking ``and'' at
the end of clause (iii), by striking the period at the end of
clause (iv) and inserting ``, and'', and by adding at the end
the following clause:
``(v) in the case of a vehicle placed in
service after December 31, 2026, 80 percent.''.
(2) Section 30D(e)(2)(B) is amended by striking ``and'' at
the end of clause (ii), by striking the period at the end of
clause (iii), and by adding at the end the following clauses:
``(iv) in the case of a vehicle placed in
service during calendar year 2027, 80 percent,
``(v) in the case of a vehicle placed in
service during calendar year 2028, 90 percent,
and
``(vi) in the case of a vehicle placed in
service after December 31, 2028, 100
percent.''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in section 70502 of Public Law 119-21.
SEC. 23003. QUALIFIED COMMERCIAL CLEAN VEHICLES CREDIT.
(a) Reversion of Termination Date.--Section 45W(g) is amended by
striking ``September 30, 2025'' and inserting ``December 31, 2032''.
(b) Clarification of Application to Mobile Machinery.--
(1) In general.--Section 45W(c)(2) is amended--
(A) in subparagraph (A), by striking ``primarily'',
and
(B) in subparagraph (B), by striking ``mobile
machinery, as defined in section 4053(8)'' and
inserting ``a vehicle that performs a construction,
manufacturing, processing, farming, mining, drilling,
timbering, or similar operation''.
(2) Qualified manufacturer and vin requirements not
applicable.--
(A) Qualified manufacturer requirements.--Section
45W(c) is amended--
(i) in paragraph (1), by striking ``meets
the requirements of section 30D(d)(1)(C) and'',
(ii) in paragraph (2)(A), by striking
``subparagraph (D)'' and inserting
``subparagraphs (C) and (D)'', and
(iii) in paragraph (3), by striking
``either--'' and inserting ``meets the
requirements of section 30D(d)(1)(C) and
either--''.
(B) VIN requirements.--Section 45W(e) is amended by
inserting ``(other than a vehicle described in
subsection (c)(2)(B))'' after ``any vehicle''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in section 70503 of Public Law 119-21.
SEC. 23004. REVERSION OF TERMINATION DATE FOR ALTERNATIVE FUEL VEHICLE
REFUELING PROPERTY CREDIT.
(a) In General.--Section 30C(i) is amended by striking ``June 30,
2026'' and inserting ``December 31, 2032''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 70504 of Public Law 119-21.
SEC. 23005. CREDIT FOR CERTAIN NEW ELECTRIC BICYCLES.
(a) In General.--Subpart C of part IV of subchapter A of chapter 1,
as amended by the preceding provision of this Act, is amended by
inserting after section 36C the following new section:
``SEC. 36D. ELECTRIC BICYCLES.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 30 percent of the cost of each
qualified electric bicycle placed in service by the taxpayer during
such taxable year.
``(b) Limitations.--
``(1) Limitation on cost per bicycle taken into account.--
The amount taken into account under subsection (a) as the cost
of any qualified electric bicycle shall not exceed $5,000.
``(2) Limitation on number of bicycles.--In the case of any
taxpayer for any taxable year, the number of qualified electric
bicycles taken into account under subsection (a) shall not
exceed the excess (if any) of--
``(A) 1 (2 in the case of a joint return), reduced
by
``(B) the aggregate number of qualified electric
bicycles taken into account by the taxpayer under
subsection (a) for the 2 preceding taxable years.
``(3) Phaseout based on income.--
``(A) Phaseout based on modified adjusted gross
income.--The credit allowed under subsection (a) shall
be reduced by $100 for each $1,000 (or fraction
thereof) by which the taxpayer's modified adjusted
gross income exceeds--
``(i) $300,000 in the case of a joint
return or a surviving spouse (as defined in
section 2(a)),
``(ii) $225,000 in the case of a head of
household (as defined in section 2(b)), and
``(iii) $150,000 in the case of a taxpayer
not described in clause (i) or (ii).
``(B) Special rule for modified adjusted gross
income taken into account.--The modified adjusted gross
income of the taxpayer that is taken into account for
purposes of subparagraph (A) shall be the lesser of--
``(i) the modified adjusted gross income
for the taxable year with respect to which the
credit is claimed, or
``(ii) the modified adjusted gross income
for the immediately preceding taxable year.
``(C) Modified adjusted gross income.--For purposes
of subparagraph (A), the term `modified adjusted gross
income' means adjusted gross income increased by any
amount excluded from gross income under section 911,
931, or 933.
``(c) Qualified Electric Bicycle.--For purposes of this section--
``(1) In general.--The term `qualified electric bicycle'
means a bicycle or tricycle--
``(A) the original use of which commences with the
taxpayer,
``(B) which is acquired for use by the taxpayer and
not for resale,
``(C) which is not property of a character subject
to an allowance for depreciation or amortization in the
hands of the taxpayer,
``(D) which is made by a qualified manufacturer and
is labeled with the qualified vehicle identification
number assigned to such bicycle or tricycle by such
manufacturer,
``(E) with respect to which the aggregate amount
paid for such acquisition does not exceed $8,000,
``(F) which is a class 1 electric bicycle or
tricycle, a class 2 electric bicycle or tricycle, or a
class 3 electric bicycle or tricycle,
``(G) which is equipped with--
``(i) fully operable pedals,
``(ii) a saddle or seat for the rider, and
``(iii) an electric motor of less than 750
watts which is designed to provide assistance
in propelling the bicycle or tricycle and--
``(I) does not provide such
assistance if the bicycle or tricycle
is moving in excess of 20 miles per
hour, or
``(II) if such motor only provides
such assistance when the rider is
pedaling, does not provide such
assistance if the bicycle or tricycle
is moving in excess of 28 miles per
hour,
``(H) which is not equipped with any motor other
than the motor described in subparagraph (G)(iii),
``(I) which is not capable of exceeding the speed
limitation in paragraph (2) by means of any electronic
switch, setting or software modification provided or
made available by the manufacturer, and
``(J) which has a drive system that has been
certified by an accredited laboratory to Underwriters
Laboratory (UL) standard UL 2849, or a battery that has
been certified to any of the battery safety standards
listed in such standard UL 2849 or such other drive
system or battery safety standard as may be recognized
by the United States Consumer Product Safety
Commission.
``(2) Class 1 electric bicycle or tricycle.--The term
`class 1 electric bicycle or tricycle' means a two- or three-
wheeled vehicle equipped with an electric motor that provides
assistance only when the rider is pedaling, that is not capable
of providing assistance when the speed of the vehicle exceeds
20 miles per hour, and that is not a class 3 electric bicycle
or tricycle.
``(3) Class 2 electric bicycle or tricycle.--The term
`class 2 electric bicycle or tricycle' means a two- or three-
wheeled vehicle equipped with an electric motor that may be
used to propel the vehicle without the need of any additional
assistance, and that is not capable of providing assistance
when the speed of the vehicle exceeds 20 miles per hour.
``(4) Class 3 electric bicycle or tricycle.--The term
`class 3 electric bicycle or tricycle' means a two- or three-
wheeled vehicle equipped with an electric motor that provides
assistance only when the rider is pedaling, and that is not
capable of providing assistance when the speed of the vehicle
exceeds 28 miles per hour.
``(d) Special Rule for Bicycles Used by an Individual in a Trade or
Business.--In the case of any bicycle or tricycle with respect to which
the taxpayer elects (at such time and in such manner as the Secretary
may provide) the application of this subsection--
``(1) subsections (c)(1)(C) and (f)(2) shall not apply with
respect to such bicycle or tricycle, and
``(2) no deduction (including any deduction for
depreciation or amortization) or credit (other than the credit
allowed under this section) shall be allowed for the cost of
such bicycle or tricycle.
``(e) VIN Number Requirement.--
``(1) In general.--No credit shall be allowed under
subsection (a) with respect to any qualified electric bicycle
unless the taxpayer includes the qualified vehicle
identification number of such bicycle on the return of tax for
the taxable year.
``(2) Qualified vehicle identification number.--For
purposes of this section, the term `qualified vehicle
identification number' means, with respect to any qualified
electric bicycle, the vehicle identification number assigned to
such bicycle by a qualified manufacturer pursuant to the
methodology referred to in paragraph (3)(A).
``(3) Qualified manufacturer.--For purposes of this
section, the term `qualified manufacturer' means any
manufacturer of qualified electric bicycles which enters into
an agreement with the Secretary which provides that such
manufacturer will--
``(A) assign a vehicle identification number to
each qualified electric bicycle produced by such
manufacturer utilizing a methodology that will ensure
that such number (including any alphanumeric) is unique
to such bicycle (by utilizing numbers or letters which
are unique to such manufacturer or by such other method
as the Secretary may provide),
``(B) label such bicycle with such number in such
manner as the Secretary may provide, and
``(C) make periodic written reports to the
Secretary (at such times and in such manner as the
Secretary may provide) of the vehicle identification
numbers so assigned and including such information as
the Secretary may require with respect to the qualified
electric bicycle to which such number was so assigned.
``(f) Special Rules.--
``(1) Basis reduction.--For purposes of this subtitle, the
basis of any property for which a credit is allowable under
subsection (a) shall be reduced by the amount of such credit so
allowed.
``(2) No double benefit.--The amount of any deduction or
other credit allowable under this chapter for a qualified
electric bicycle for which a credit is allowable under
subsection (a) shall be reduced by the amount of credit allowed
under such subsection for such bicycle.
``(3) Property used outside united states not qualified.--
No credit shall be allowable under subsection (a) with respect
to any property referred to in section 50(b)(1).
``(4) Recapture.--The Secretary shall, by regulations or
other guidance, provide for recapturing the benefit of any
credit allowable under subsection (a) with respect to any
property which ceases to be property eligible for such credit.
``(5) Election not to take credit.--No credit shall be
allowed under subsection (a) for any qualified electric bicycle
if the taxpayer elects to not have this section apply to such
bicycle.
``(g) Treatment of Certain Possessions.--
``(1) Payments to possessions with mirror code tax
systems.--The Secretary shall pay to each possession of the
United States which has a mirror code tax system amounts equal
to the loss (if any) to that possession by reason of the
application of the provisions of this section (determined
without regard to this subsection). Such amounts shall be
determined by the Secretary based on information provided by
the government of the respective possession.
``(2) Payments to other possessions.--The Secretary shall
pay to each possession of the United States which does not have
a mirror code tax system amounts estimated by the Secretary as
being equal to the aggregate benefits (if any) that would have
been provided to residents of such possession by reason of the
provisions of this section if a mirror code tax system had been
in effect in such possession. The preceding sentence shall not
apply unless the respective possession has a plan which has
been approved by the Secretary under which such possession will
promptly distribute such payments to its residents.
``(3) Mirror code tax system; treatment of payments.--Rules
similar to the rules of paragraphs (3), (4), and (5) of section
21(h) shall apply for purposes of this section.
``(h) Transfer of Credit.--
``(1) In general.--Subject to such regulations or other
guidance as the Secretary determines necessary or appropriate,
if the taxpayer who acquires a qualified electric bicycle is an
individual and elects the application of this subsection with
respect to such qualified electric bicycle, the credit which
would (but for this subsection) be allowed to such taxpayer
with respect to such qualified electric bicycle shall be
allowed to the eligible entity specified in such election (and
not to such taxpayer).
``(2) Eligible entity.--For purposes of this paragraph, the
term `eligible entity' means, with respect to the qualified
electric bicycle for which the credit is allowed under
subsection (a), the retailer which sold such qualified electric
bicycle to the taxpayer and has--
``(A) subject to paragraph (4), registered with the
Secretary for purposes of this paragraph, at such time,
and in such form and manner, as the Secretary may
prescribe,
``(B) prior to the election described in paragraph
(1) and no later than at the time of such sale,
disclosed to the taxpayer purchasing such qualified
electric bicycle--
``(i) the retail price,
``(ii) the value of the credit allowed or
other incentive available for the purchase of
such qualified electric bicycle,
``(iii) all fees associated with the
purchase of such qualified electric bicycle,
and
``(iv) the amount provided by the retailer
to such taxpayer as a condition of the election
described in paragraph (1),
``(C) made payment to such taxpayer (whether in
cash or in the form of a partial payment or down
payment for the purchase of such qualified electric
bicycle) in an amount equal to the credit otherwise
allowable to such taxpayer, and
``(D) with respect to any incentive otherwise
available for the purchase of a qualified electric
bicycle for which a credit is allowed under this
section, including any incentive in the form of a
rebate or discount provided by the retailer or
manufacturer, ensured that--
``(i) the availability or use of such
incentive shall not limit the ability of a
taxpayer to make an election described in
paragraph (1), and
``(ii) such election shall not limit the
value or use of such incentive.
``(3) Timing.--An election described in paragraph (1) shall
be made by the taxpayer not later than the date on which the
qualified electric bicycle for which the credit is allowed
under subsection (a) is purchased.
``(4) Revocation of registration.--Upon determination by
the Secretary that a retailer has failed to comply with the
requirements described in paragraph (2), the Secretary may
revoke the registration (as described in subparagraph (A) of
such paragraph) of such retailer.
``(5) Tax treatment of payments.--With respect to any
payment described in paragraph (2)(C), such payment--
``(A) shall not be includible in the gross income
of the taxpayer, and
``(B) with respect to the retailer, shall not be
deductible under this title.
``(6) Application of certain other requirements.--In the
case of any election under paragraph (1) with respect to any
qualified electric bicycle--
``(A) the amount of the reduction under subsection
(b) shall be determined with respect to the modified
adjusted gross income of the taxpayer for the taxable
year preceding the taxable year in which such qualified
electric bicycle was acquired (and not with respect to
such income for the taxable year in which such
qualified electric bicycle was acquired),
``(B) the requirements of paragraphs (1) and (2) of
subsection (f) shall apply to the taxpayer who acquired
the qualified electric bicycle in the same manner as if
the credit determined under this section with respect
to such qualified electric bicycle were allowed to such
taxpayer, and
``(C) subsection (f)(5) shall not apply.
``(7) Advance payment to registered retailers.--
``(A) In general.--The Secretary shall establish a
program to make advance payments to any eligible entity
in an amount equal to the cumulative amount of the
credits allowed under subsection (a) with respect to
any qualified electric bicycles sold by such entity for
which an election described in paragraph (1) has been
made.
``(B) Excessive payments.--Rules similar to the
rules of section 6417(c)(6) shall apply for purposes of
this paragraph.
``(8) Retailer.--For purposes of this subsection, the term
`retailer' means a person engaged in the trade or business of
selling qualified electric bicycles in a State, the District of
Columbia, the Commonwealth of Puerto Rico, or any other
territory or possession of the United States.''.
(b) Conforming Amendments.--
(1) Section 1016(a), as amended by the preceding provisions
of this Act, is amended by striking ``and'' at the end of
paragraph (38), by striking the period at the end of paragraph
(39) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(40) to the extent provided in section 36D(f)(1).''.
(2) Section 6211(b)(4)(A), as amended by the preceding
provisions of this Act, is amended by inserting ``36D,'' after
``36C,''.
(3) Section 6213(g)(2) is amended--
(A) in subparagraph (Z), by striking ``and'' at the
end,
(B) in subparagraph (AA), by striking the period at
the end and inserting ``, and'', and
(C) by adding at the end the following:
``(BB) an omission of a correct vehicle
identification number required under section 36D(e)
(relating to electric bicycles credit) to be included
on a return.''.
(4) Section 6501(m) is amended by inserting ``36D(f)(5),''
after ``35(g)(11),''.
(5) Section 1324(b)(2) of title 31, United States Code, as
amended by the preceding provisions of this Act, is amended by
inserting ``36D,'' after ``36C,''.
(c) Clerical Amendment.--The table of sections for subpart C of
part IV of subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by adding at the end the following
new item:
``Sec. 36D. Electric bicycles.''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act, in taxable years ending after such date.
(e) Treasury Report.--Not later than 3 years after the date of the
enactment of this Act, the Secretary of the Treasury (or the
Secretary's delegate) shall make publicly available a written report
specifying the number of taxpayers claiming the credit allowed under
section 36D of the Internal Revenue Code of 1986 (as added by this
section) and the aggregate dollar amount of such credits so allowed.
Such information shall be stated separately for taxable years beginning
in 2026 and 2027, and shall be stated separately with respect to each
such years with respect to taxpayers in each of the income brackets to
which section 1 of such Code applies.
Subtitle D--Lowering Costs of Clean Infrastructure and Resiliency
SEC. 24001. QUALIFYING WATER REUSE PROJECT CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1,
as amended by the preceding provisions of this Act, is amended by
inserting after section 48H the following new section:
``SEC. 48I. QUALIFYING WATER REUSE PROJECT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying water
reuse project credit for any taxable year is an amount equal to 30
percent of the qualified investment for such taxable year with respect
to any qualifying water reuse project of the taxpayer.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment with respect to any qualifying water reuse
project for any taxable year is the basis of qualified property
placed in service by the taxpayer during such taxable year
which is part of such qualifying water reuse project.
``(2) Qualified property.--For purposes of this subsection,
the term `qualified property' means property--
``(A) which is tangible property,
``(B) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable, and
``(C) which is--
``(i) constructed, reconstructed, or
erected by the taxpayer, or
``(ii) acquired by the taxpayer if the
original use of such property commences with
the taxpayer.
``(3) Certain qualified progress expenditures rules made
applicable.--Rules similar to the rules of subsections (c)(4)
and (d) of section 46 (as in effect on the day before the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this section.
``(c) Qualifying Water Reuse Project.--For purposes of this
section--
``(1) In general.--The term `qualifying water reuse
project' means a project which--
``(A) installs, replaces, or modifies an onsite
water recycling system within an industrial,
manufacturing, data center, or food processing
facility,
``(B) replaces the use of freshwater, such as
groundwater, with recycled water from a municipal water
provider for the production of goods or provision of
services, or
``(C) builds or expands a municipal water recycling
system for the purpose of securing recycled water for
the production of goods or provision of services.
``(2) Prevailing wage and apprenticeship requirements.--
Such term shall not include any project unless such project
meets the requirements of paragraph (7) and (8) of section
45(b).
``(d) Special Rule for Certain Property Transferred to Utilities.--
``(1) In general.--In the case of any qualified transfer
property transferred from a person to a utility--
``(A) such property shall be treated as qualified
property with respect to such person,
``(B) such person shall be treated as having placed
such property in service at the time of such transfer,
``(C) the basis of such person in such property
which is taken into account under subsection (b)(1)
shall be the basis of such person in such property at
the time of such transfer, and
``(D) such property shall not be taken into account
for purposes of determining any credit allowed under
this section to such utility.
``(2) Qualified transfer property.--For purposes of this
subsection, the term `qualified transfer property' means
property transferred from a person to a utility if--
``(A) such property is qualified property with
respect to such utility, and
``(B) such person and such utility enter into a
binding written agreement under which such person is
treated as eligible for the credit allowed under this
section with respect to such property in lieu of such
utility.
``(e) Termination.--This section shall not apply to any property
the construction of which begins after December 31, 2032.''.
(b) Part of Investment Credit.--Section 46, as amended by the
preceding provisions of this Act, is amended by striking ``and'' at the
end of paragraph (9), by striking the period at the end of paragraph
(10) and inserting ``, and'', and by adding at the end the following
new paragraph:
``(11) the qualifying water reuse project credit.''.
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by inserting after the item relating
to section 48H the following new item:
``Sec. 48I. Qualifying water reuse project credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this section under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the date of the enactment of the Revenue
Reconciliation Act of 1990).
SEC. 24002. RECYCLING PROPERTY INVESTMENT CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1,
as amended by the preceding provisions of this Act, is amended by
inserting after section 48I the following new section:
``SEC. 48J. RECYCLING PROPERTY INVESTMENT CREDIT.
``(a) In General.--For purposes of section 46, the recycling
property investment credit for any taxable year is an amount equal to
30 percent of the qualified investment for such taxable year.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of any
eligible property placed in service by the taxpayer during such
taxable year.
``(2) Eligible property.--For purposes of this section--
``(A) In general.--The term `eligible property'
means property--
``(i) which is qualified recycling
property,
``(ii) with respect to which depreciation
(or amortization in lieu of depreciation) is
allowable, and
``(iii)(I) the construction,
reconstruction, addition, or erection of which
is completed by the taxpayer, or
``(II) which is acquired by the taxpayer if
the original use of such property commences
with the taxpayer, and
``(B) Prevailing wage and apprenticeship
requirements.--Such term shall not include any property
unless such property meets the requirements of
paragraph (7) and (8) of section 45(b).
``(c) Special Rules.--For purposes of this section--
``(1) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of
section 46 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) shall
apply.
``(2) Special rule for certain subsidized property.--Rules
similar to section 45(b)(3) shall apply.
``(3) Domestic content bonus credit amount.--
``(A) In general.--In the case of any qualified
investment which satisfies the requirement under
subparagraph (B), the amount of the credit determined
under subsection (a) (determined without regard to this
paragraph before the application of subsection (d) and
after the application of any other provision of this
section) shall be increased by an amount equal to 10
percentage points of the amount so determined.
``(B) Requirement.--Rules similar to the rules of
section 45(b)(9)(B) shall apply.
``(4) Phaseout for elective payment.--In the case of a
taxpayer making an election under section 6417 with respect to
a credit under this section, rules similar to the rules of
section 45(b)(10) shall apply.
``(d) Credit Phase-Out.--
``(1) In general.--The amount of the credit determined
under subsection (a) with respect to any qualified investment
shall be equal to the product of--
``(A) the amount of the credit determined under
subsection (a) without regard to this subsection,
multiplied by
``(B) the phase-out percentage under paragraph (2).
``(2) Phase-out percentage.--The phase-out percentage under
this paragraph is equal to--
``(A) in the case of any eligible property with a
determination date beginning on or after January 1,
2026, and before December 31, 2032, 100 percent,
``(B) in the case of any eligible property with a
determination date beginning on or after January 1,
2033, and before December 31, 2033, 80 percent,
``(C) in the case of any eligible property with a
determination date beginning on or after January 1,
2034, and before December 31, 2034, 60 percent,
``(D) in the case of any eligible property with a
determination date beginning on or after January 1,
2035, and before December 31, 2035, 40 percent,
``(E) in the case of any eligible property with a
determination date beginning on or after January 1,
2036, and before December 31, 2036, 20 percent, and
``(F) in the case of any eligible property with a
determination date beginning on or after January 1,
2037, 0 percent.
``(3) Determination date.--For purposes of paragraph (2),
the determination date of an eligible property is--
``(A) in the case such property is described in
subsection (b)(2)(C)(i), the date on which the
construction, reconstruction, addition, or erection of
such property begins, and
``(B) in any other case, the date on which such
property is placed in service.
``(e) Denial of Double Benefit.--In the case of any eligible
property with respect to which credit is allowed under subsection (a)--
``(1) no other credit or deduction shall be allowed for, or
by reason of, such property to the extent of the amount of such
credit, and
``(2) the basis of such property shall be reduced by the
amount of such credit.
``(f) Regulations and Guidance.--The Secretary shall issue such
regulations or other guidance as the Secretary determines necessary to
carry out the purposes of this section, including regulations or other
guidance which provides for requirements for recordkeeping or
information reporting for purposes of administering the requirements of
this section.
``(g) Definitions.--For purposes of this section--
``(1) Qualified recycling property.--The term `qualified
recycling property' has the meaning given the term `reuse and
recycling property' in section 168(m)(3)(A).
``(2) Qualified reuse and recyclable materials.--The term
`qualified reuse and recyclable materials' has the meaning
given such term in section 168(m)(3)(B), except that for
purposes of this section such term includes any video display
device and any computer device (including computer peripherals,
such as keyboards, mice, speakers, cables, printers, and
scanners).
``(3) Recycle.--The term `recycle' has the meaning given
such term in section 168(m)(3)(C), except that for purposes of
this section such term does not include--
``(A) any method of sorting, processing, and
aggregating materials from solid waste that--
``(i) does not preserve the original
quality of such materials, and
``(ii) results in the aggregated material
not being usable--
``(I) for the initial purpose (or a
substantially similar purpose) of such
materials, or
``(II) as feedstock in lieu of
virgin feedstock in the production of
specification grade commodities, or
``(B) the primary use of waste or qualified reuse
and recyclable materials--
``(i) as a fuel or fuel substitute;
``(ii) for the production or generation of
energy (including heat and electricity);
``(iii) for incineration;
``(iv) for alternate operating cover; or
``(v) within the footprint of a
landfill.''.
(b) Credit Made Part of Investment Credit.--Section 46, as amended
by the preceding provisions of this Act, is amended by striking ``and''
at the end of paragraph (10), by striking the period at the end of
paragraph (11) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(12) the recycling property investment credit.''.
(c) Clerical Amendment.--The table of sections for subpart E of
part IV of subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by inserting after the item relating
to section 48I the following new item:
``48J. Recycling property investment credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to--
(1) in the case of property described in section
48J(b)(2)(C)(i) of the Internal Revenue Code of 1986 (as added
by subsection (a)), property which is constructed,
reconstructed, added, or erected after December 31, 2025, and
(2) in any other case, property which is placed in service
after December 31, 2025.
SEC. 24003. EXCLUSION OF AMOUNTS RECEIVED FROM STATE-BASED CATASTROPHE
LOSS MITIGATION PROGRAMS.
(a) In General.--Section 139 is amended by redesignating subsection
(h) as subsection (i) and by inserting after subsection (g) the
following new subsection:
``(h) State-Based Catastrophe Loss Mitigation Programs.--
``(1) In general.--Gross income shall not include any
amount received by an individual as a qualified catastrophe
loss mitigation payment under a program established or
administered by a State, or a political subdivision or
instrumentality thereof, for the purpose of making such
payments.
``(2) Qualified catastrophe loss mitigation payment.--For
purposes of this section, the term `qualified catastrophe loss
mitigation payment' means any amount which is received by an
individual to make improvements to such individual's residence
for the sole purpose of hazard mitigation with respect to such
residence.
``(3) No increase in basis.--Rules similar to the rules of
subsection (g)(3) shall apply in the case of this
subsection.''.
(b) Conforming Amendments.--
(1) Section 139(d) is amended by striking ``and qualified''
and inserting ``, qualified catastrophe mitigation payments,
and qualified''.
(2) Section 139(i) (as redesignated by subsection (a)) is
amended by striking ``or qualified'' and inserting ``,
qualified catastrophe mitigation payment, or qualified''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 24004. EXCLUSION FROM GROSS INCOME OF CERTAIN EMERGENCY
AGRICULTURAL ASSISTANCE.
(a) In General.--Section 139, as amended by the preceding
provisions of this Act, is amended by redesignating subsection (i) as
subsection (j) and by inserting after subsection (h) the following new
subsection:
``(i) Certain Agricultural Assistance.--For purposes of this
section, the term `qualified disaster relief payment' shall include any
assistance received under any of the following:
``(1) Assistance received under the Wildfires and
Hurricanes Indemnity Program Plus under subpart O of part 760
of title 7, Code of Federal Regulations.
``(2) Assistance received under section 1501 of the
Agricultural Act of 2014 (7 U.S.C. 9081).
``(3) Noninsured crop assistance under section 196 of the
Federal Agriculture Improvement and Reform Act of 1996 (7
U.S.C. 7333).
``(4) Assistance under a food assistance program under part
9 of title 7, Code of Federal Regulations.
``(5) Assistance under title IV of the Agricultural Credit
Act of 1978 (16 U.S.C. 2201 et seq.).
``(6) Assistance under the Quality Loss Assistance
Program.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 24005. CREDIT FOR DISASTER MITIGATION EXPENDITURES.
(a) In General.--Subpart B of part IV of subchapter A of chapter 1
is amended by inserting after section 27 the following new section:
``SEC. 28. DISASTER MITIGATION EXPENDITURES.
``(a) In General.--There shall be allowed as a credit against the
tax imposed by this chapter for the taxable year an amount equal to 30
percent of the expenditures paid for qualifying mitigation activities
paid or incurred by the taxpayer during such taxable year with respect
to real property owned or leased by the taxpayer.
``(b) Qualifying Mitigation Activities.--For purposes of this
section, the term `qualifying mitigation activity' means an activity
relating to a housing unit--
``(1) for property to--
``(A) improve the strength of a roof deck
attachment;
``(B) create a secondary water barrier to prevent
water intrusion or mitigate against potential water
intrusion from wind-driven rain;
``(C) improve the durability, impact resistance
(not less than class 3 or 4 rating), or fire resistance
(not less than class A rating) of a roof covering;
``(D) brace gable-end walls;
``(E) reinforce the connection between a roof and
supporting wall;
``(F) protect openings from penetration by wind-
borne debris;
``(G) protect exterior doors and garages from
natural hazards;
``(H) complete measures contained in the
publication of the Federal Emergency Management Agency
entitled `Wind Retrofit Guide for Residential
Buildings' (P-804);
``(I) elevate the qualified dwelling unit, as well
as utilities, machinery, or equipment, above the base
flood elevation or other applicable minimum elevation
requirement;
``(J) seal walls in the basement of the qualified
dwelling unit using waterproofing compounds; or
``(K) protect propane tanks or other external fuel
sources;
``(2) to install--
``(A) check valves to prevent flood water from
backing up into drains;
``(B) flood vents, breakaway walls or open lattice
for homes located in V zones;
``(C) a stormwater drainage system or improve an
existing system;
``(D) natural or nature-based features for flood
control, including living shorelines;
``(E) roof coverings, sheathing, flashing, roof and
attic vents, eaves, or gutters that conform to
ignition-resistant construction standards;
``(F) wall components for wall assemblies that
conform to ignition-resistant construction standards;
``(G) a wall-to-foundation anchor or connector, or
a shear transfer anchor or connector;
``(H) wood structural panel sheathing for
strengthening cripple walls;
``(I) anchorage of the masonry chimney to the
framing;
``(J) prefabricated lateral resisting systems;
``(K) a standby generator system consisting of a
standby generator and an automatic transfer switch;
``(L) a storm shelter that meets the design and
construction standards established by the International
Code Council and the National Storm Shelter Association
(ICC-500), or a safe room that satisfies the criteria
contained in--
``(i) the publication of the Federal
Emergency Management Agency entitled `Safe
Rooms for Tornadoes and Hurricanes' (P-361); or
``(ii) the publication of the Federal
Emergency Management Agency entitled `Taking
Shelter from the Storm' (P-320);
``(M) a lightning protection system;
``(N) exterior walls, doors, windows, or other
exterior dwelling unit elements that conform to
ignition-resistant construction standards;
``(O) exterior deck or fence components that
conform to ignition-resistant construction standards;
``(P) structure-specific water hydration systems,
including fire mitigation systems such as interior
sprinkler systems;
``(Q) flood openings for fully enclosed areas below
the lowest floor of the dwelling unit;
``(R) lateral bracing for wall elements, foundation
elements, and garage doors or other large openings to
resist seismic loads; or
``(S) automatic shutoff valves for water and gas
lines;
``(3) for services or equipment to--
``(A) create buffers around the qualified dwelling
unit through the removal or reduction of flammable
vegetation, including vertical clearance of tree
branches;
``(B) create buffers around the dwelling unit
through--
``(i) the removal of exterior deck or fence
components or ignition-prone landscape
features; or
``(ii) replacement of the components or
features described in clause (i) with
components or features that conform to
ignition-resistant construction standards;
``(C) perform fire maintenance procedures
identified by the Federal Emergency Management Agency
or the United States Forest Service, including fuel
management techniques such as creating fuel and fire
breaks; or
``(D) replace flammable vegetation with less
flammable species;
``(4) for property relating to satisfying the standards
required for receipt of a FORTIFIED designation from the
Insurance Institute for Business and Home Safety, provided that
the qualified dwelling unit receives such designation following
installation of such property;
``(5) for property relating to satisfying the standards
required for receipt of a Wildfire Prepared Homes designation
from the Insurance Institute for Business and Home Safety,
provided that the qualified dwelling unit receives such
designation following installation of such property; or
``(6) for any other hazard mitigation activity identified
by the President, in consultation with the Administrator of the
Federal Emergency Management Agency, for mitigation of a
natural hazard.
``(c) Application With Other Credits.--
``(1) Business credit treated as part of general business
credit.--So much of the credit which would be allowed under
subsection (a) for any taxable year (determined without regard
to this subsection) that is attributable to expenditures made
in the ordinary course of the taxpayer's trade or business (or,
in the case of expenditures made by a State, would have been
expenditures made in the ordinary course of the taxpayer's
trade or business if made by the taxpayer) shall be treated as
a credit listed in section 38(b) for taxable year (and not
allowed under subsection (a)).
``(2) Personal credit.--For purposes of this title, the
credit allowed under subsection (a) for any taxable year
(determined after application of paragraph (1)) shall be
treated as a credit allowable under subpart A for such taxable
year.
``(d) Reduction of Credit Percentage Where Taxpayer Expenditures
Less Than 30 Percent.--
``(1) In general.--If the expenditure percentage with
respect to any item of expenditure described under subsection
(a) is less than 30 percent, subsection (a) shall be applied by
substituting `the expenditure percentage' for `30 percent' with
respect to such item of expenditure.
``(2) Expenditure percentage.--For purposes of this
section, the term `expenditure percentage' means, with respect
to any item of expenditure described under subsection (a) any
portion of which is paid or incurred by a State, the ratio
(expressed as a percentage) of--
``(A) the taxpayer's expenditure for such item,
divided by
``(B) the sum of the taxpayer's and such State's
expenditures for such item.
``(e) Special Rules.--
``(1) Treatment of expenditures related to marketable
timber.--An expenditure shall not be taken into account for
purposes of this section (whether made by the taxpayer or a
State) if such expenditure is properly allocable to timber
which is sold or exchanged by the taxpayer. The preceding
sentence shall not apply to the extent that such amount exceeds
the gain on such sale or exchange.
``(2) Treatment of reimbursements.--Any amount originally
paid or incurred by the taxpayer which is reimbursed by a State
under a qualified State disaster mitigation program shall be
treated as paid by such State (and not by such taxpayer).
``(3) Basis reduction.--For purposes of this subtitle, if
the basis of any property would (but for this paragraph) be
determined by taking into account any expenditure described
under subsection (a), the basis of such property shall be
reduced by the amount of the credit allowed under subsection
(a) with respect to such expenditure (determined without regard
to subsection (c)).
``(4) Denial of double benefit.--The amount of any
deduction or other credit allowable under this chapter for any
expenditure for which a credit is allowable under subsection
(a) shall be reduced by the amount of credit allowed under such
subsection for such expenditure (determined without regard to
subsection (c)).''.
(b) Conforming Amendments.--
(1) Section 38(b), as amended by the preceding provisions
of this Act, is amended by striking ``plus'' at the end of
paragraph (42), by striking the period at the end of paragraph
(43) and inserting ``, plus'', and by adding at the end the
following new paragraph:
``(44) the portion of the disaster mitigation expenditures
credit to which section 28(c)(1) applies.''.
(2) Section 1016(a), as amended by the preceding provisions
of this Act, is amended by striking ``and'' at the end of
paragraph (39), by striking the period at the end of paragraph
(40) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(41) to the extent provided in section 28(e)(2).''.
(3) The table of sections for subpart B of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 27 the following new item:
``Sec. 28. Qualified disaster mitigation expenditures.''.
(c) Effective Date.--The amendments made by this section shall
apply to expenditures paid or incurred after the date of the enactment
of this Act, in taxable years ending after such date.
SEC. 24006. ESTABLISHMENT OF ELECTRIC POWER TRANSMISSION LINE CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1,
as amended by the preceding provisions of this Act, is amended by
inserting after section 48F the following new section:
``SEC. 48G. QUALIFYING ELECTRIC POWER TRANSMISSION LINE CREDIT.
``(a) Allowance of Credit.--For purposes of section 46, the
qualifying electric power transmission line credit for any taxable year
is an amount equal to 30 percent of the qualified investment for such
taxable year with respect to any qualifying electric power transmission
line property of the taxpayer.
``(b) Qualifying Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of any
qualifying electric power transmission line property placed in
service by the taxpayer during such taxable year.
``(2) Certain qualified progress expenditures rules made
applicable.--Rules similar to the rules of subsections (c)(4)
and (d) of section 46 (as in effect on the day before the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this section.
``(c) Qualifying Electric Power Transmission Line Property.--For
purposes of this section--
``(1) In general.--The term `qualifying electric power
transmission line property' means any overhead, submarine, or
underground property--
``(A) which is a qualifying electric power
transmission line that transmits electricity--
``(i) across not less than 2 States or not
less than 150 continuous miles, or
``(ii) across the Outer Continental Shelf
(as defined in section 2 of the Outer
Continental Lands Act (43 U.S.C. 1331)), or
``(B) which is related transmission property.
``(2) Prevailing wage and apprenticeship requirements.--
Such term shall not include any property unless such property
meets the requirements of paragraph (7) and (8) of section
45(b).
``(d) Qualifying Electric Power Transmission Line.--For purposes of
this section--
``(1) In general.--The term `qualifying electric power
transmission line' means any of the following:
``(A) New transmission property.--
``(i) In general.--Any electric power
transmission line which is--
``(I) originally placed in service
after the date of enactment of this
section,
``(II) primarily used for one or
more purposes described in clause (ii),
and
``(III) described in clause (iv).
``(ii) Purposes described.--The purposes
described in this clause are--
``(I) enhancing resilience to
prepare for, withstand, and recover
rapidly from disruptions from the
impact of weather events, wildfires, or
natural disasters,
``(II) addressing clearance
concerns,
``(III) facilitating the
interconnection of electric generation
capacity to the bulk-power system (as
defined in section 215 of the Federal
Power Act), or
``(IV) addressing high load needs
of 2,000 ampere and above.
``(iii) Multiple transmission lines located
in the same right-of-way.--A transmission line
is described in this clause if such a
transmission line--
``(I) is co-located in the same
right-of-way or adjacent right-of-way
as one or more other overhead,
submarine, or underground transmission
lines, and
``(II) together with the other
transmission lines described in
subclause (I), has a transmission
capacity of not less than 1,000
megawatts.
``(iv) Additional requirements for new
transmission property.--An electric power
transmission line is described in this clause
if--
``(I) such transmission line--
``(aa) includes an advanced
transmission conductor, and
``(bb) is capable of
transmitting electricity at a
voltage of not less than 100
kilovolts, or
``(II) such transmission line--
``(aa) is--
``(AA) capable of
transmitting
electricity at a
voltage of not less
than 345 kilovolts, or
``(BB) a
superconducting
transmission line, and
``(bb) has a transmission
capacity of not less than 750
megawatts or is a transmission
line described in clause (iii).
``(B) Modification of existing transmission
property.--Any electric power transmission line which--
``(i) was placed in service before the date
of the enactment of this section,
``(ii) is modified after the date of the
enactment of this Act in a manner that
increases the transmission capacity of such
transmission line by not less than 500
megawatts, and
``(iii) after the completion of such
modification, is an electric power transmission
line which satisfies the requirements under
subclauses (II) and (III) of subparagraph
(A)(i).
``(2) Advanced transmission conductor.--The term `advanced
transmission conductor' means a transmission conductor
technology that uses recently developed technology or materials
such as a composite core and such other future advances as
determined by the Secretary, in consultation with the Secretary
of Energy.
``(3) Superconducting transmission line.--The term
`superconducting transmission line' means a transmission line
that conducts all of its current over a super-conducting
material.
``(e) Related Transmission Property.--For purposes of this
section--
``(1) In general.--The term `related transmission property'
means any of the following:
``(A) Transmission property used for
interconnection or generator tie-line.--Any electric
power transmission line which is--
``(i) placed in service after the date of
enactment of this section,
``(ii) primarily used--
``(I) as a generator
interconnection tie line at an
associated facility that extends from
the secondary (high) side of a
generator step-up transformer to the
point of interconnection with the host
transmission owner from interconnecting
new generation resources or facilities
to the electric grid, or
``(II) for network upgrades
associated with the interconnection of
new generation resources or facilities
to the electric grid,
``(iii) primarily used for one or more
purposes described in subparagraph
(d)(1)(A)(ii), and
``(iv) capable of transmitting electricity
at a voltage of not less than 230 kilovolts.
``(B) Grid enhancing technology.--Any grid
enhancing technology property used in the operation of
the electric power transmission line described in
subparagraph (A) or (B) of subsection (d)(1).
``(C) Subcomponents.--Any conductors or cables,
towers, insulators, reactors, capacitors, circuit
breakers, static VAR compensators, static synchronous
compensators, power converters, transformers,
synchronous condensers, braking resistors, and any
ancillary facilities and equipment necessary for the
proper operation of the electric transmission line
described in subparagraph (A) or (B) of subsection
(d)(1) or for the proper operation of any property
described in subsection (1)(A).
``(2) Grid enhancing technology property.--The term `grid
enhancing technology property' means power flow controls and
transmission switching equipment, storage technology, and
hardware or software that enables dynamic line ratings,
advanced line rating management technologies, on new or
existing transmission property for the purpose of enhancing the
capacity, efficiency, resiliency, or reliability of an electric
power transmission system and such other similar property
determined by the Secretary, in consultation with the Secretary
of Energy.
``(f) Termination.--This section shall not apply to any property
the construction of which begins after December 31, 2033.''.
(b) Public Utility Property.--Paragraph (2) of section 50(d) is
amended--
(1) by striking ``(as defined in section 48(c)(6))'' and
inserting ``(as defined in section 48(c)(6), except that
subparagraph (D) of such section shall not apply) or any
qualifying electric power transmission line property (as
defined by section 48G(c))'', and
(2) in subparagraph (B)--
(A) by inserting ``or qualifying electric
transmission line property'' after ``each energy
storage technology'', and
(B) by inserting ``or the qualifying electric
transmission line property'' after ``the energy storage
technology''.
(c) Transfer of Certain Credits.--Section 6418(f)(1)(A), as amended
by the preceding provisions of this Act, is amended by adding the
following new clause:
``(xiv) The qualifying electric power
transmission line credit under section 48G.''.
(d) Conforming Amendments.--
(1) Section 46, as amended by the preceding provisions of
this Act, is amended--
(A) by striking ``and'' at the end of paragraph
(7),
(B) by striking the period at the end of paragraph
(8) and inserting ``, and'', and
(C) by adding at the end the following new
paragraph:
``(9) the qualifying electric power transmission line
credit.''.
(2) Section 49(a)(1)(C), as amended by the preceding
provisions of this Act, is amended--
(A) by striking ``and'' at the end of clause
(viii),
(B) by striking the period at the end of clause
(ix) and inserting ``, and'', and
(C) by adding at the end the following new clause:
``(x) the basis of any qualifying electric
power transmission line property under section
48G.''.
(3) The table of sections for subpart E of part IV of
subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by inserting after the item
relating to section 48F the following new item:
``Sec. 48G. Qualifying electric power transmission line credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2025.
SEC. 24007. QUALIFYING ADVANCED BATTERY PROJECT CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1,
as amended by the preceding provisions of this Act, is amended by
inserting after section 48G the following new section:
``SEC. 48H. QUALIFYING ADVANCED BATTERY PROJECT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
advanced battery project credit for any taxable year is an amount equal
to 30 percent of the qualified investment for such taxable year with
respect to any qualifying advanced battery project of the taxpayer.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of
eligible property placed in service by the taxpayer during such
taxable year which is part of a qualifying advanced battery
project.
``(2) Certain qualified progress expenditures rules made
applicable.--Rules similar to the rules of subsections (c)(4)
and (d) of section 46 (as in effect on the day before the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this section.
``(3) Limitation.--The amount which is treated as the
qualified investment for all taxable years with respect to any
qualifying advanced battery project shall not exceed the amount
designated by the Secretary as eligible for the credit under
this section.
``(c) Definitions.--For purposes of this section--
``(1) Qualifying advanced battery project.--The term
`qualifying advanced battery project' means a project, any
portion of the qualified investment of which is certified by
the Secretary under subsection (e) as eligible for a credit
under this section, which re-equips, expands, or establishes a
qualified advanced battery manufacturing and research facility.
``(2) Qualified advanced battery manufacturing and research
facility.--The term `qualified advanced battery manufacturing
or research facility'--
``(A) means a facility--
``(i) located within the United States, and
``(ii) primarily used for the production or
research and development of batteries or
battery components employing advanced
chemistries or technologies that improve
battery performance, fire safety, and
longevity, including--
``(I) solid-state lithium metal
batteries,
``(II) lithium-sulfur batteries,
``(III) metal-air batteries,
``(IV) sodium-ion batteries, and
``(V) such other chemistries or
technologies as the Secretary, after
consultation with the Secretary of
Energy, determines to offer significant
advancements over traditional lithium-
ion technology with respect to
performance or fire safety, and
``(B) does not include facilities which produce
only traditional lithium-ion batteries without
incorporating advanced chemistries or technologies
described in subparagraph (A)(ii).
``(d) Qualifying Advanced Battery Project Program.--
``(1) Establishment.--
``(A) In general.--Not later than 180 days after
the date of enactment of this section, the Secretary,
in consultation with the Secretary of Energy, shall
establish a qualifying advanced battery project program
to consider and award certifications for qualified
investments eligible for credits under this section to
qualifying advanced battery project sponsors.
``(B) Limitation.--The total amount of credits that
may be allocated under the program shall not exceed
$3,000,000,000.
``(2) Certification.--
``(A) Application period.--Each applicant for
certification under this paragraph shall submit an
application containing such information as the
Secretary may require during the 2-year period
beginning on the date the Secretary establishes the
program under paragraph (1).
``(B) Time to meet criteria for certification.--
Each applicant for certification shall have 1 year from
the date of acceptance by the Secretary of the
application during which to provide to the Secretary
evidence that the requirements of the certification
have been met.
``(C) Period of issuance.--An applicant which
receives a certification shall have 3 years from the
date of issuance of the certification in order to place
the project in service and if such project is not
placed in service by that time period, then the
certification shall no longer be valid.
``(3) Selection criteria.--Rules similar to the rules of
section 48C(d)(3) shall apply.
``(4) Review and redistribution.--
``(A) Review.--Not later than 4 years after the
date of enactment of this section, the Secretary shall
review the credits allocated under this section as of
such date.
``(B) Redistribution.--The Secretary may reallocate
credits awarded under this section if the Secretary
determines that--
``(i) there is an insufficient quantity of
qualifying applications for certification
pending at the time of the review, or
``(ii) any certification made pursuant to
paragraph (2) has been revoked pursuant to
paragraph (2)(B) because the project subject to
the certification has been delayed as a result
of third party opposition or litigation to the
proposed project.
``(C) Reallocation.--If the Secretary determines
that credits under this section are available for
reallocation pursuant to the requirements set forth in
paragraph (2), the Secretary is authorized to conduct
an additional program for applications for
certification.
``(5) Disclosure of allocations.--The Secretary shall, upon
making an allocation under this subsection, publicly disclose
the identity of the applicant and the amount of the credit with
respect to such applicant.
``(e) Denial of Double Benefit.--No credit shall be allowed under
this section for any qualified investment for which a credit is allowed
under another provision of this title.
``(f) Regulations and Guidance.--The Secretary, after consultation
with the Secretary of Energy, shall issue such regulations and guidance
as necessary to implement this section, including the publication of an
annual list of advanced chemistries or technologies under subsection
(c)(2).''.
(b) Credit Eligible for Elective Payment.--Section 6417(b) is
amended by adding at the end the following new paragraph:
``(13) The qualifying advanced battery project credit
determined under section 48H.''.
(c) Credit Transferable.--Section 6418(f)(1)(A), as amended by the
preceding provisions of this Act, is amended by adding at the end the
following new clause:
``(xv) The qualifying advanced battery
project credit determined under section 48H.''.
(d) Conforming Amendments.--
(1) Section 46, as amended by the preceding provisions of
this Act, is amended by striking ``and'' at the end of
paragraph (8), by striking the period at the end of paragraph
(9) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(10) the qualifying advanced battery project credit.''.
(2) Section 49(a)(1)(C), as amended by the preceding
provisions of this Act, is amended by striking ``and'' at the
end of clause (ix), by striking the period at the end of clause
(x) and inserting ``, and'', and by adding at the end the
following new clause:
``(xi) the basis of any property which is
part of a qualified advanced battery
manufacturing or research facility under
section 48H.''.
(3) Section 50(a)(2)(E), as amended by the preceding
provisions of this Act, is amended by striking ``or 48F(f)''
and inserting ``48F(f), or 48H(c)(5)''.
(4) The table of sections for subpart E of part IV of
subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by inserting after the item
relating to section 48G the following new item:
``Sec. 48H..Qualifying advanced battery project credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
TITLE III--CHILD AND DEPENDENT CARE
Subtitle A--Child Tax Credit
SEC. 31001. ESTABLISHMENT OF REFUNDABLE CHILD TAX CREDIT WITH MONTHLY
ADVANCE PAYMENT.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
is amended by inserting after section 24 the following new sections:
``SEC. 24A. MONTHLY CHILD TAX CREDIT.
``(a) Allowance of Credit.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year the sum of
the monthly specified child allowances determined with respect to the
taxpayer under subsection (b) for each calendar month during such
taxable year.
``(b) Monthly Specified Child Allowance.--
``(1) In general.--For purposes of this section, the term
`monthly specified child allowance' means, with respect to any
taxpayer for any calendar month, the sum of--
``(A) $300, with respect to each specified child of
such taxpayer who will (as of the close of such month)
have attained age 6, plus
``(B) 120 percent of the dollar amount in effect
for such month under subparagraph (A), with respect to
each specified child of such taxpayer who will not (as
of the close of such month) have attained age 6.
In the case of any specified child of such taxpayer who will
not (as of the close of such month) have attained the age of 1
month, subparagraph (B) shall be applied by substituting `800
percent' for `120 percent'.
``(2) Limitations based on modified adjusted gross
income.--
``(A) Initial reduction.--The monthly specified
child allowance otherwise determined under paragraph
(1) with respect to any taxpayer for any calendar month
shall be reduced (but not below zero) by \1/12\ of 5
percent of the excess (if any) of the taxpayer's
modified adjusted gross income for the applicable
taxable year over the initial threshold amount in
effect for such applicable taxable year.
``(B) Limitation on initial reduction.--The amount
of the reduction under subparagraph (A) shall not
exceed the lesser of--
``(i) the excess (if any) of--
``(I) the monthly specified child
allowance with respect to the taxpayer
for such calendar month (determined
without regard to this paragraph), over
``(II) the amount which would be
determined under subclause (I) if the
dollar amounts in effect under
subparagraphs (A) and (B) of paragraph
(1) were each equal to $166.67, or
``(ii) \1/12\ of 5 percent of the excess of
the secondary threshold amount over the initial
threshold amount.
``(C) Secondary reduction.--The monthly specified
child allowance otherwise determined under paragraph
(1) with respect to any taxpayer for such calendar
month (determined after the application of
subparagraphs (A) and (B)) shall be reduced (but not
below zero) by \1/12\ of 5 percent of the excess (if
any) of the taxpayer's modified adjusted gross income
for the applicable taxable year over the secondary
threshold amount.
``(D) Definitions related to limitations based on
modified adjusted gross income.--For purposes of this
paragraph--
``(i) Initial threshold amount.--The term
`initial threshold amount' means--
``(I) $150,000, in the case of a
joint return or surviving spouse (as
defined in section 2(a)),
``(II) \1/2\ the dollar amount in
effect under subclause (I), in the case
of a married individual filing a
separate return, and
``(III) $112,500, in any other
case.
``(ii) Secondary threshold amount.--The
term `secondary threshold amount' means--
``(I) $400,000, in the case of a
joint return or surviving spouse (as
defined in section 2(a)),
``(II) $200,000, in the case of a
married individual filing a separate
return, and
``(III) $300,000, in any other
case.
``(iii) Applicable taxable year.--The term
`applicable taxable year' means, with respect
to any taxable year for which the credit under
this section is determined--
``(I) such taxable year, or
``(II) if the taxpayer elects the
application of this subclause (at such
time and in such form and manner as the
Secretary may provide), the preceding
taxable year or the second preceding
taxable year (as specified in such
election).
``(iv) Modified adjusted gross income.--The
term `modified adjusted gross income' means
adjusted gross income increased by any amount
excluded from gross income under section 911,
931, or 933.
``(3) Inflation adjustments.--
``(A) Monthly specified child allowance.--In the
case of any month beginning after December 31, 2026,
the $300 amount in paragraph (1)(A) shall be increased
by an amount equal to--
``(i) such dollar amount, multiplied by--
``(ii) the percentage (if any) by which--
``(I) the CPI (as defined in
section 1(f)(4)) for the calendar year
preceding the calendar year in which
such month begins, exceeds
``(II) the CPI (as so defined) for
calendar year 2025.
``(B) Initial threshold amount.--In the case of any
taxable year beginning after December 31, 2025, the
dollar amounts in subclauses (I) and (III) of paragraph
(2)(D)(i) shall each be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the percentage (if any) which would
be determined under subparagraph (A)(ii) if
subclause (II) thereof were applied by
substituting `2022' for `2024'.
``(C) Rounding.--
``(i) Monthly specified child allowance.--
Any increase under subparagraph (A) which is
not a multiple of $10 shall be rounded to the
nearest multiple of $10.
``(ii) Initial threshold amount.--Any
increase under subparagraph (B) which is not a
multiple of $5,000 shall be rounded to the
nearest multiple of $5,000.
``(c) Specified Child.--For purposes of this section--
``(1) In general.--The term `specified child' means, with
respect to any taxpayer for any calendar month, an individual--
``(A) who has the same principal place of abode as
the taxpayer for more than one-half of such month,
``(B) who is younger than the taxpayer and will
not, as of the close of such month, have attained age
18,
``(C) who receives care from the taxpayer during
such month that is not compensated,
``(D) who is not the spouse of the taxpayer at any
time during such month, and
``(E) who either--
``(i) is a citizen, national, or resident
of the United States, or
``(ii) if the taxpayer is a citizen or
national of the United States, such individual
is a legally adopted individual of such
taxpayer or is lawfully placed with such
taxpayer for legal adoption by such taxpayer.
``(2) Certain individuals ineligible.--In the case of an
individual who is a specified child with respect to another
taxpayer for any calendar month, such individual shall be
treated for such calendar month as having no specified
children.
``(3) Care from the taxpayer.--
``(A) In general.--Except as otherwise provided by
the Secretary, whether any individual receives care
from the taxpayer (within the meaning of paragraph
(1)(C)) shall be determined on the basis of facts and
circumstances with respect to the following factors:
``(i) The supervision provided by the
taxpayer regarding the daily activities and
needs of the individual.
``(ii) The maintenance by the taxpayer of a
secure environment at which the individual
resides.
``(iii) The provision or arrangement by the
taxpayer of, and transportation by the taxpayer
to, medical care at regular intervals and as
required for the individual.
``(iv) The involvement by the taxpayer in,
and financial and other support by the taxpayer
for, educational or similar activities of the
individual.
``(v) Any other factor that the Secretary
determines to be appropriate to determine
whether the individual receives care from the
taxpayer.
``(B) Determination of whether care is
compensated.--For purposes of determining if care is
compensated within the meaning of paragraph (1)(C),
compensation from the Federal Government, a State or
local government, a Tribal government, or any
possession of the United States shall not be taken into
account.
``(4) Application of tie-breaker rules.--
``(A) In general.--Except as provided in
subparagraph (D), if any individual would (but for this
paragraph) be a specified child of 2 or more taxpayers
for any month, such individual shall be treated as the
specified child only of the taxpayer who is--
``(i) the parent of the individual (or, if
such individual would (but for this paragraph)
be a specified child of 2 or more parents of
the individual for such month, the parent of
the individual determined under subparagraph
(B)),
``(ii) if the individual is not a specified
child of any parent of the individual
(determined without regard to this paragraph),
the specified relative of the individual with
the highest adjusted gross income for the
taxable year which includes such month, or
``(iii) if the individual is neither a
specified child of any parent of the individual
nor a specified child of any specified relative
of the individual (in both cases determined
without regard to this paragraph), the taxpayer
with the highest adjusted gross income for the
taxable year which includes such month.
``(B) Tie-breaker among parents.--If any individual
would (but for this paragraph) be the specified child
of 2 or more parents of the individual for any month,
such child shall be treated only as the specified child
of--
``(i) the parent with whom the child
resided for the longest period of time during
such month, or
``(ii) if the child resides with both
parents for the same amount of time during such
month, the parent with the highest adjusted
gross income for the taxable year which
includes such month.
``(C) Specified relative.--For purposes of this
paragraph, the term `specified relative' means an
individual who is--
``(i) an ancestor of a parent of the
specified child,
``(ii) a brother or sister of a parent of
the specified child, or
``(iii) a brother, sister, stepbrother, or
stepsister of the specified child.
``(D) Certain parents or specified relatives not
taken into account.--This paragraph shall be applied
without regard to any parent or specified relative of
an individual for any month if--
``(i) such parent or specified relative
elects to have such individual not be treated
as a specified child of such parent or
specified relative for such month,
``(ii) in the case of a parent of such
individual, the adjusted gross income of the
taxpayer (with respect to whom such individual
would be treated as a specified child after
application of this subparagraph) for the
taxable year which includes such month is
higher than the highest adjusted gross income
of any parent of the individual for any taxable
year which includes such month (determined
without regard to any parent with respect to
whom such individual is not a specified child,
determined without regard to subparagraphs (A)
and (B) and after application of this
subparagraph), and
``(iii) in the case of a specified relative
of such individual, the adjusted gross income
of the taxpayer (with respect to whom such
individual would be treated as a specified
child after application of this subparagraph)
for the taxable year which includes such month
is higher than the highest adjusted gross
income of any parent and any specified relative
of the individual for any taxable year which
includes such month (determined without regard
to any parent and any specified relative with
respect to whom such individual is not a
specified child, determined without regard to
subparagraphs (A) and (B) and after application
of this subparagraph).
``(E) Treatment of joint returns.--For purposes of
this paragraph, with respect to any month, the adjusted
gross income of each person who files a joint return
for the taxable year which includes such month is the
total adjusted gross income shown on the joint return
for the taxable year.
``(F) Parent.--Except as otherwise provided by the
Secretary, the term `parent' shall have the same
meaning as when used in section 152(c)(4).
``(5) Treatment of temporary absences.--Except as provided
in regulations or other guidance issued by the Secretary, for
purposes of this subsection--
``(A) In general.--In the case of any individual's
temporary absence from such individual's principal
place of abode, each day composing the temporary
absence shall--
``(i) be treated as a day at such
individual's principal place of abode,
``(ii) be treated as satisfying the care
requirement described in paragraph (1)(C) for
each day described in clause (i), and
``(iii) not be treated as a day at any
other location.
``(B) Temporary absence.--For purposes of
subparagraph (A), an absence shall be treated as
temporary if--
``(i) the individual would have resided at
the place of abode but for the absence, and
``(ii) under the facts and circumstances,
it is reasonable to assume that the individual
will return to reside at the place of abode.
``(6) Special rule for divorced parents, etc.--Rules
similar to the rules section 152(e) shall apply for purposes of
this subsection.
``(7) Eligibility determined on basis of presumptive
eligibility.--
``(A) In general.--If a period of presumptive
eligibility is established under section 7527A(c) with
respect to any taxpayer and child--
``(i) such child shall be treated as the
specified child of such taxpayer for any month
in such period of presumptive eligibility, and
``(ii) such child shall not be treated as
the specified child of any other taxpayer with
respect to whom a period of presumptive
eligibility has not been established for any
such month.
``(B) Ability of credit claimants to establish
presumptive eligibility.--Nothing in section 7527A(c)
shall be interpreted to preclude a taxpayer from
establishing a period of presumptive eligibility
(including any period described in subparagraph (D)
with respect to which payment could be made) with
respect to any specified child for purposes of this
section solely because such taxpayer affirmatively
elects not to receive monthly advance child payments
under section 7527A.
``(C) Exception for income-based tie-breaker
rules.--If a period of presumptive eligibility is
established under section 7527A(c) for any individual
with respect to any taxpayer and such individual is not
the specified child of such taxpayer for any month in
such period by reason of such taxpayer failing to be
described in clause (i), (ii), or (iii) of paragraph
(4)(A) for the taxable year which includes such month,
subparagraph (A) shall not apply with respect to such
month.
``(D) Treatment of certain retroactive payments.--
If any payment is made under subparagraph (A) or (B) of
section 7527A(f)(3) or paragraph (1) or (2) of section
7527A(g), with respect to any taxpayer and child for
any period, such period shall be treated as a period of
presumptive eligibility established under section
7527A(c) with respect to such taxpayer and child for
purposes of applying subparagraph (A).
``(E) Fraud and intentional disregard of rules or
regulations.--If the Secretary determines that the
taxpayer committed fraud or intentionally disregarded
rules or regulations in establishing or maintaining any
period of presumptive eligibility, the months with
respect to which such fraud or intentional disregard
relates shall not be treated as a period of presumptive
eligibility for purposes of subparagraph (A).
``(d) Credit Refundable.--If the taxpayer (in the case of a joint
return, either spouse) has a principal place of abode (determined as
provided in section 32) in the United States or Puerto Rico for more
than one-half of any calendar month during the taxable year, so much of
the credit otherwise allowed under subsection (a) as is attributable to
monthly specified child allowances with respect to any such calendar
month shall be allowed under subpart C (and not allowed under this
subpart).
``(e) Identification Requirements.--
``(1) Qualifying child identification requirement.--No
credit shall be allowed under this section to a taxpayer with
respect to any qualifying child unless the taxpayer includes
the name and taxpayer identification number of such qualifying
child on the return of tax for the taxable year and such
taxpayer identification number was issued on or before the due
date for filing such return.
``(2) Taxpayer identification requirement.--No credit shall
be allowed under this section if the taxpayer identification
number of the taxpayer was issued after the due date for filing
the return for the taxable year.
``(f) Restrictions on Taxpayers Who Improperly Claimed Credit or
Improperly Received Monthly Advance Child Payment.--
``(1) Taxpayers making prior fraudulent or reckless
claims.--
``(A) In general.--No credit shall be allowed under
this section for any taxable year (and no payment shall
be made under section 7527A for any month) in the
disallowance period.
``(B) Disallowance period.--For purposes of
subparagraph (A), the disallowance period is--
``(i) the period of 120 calendar months
after the most recent calendar month for which
there was a final determination that the
taxpayer's claim of credit under this section
or section 24 (or payment received under
section 7527A) was due to fraud, and
``(ii) the period of 24 calendar months
after the most recent calendar month for which
there was a final determination that the
taxpayer's claim of credit under this section
or section 24 (or payment received under
section 7527A) was due to reckless or
intentional disregard of rules and regulations
(but not due to fraud).
``(2) Taxpayers making improper prior claims.--In the case
of a taxpayer who is denied credit under this section or
section 24 for any taxable year as a result of the deficiency
procedures under subchapter B of chapter 63, no credit shall be
allowed under this section for any subsequent taxable year (and
no payment shall be made under section 7527A for any subsequent
month) unless the taxpayer provides such information as the
Secretary may require to demonstrate eligibility for such
credit.
``(3) Coordination with possessions of the united states.--
For purposes of this subsection, a taxpayer's claim of credit
under this section or section 24 (or payment received under
section 7527A) includes a claim of credit under this section or
section 24 of the income tax law of any jurisdiction other than
the United States (or similar payment received under section
7527A of such income tax law), and a claim made or a payment
received from American Samoa pursuant to a plan described in
subsection (h)(3)(B) or section 24(k)(3)(B).
``(g) Reconciliation of Credit and Monthly Advance Child
Payments.--
``(1) In general.--The amount otherwise determined under
subsection (a) with respect to any taxpayer for any taxable
year shall be reduced (but not below zero) by the aggregate
amount of payments made under section 7527A to such taxpayer
for one or more calendar months in such taxable year. Any
failure to so reduce the credit shall be treated as arising out
of a mathematical or clerical error and assessed according to
section 6213(b)(1).
``(2) Increase in tax equal to excess advance payments in
certain circumstances.--If the aggregate amount of payments
made to the taxpayer under section 7527A for one or more
calendar months in such taxable year exceeds the amount allowed
as a credit under subpart C by reason of this section with
respect to such taxpayer for such taxable year (without regard
to paragraph (1) of this subsection), the tax imposed by this
chapter for such taxable year shall be increased by so much of
such excess as is attributable to one or more of the following:
``(A) Fraud, or reckless or intentional disregard
of rules and regulations, by the taxpayer.
``(B) Changes in the taxpayer's modified adjusted
gross income or filing status that affect the
application of the limitation imposed by subsection
(b)(2).
``(C) Payments under section 7527A which were made
for months which were not part of a period of
presumptive eligibility.
``(D) A failure to be the taxpayer described in
clause (i), (ii), or (iii) of subsection (c)(4)(A).
``(E) A failure to satisfy the requirements of
subsection (d).
``(F) A failure to satisfy the requirements of
paragraphs (1) or (2) of subsection (e), except that a
failure to satisfy the requirements of subsection
(e)(1) shall not be taken into account under this
subparagraph if the taxpayer demonstrates to the
satisfaction of the Secretary that it is reasonable to
expect that the qualifying child will be issued a
taxpayer identification number and that the delay in
such issuance was due to reasonable cause and not
willful neglect.
``(G) Such other circumstances as the Secretary
identifies for purposes of this subparagraph to
facilitate the administration and enforcement by the
Secretary of section 7527A, to minimize the amount of
advance payments made under section 7527A to ineligible
individuals, and to prevent abuse.
``(H) Payments subject to treatment as excess
advance payments after notice under section
7527A(j)(2).
``(3) Joint returns.--Except as otherwise provided by the
Secretary, in the case of an advance payment made under section
7527A with respect to a joint return, half of such payment
shall be treated as having been made to each individual filing
such return.
``(4) Coordination with possessions of the united states.--
For purposes of this subsection, payments made under section
7527A include payments made by any jurisdiction other than the
United States under section 7527A of the income tax law of such
jurisdiction, and advance payments made by American Samoa
pursuant to a plan described in subsection (h)(3)(B). Any
increase in tax imposed on a taxpayer by reason of paragraph
(2) of the income tax law of a jurisdiction other than the
United States shall be considered to reduce the aggregate
amount of payments made to such taxpayer by such jurisdiction.
In carrying out this section, the Secretary shall coordinate
with each possession of the United States to prevent any
application of this paragraph that is inconsistent with the
purposes of this subsection.
``(h) Application of Credit in Possessions.--
``(1) Mirror code possessions.--
``(A) In general.--The Secretary shall pay to each
possession of the United States with a mirror code tax
system amounts equal to the loss (if any) to that
possession by reason of the application of this section
(determined without regard to this subsection) with
respect to taxable years beginning in calendar years
after 2025. Such amounts shall be determined by the
Secretary based on information provided by the
government of the respective possession.
``(B) Coordination with credit allowed against
united states income taxes.--No credit shall be allowed
under this section for any taxable year to any
individual to whom a credit is allowable against taxes
imposed by a possession of the United States with a
mirror code tax system by reason of the application of
this section in such possession for such taxable year.
``(C) Mirror code tax system.--For purposes of this
paragraph, the term `mirror code tax system' means,
with respect to any possession of the United States,
the income tax system of such possession if the income
tax liability of the residents of such possession under
such system is determined by reference to the income
tax laws of the United States as if such possession
were the United States.
``(2) Cross references related to application of credit to
residents of puerto rico.--
``(A) For application of refundable credit to
residents of Puerto Rico, see subsection (d).
``(B) For application of advance payment to
residents of Puerto Rico, see section 7527A(b)(5).
``(3) American samoa.--
``(A) In general.--The Secretary shall pay to
American Samoa amounts estimated by the Secretary as
being equal to the aggregate benefits that would have
been provided to residents of American Samoa by reason
of the application of this section for taxable years
beginning in calendar years after 2025 if the
provisions of this section had been in effect in
American Samoa (applied as if American Samoa were the
United States and without regard to the application of
this section to residents of Puerto Rico under
subsection (d)).
``(B) Distribution requirement.--Subparagraph (A)
shall not apply unless American Samoa has a plan, which
has been approved by the Secretary, under which
American Samoa will promptly distribute such payments
to its residents.
``(C) Coordination with credit allowed against
united states income taxes.--
``(i) In general.--In the case of a taxable
year with respect to which a plan is approved
under subparagraph (B), this section (other
than this subsection) shall not apply to any
individual eligible for a distribution under
such plan.
``(ii) Application of section in event of
absence of approved plan.--In the case of a
taxable year with respect to which a plan is
not approved under subparagraph (B), subsection
(d) shall be applied by substituting `, Puerto
Rico, or American Samoa' for `or Puerto Rico'.
``(4) Treatment of payments.--For purposes of section 1324
of title 31, United States Code, the payments under this
subsection shall be treated in the same manner as a refund due
from a credit provision referred to in subsection (b)(2) of
such section.
``(i) Regulations.--The Secretary shall issue such regulations or
other guidance as the Secretary determines necessary or appropriate to
carry out the purposes of this section, including regulations or other
guidance--
``(1) for determining whether an individual receives care
from a taxpayer for purposes of subsection (c)(1)(C), and
``(2) to coordinate or modify the application of this
section, section 24, and section 7527A in the case of any
taxpayer--
``(A) whose taxable year is other than a calendar
year,
``(B) whose filing status for a taxable year is
different from the status used for determining one or
more monthly payments under section 7527A during such
taxable year, or
``(C) whose principal place of abode for any month
is different from the principal place of abode used for
determining the monthly payment under section 7527A for
such month.
``SEC. 24B. CREDIT FOR CERTAIN OTHER DEPENDENTS.
``(a) In General.--There shall be allowed as a credit against the
tax imposed by this chapter for the taxable year an amount equal to
$500 with respect to each specified dependent of such taxpayer for such
taxable year.
``(b) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--The amount of the credit allowable under
subsection (a) shall be reduced (but not below zero) by $50 for
each $1,000 (or fraction thereof) by which the taxpayer's
modified adjusted gross income exceeds the threshold amount.
``(2) Threshold amount.--For purposes of this subsection,
the term `threshold amount' means--
``(A) $400,000, in the case of a joint return or
surviving spouse (as defined in section 2(a)),
``(B) $200,000, in the case of a married individual
filing a separate return, and
``(C) $300,000, in any other case.
``(3) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means
adjusted gross income increased by any amount excluded from
gross income under section 911, 931, or 933.
``(c) Specified Dependent.--For purposes of this section, the term
`specified dependent' means, with respect to any taxpayer for any
taxable year, any dependent of such taxpayer (as defined in section
152) for such taxable year unless such dependent--
``(1) is a specified child of the taxpayer, or any other
taxpayer, for any month during such taxable year, or
``(2) would not be a dependent if subparagraph (A) of
section 152(b)(3) were applied without regard to all that
follows `resident of the United States'.
``(d) Special Rule for Taxable Year Child Attains Age 18.--If any
dependent of the taxpayer attains age 18 during the taxable year--
``(1) whether such dependent is a specified dependent shall
be determined without regard to paragraph (1) of subsection
(c), and
``(2) with respect to such dependent, subsection (a) shall
be applied by substituting an amount for `$500' that bears the
same ratio to $500 as--
``(A) the excess of--
``(i) 12, over
``(ii) the number of months during such
taxable year with respect to which such
dependent is a specified child of the taxpayer
or any other taxpayer, bears to
``(B) 12.
``(e) Identification Requirements.--Rules similar to the rules of
section 24A(e) shall apply for purposes of this section.
``(f) Taxable Year Must Be Full Taxable Year.--Except in the case
of a taxable year closed by reason of the death of the taxpayer, no
credit shall be allowable under this section in the case of a taxable
year covering a period of less than 12 months.
``(g) Regulations.--The Secretary shall issue such regulations or
other guidance as the Secretary determines necessary or appropriate to
carry out the purposes of this section.''.
(b) Monthly Payment of Child Tax Credit.--Section 7527A is amended
to read as follows:
``SEC. 7527A. MONTHLY PAYMENTS OF CHILD TAX CREDIT.
``(a) In General.--The Secretary shall pay to each taxpayer, during
each calendar month which is during a period of presumptive eligibility
with respect to the taxpayer and any child, an amount equal to the
monthly advance child payment determined with respect to such taxpayer
for such month.
``(b) Monthly Advance Child Payment.--The term `monthly advance
child payment' means, with respect to any taxpayer for any calendar
month, the amount (if any) which is estimated by the Secretary as being
equal to the monthly specified child allowance which would be
determined under section 24A(b) with respect to such taxpayer for such
calendar month if--
``(1) the only specified children of such taxpayer for such
calendar month are the specified children of such taxpayer for
the reference month (determined without regard to section
24A(c)(7)),
``(2) the ages of such children (and the status of such
children as specified children) are determined for such
calendar month by taking into account the passage of time since
such reference month,
``(3) each child is only taken into account as a specified
child for such calendar month if such calendar month is during
a period of presumptive eligibility with respect to the
taxpayer and such child,
``(4) the limitations of section 24A(b)(2) were applied
with respect to the reference taxable year rather than with
respect to the applicable taxable year, and
``(5) no monthly specified child allowance were determined
with respect to such taxpayer for such calendar month unless
the taxpayer (in the case of a joint return, either spouse) has
a principal place of abode (determined as provided in section
32) in the United States or Puerto Rico for more than one-half
of the reference month.
``(c) Period of Presumptive Eligibility.--
``(1) In general.--For purposes of this section, the term
`period of presumptive eligibility' means, with respect to any
taxpayer and any child, the period--
``(A) beginning with the calendar month following
the calendar month during which the taxpayer provides
the Secretary with sufficient information for the
Secretary to--
``(i) determine that such child was a
specified child of the taxpayer for the
reference month (determined without regard to
section 24A(c)(7)), and
``(ii) estimate the monthly advance child
payment for such calendar month, and
``(B) ending with the earliest of--
``(i) the month beginning immediately after
the month on which the Secretary sends the
taxpayer a written notice that the taxpayer's
period of presumptive eligibility with respect
to such child is being terminated by reason of
information known to the Secretary (including a
failure to provide annual information under
paragraph (2)) which casts doubt on such
taxpayer's status as being allowed the monthly
specified child allowance under section 24A for
such child (determined without regard to
section 24A(c)(7)) with respect to one or more
months following the reference month,
``(ii) any month with respect to which the
taxpayer notifies the Secretary that such
taxpayer is not allowed a monthly specified
child allowance for such month under section
24A(b) (determined without regard to section
24A(c)(7)), and
``(iii) the month beginning immediately
before the first month of a new period of
presumptive eligibility with respect to such
taxpayer and such child which is established on
the basis of a reference month more recent than
the reference month with respect to which such
prior period was established (including on the
basis of an annual renewal described in
paragraph (2)).
``(2) Annual renewal.--The Secretary shall terminate a
taxpayer's period of presumptive eligibility with respect to
any child under paragraph (1)(B)(i) unless such taxpayer
provides information sufficient to establish a new period of
presumptive eligibility with respect to such child (as
described in paragraph (1)(B)(ii)) on an annual basis.
``(3) Automatic eligibility for birth of child.--The
Secretary shall issue regulations or other guidance to
establish procedures pursuant to which, to the maximum extent
administratively practicable--
``(A) a parent of a child born during a calendar
month shall be treated as automatically establishing a
period of presumptive eligibility with respect to such
child,
``(B) the month for which such period begins, and
the month by which the first annual renewal described
in paragraph (2) must be completed, are determined, and
``(C) if the first monthly advance child payment
with respect to such child is made after the calendar
month in which such child is born, such payment is
increased to properly take into account the months in
such period of presumptive eligibility which precede
the month in which such payment is made.
``(4) Presumptive eligibility based on certain government
programs.--The Secretary shall issue regulations or other
guidance to establish procedures under which--
``(A) based on information provided to the
Secretary by one or more government entities, a parent
or specified relative of a child is treated as
automatically establishing a period of presumptive
eligibility with respect to such child, and
``(B) the month for which such period begins, the
month by which the first annual renewal described in
paragraph (2) must be completed, and any additional
circumstances under which such period will terminate,
are determined.
``(5) Taxpayer responsibility to notify secretary.--In the
event that any taxpayer is not allowed a monthly specified
child allowance under section 24A(b) (determined without regard
to section 24A(c)(7)) for any month in a period of presumptive
eligibility with respect to such taxpayer, such taxpayer shall
notify the Secretary under paragraph (1)(B)(ii) at such time
and in such manner as the Secretary may provide.
``(6) Transition rule.--With respect periods of presumptive
eligibility beginning during the first 6 months to which this
section applies, the Secretary shall issue regulations or other
guidance to establish procedures pursuant to which--
``(A) based on information known to the Secretary
including returns of tax for either of the last 2
taxable years ending before such month, a parent or
specified relative of a child is treated as
automatically establishing a period of presumptive
eligibility with respect to such child, and
``(B) the month for which such period begins, the
month by which the first annual renewal described in
paragraph (2) must be completed, and any additional
circumstances under which such period will terminate,
are determined.
``(d) Determination of Reference Month and Reference Taxable
Year.--For purposes of this section--
``(1) Reference month.--The term `reference month' means,
with respect to any calendar month in a period of presumptive
eligibility with respect to a taxpayer, the most recent of--
``(A) in the case of a taxpayer who filed a return
of tax for the last taxable year ending before such
calendar month, the last month of such taxable year,
``(B) in the case of a taxpayer who filed a return
of tax for the taxable year preceding the taxable year
described in subparagraph (A), the last month of such
preceding taxable year, and
``(C) in the case of a taxpayer who otherwise
provides the information referred to in subsection
(c)(1)(A), the month with respect to which such
information is provided.
``(2) Reference taxable year.--The term `reference taxable
year' means, with respect to any calendar month in a period of
presumptive eligibility with respect to a taxpayer--
``(A) if the reference month with respect to such
calendar month is determined under subparagraph (A) or
(B) of paragraph (1), the taxable year referred to in
such subparagraph, respectively, and
``(B) if the reference month with respect to such
calendar month is determined under subparagraph (1)(C),
the last taxable year ending before such reference
month.
``(e) Methods of Providing Information To Establish a Period of
Presumptive Eligibility.--
``(1) In general.--The Secretary shall ensure the
information described in subsection (c)(1)(A) may be provided
on the return of tax for the taxable year ending before the
calendar year which includes the month for which such period
would begin, through the on-line portal described in paragraph
(2), or in such other manner as the Secretary may provide.
``(2) On-line information portal.--The Secretary shall
establish an on-line portal (available in multiple languages)
which allows taxpayers to--
``(A) subject to such restrictions as the Secretary
may provide, elect to begin or cease receiving payments
under this section, and
``(B) provide the information described in
subsection (c)(1)(A).
``(f) Resolution of Competing Claims of Presumptive Eligibility
With Respect to Same Child.--
``(1) In general.--If there is a period of presumptive
eligibility with respect to any taxpayer and child (hereafter
referred to as the `original claim'), a period of presumptive
eligibility would (without regard to this subsection) be
established with respect another taxpayer and such child
(hereafter referred to as the `challenge claim'), and the
period of such challenge claim would overlap with the period of
such original claim--
``(A) such challenge claim shall not be taken into
account under this section unless the reference month
with respect to which the challenge claim would be
established is at least as recent as the reference
month with respect to which the original claim is
established,
``(B) such challenge claim shall not begin before
the original claim is terminated, and
``(C) the Secretary shall establish procedures
under which the Secretary expeditiously adjudicates
such claims on the basis of the most recent feasible
reference month.
``(2) Provisions related to adjudication.--
``(A) Challenge claim must relate to at least 3
months prospectively.--The procedures established under
paragraph (1)(C) shall require that the taxpayer
establishing the challenge claim express a reasonable
expectation and intent that such taxpayer would be
allowed a monthly specified child allowance under
section 24A(b) (determined without regard to section
24A(c)(7)) for at least the first 2 months following
the reference month referred to in paragraph (1)(C).
``(B) Expedited process; appeals.--The procedures
established under paragraph (1)(C) shall include--
``(i) an expedited process for taxpayers
who meet such requirements as the Secretary may
establish for such expedited process, and
``(ii) procedures for adjudicating an
appeal of an adverse decision.
``(C) Information receipt and coordination.--For
purposes of obtaining information relevant to any
adjudication under this paragraph, the Secretary may
enter into agreements to receive information from, and
otherwise coordinate with--
``(i) Federal agencies (including the
Social Security Administration and the
Department of Agriculture),
``(ii) any State, local government, Tribal
government, or possession of the United States,
and
``(iii) any other individual or entity that
the Secretary determines to be appropriate for
such purposes.
``(D) Adjudication not treated as assessment.--Any
adjudication under this paragraph shall not be treated
as an assessment described in section 6201.
``(E) Adjudication not treated as inspection of
taxpayer's books of account.--The inspection of a
taxpayer's books of account in connection with any
adjudication under this paragraph shall not be treated
as an examination or inspection of a taxpayer's books
of account for purposes of section 7605(b).
``(3) Retroactive payments related to adjudication.--
``(A) Delay in establishment of challenge claim.--
If the challenge claim is established pursuant to the
procedures established under paragraph (1)(C), the
Secretary shall make a one-time payment to the taxpayer
with respect to such claim equal to the aggregate
amount of increases in the monthly advance child
payments which would have been made to such taxpayer if
such challenge claim had been allowed to take effect
without regard to this subsection. Any payment under
this subparagraph shall be in addition to any payment
made under subsection (g).
``(B) Termination and reinstatement of original
claim.--If, pursuant to the procedures established
under paragraph (1)(C), the original claim is
terminated under subsection (c)(1)(B)(i) and a new
period of presumptive eligibility is subsequently
established pursuant to such procedures with respect
the same taxpayer and child as for such original claim,
the Secretary shall make a one-time payment to the
taxpayer with respect to such claim equal to the
aggregate amount of increases in the monthly advance
child payments which would have been made to such
taxpayer if such original claim had never been
terminated.
``(g) Rules Related to Grace Periods and Hardships.--
``(1) Automatic grace period.--
``(A) In general.--If a taxpayer establishes a
period of presumptive eligibility with respect to any
child, elects the application of this paragraph, and
demonstrates to the satisfaction of the Secretary that
such taxpayer would be allowed a monthly specified
child allowance under section 24A(b) (determined
without regard to section 24A(c)(7)) for one or more of
the 3 months immediately preceding the first month of
such period, the Secretary shall make a one-time
payment to the taxpayer equal to the aggregate amount
of increases in the monthly advance child payments
which would have been made to such taxpayer if such
months were part of such period. The preceding sentence
shall not apply to the extent that the Secretary
determines that the failure to establish the period of
presumptive eligibility with respect to such child for
any such month was due to fraud or reckless or
intentional disregard of rules and regulations.
``(B) Limitation.--Subparagraph (A) shall not apply
with respect to any taxpayer more than once during any
36-month period.
``(2) Hardship.--If a taxpayer establishes a period of
presumptive eligibility with respect to any child, elects the
application of this paragraph (and does not elect the
application of paragraph (1) with respect to the establishment
of such period), demonstrates to the satisfaction of the
Secretary that such taxpayer would be allowed a monthly
specified child allowance under section 24A(b) (determined
without regard to section 24A(c)(7)) for one or more of the 6
months immediately preceding the first month of such period,
and the Secretary determines that the failure to establish the
period of presumptive eligibility with respect to such child
for such months was due to domestic violence, serious illness,
natural disaster, or any other hardship, the Secretary shall
make a one-time payment to the taxpayer equal to the aggregate
amount of increases in the monthly advance child payments which
would have been made to such taxpayer if such months were part
of such period.
``(3) Coordination with retroactive payment for delay in
establishment of challenge claim.--For purposes of applying
paragraph (1) or (2) with respect to any challenge claim to
which subsection (f)(3)(A) applies, the period of presumptive
eligibility shall be treated as including the period for which
payment is made under such subsection.
``(h) Provisions Related to Form, Manner, and Treatment of
Payments.--
``(1) Application of electronic funds payment
requirement.--The payments made by the Secretary under
subsection (a) shall be made by electronic funds transfer to
the same extent and in the same manner as if such payments were
Federal payments not made under this title.
``(2) Delivery of payments.--Notwithstanding any other
provision of law, the Secretary may certify and disburse
refunds payable under this section electronically to--
``(A) any account to which the payee authorized, on
or after January 1, 2024, the delivery of a refund of
taxes under this title or of a Federal payment (as
defined in section 3332 of title 31, United States
Code),
``(B) any account belonging to a payee from which
that individual, on or after January 1, 2024, made a
payment of taxes under this title, or
``(C) any Treasury-sponsored account (as defined in
section 208.2 of title 31, Code of Federal
Regulations).
``(3) Waiver of certain rules.--Notwithstanding section
3325 of title 31, United States Code, or any other provision of
law, with respect to any payment of a refund under this
section, a disbursing official in the executive branch of the
United States Government may modify payment information
received from an officer or employee described in section
3325(a)(1)(B) of such title for the purpose of facilitating the
accurate and efficient delivery of such payment. Except in
cases of fraud or reckless neglect, no liability under sections
3325, 3527, 3528, or 3529 of title 31, United States Code,
shall be imposed with respect to payments made under this
paragraph.
``(4) Exception from reduction or offset.--Any applicable
payment (as defined in paragraph (5)(E)(iii)) shall not be--
``(A) subject to reduction or offset pursuant to
section 3716 or 3720A of title 31, United States Code,
``(B) subject to reduction or offset pursuant to
subsection (c), (d), (e), or (f) of section 6402, or
``(C) reduced or offset by other assessed Federal
taxes that would otherwise be subject to levy or
collection.
``(5) Assignment of benefits.--
``(A) In general.--The right of any person to any
applicable payment shall not be transferable or
assignable, at law or in equity, and no applicable
payment shall be subject to, execution, levy,
attachment, garnishment, or other legal process, or the
operation of any bankruptcy or insolvency law.
``(B) Encoding of payments.--In the case of an
applicable payment described in subparagraph
(E)(iii)(I) that is paid electronically by direct
deposit through the Automated Clearing House (ACH)
network, the Secretary of the Treasury (or the
Secretary's delegate) shall--
``(i) issue the payment using a unique
identifier that is reasonably sufficient to
allow a financial institution to identify the
payment as an applicable payment, and
``(ii) further encode the payment pursuant
to the same specifications as required for a
benefit payment defined in section 212.3 of
title 31, Code of Federal Regulations.
``(C) Garnishment.--
``(i) Encoded payments.--In the case of a
garnishment order that applies to an account
that has received an applicable payment that is
encoded as provided in subparagraph (B), a
financial institution shall follow the
requirements and procedures set forth in part
212 of title 31, Code of Federal Regulations,
except--
``(I) notwithstanding section 212.4
of title 31, Code of Federal
Regulations (and except as provided in
subclause (II)), a financial
institution shall not fail to follow
the procedures of sections 212.5 and
212.6 of such title with respect to a
garnishment order merely because such
order has attached, or includes, a
notice of right to garnish Federal
benefits issued by a State child
support enforcement agency, and
``(II) a financial institution
shall not, with regard to any
applicable payment, be required to
provide the notice referenced in
sections 212.6 and 212.7 of title 31,
Code of Federal Regulations.
``(ii) Other payments.--In the case of a
garnishment order (other than an order that has
been served by the United States) that has been
received by a financial institution and that
applies to an account into which an applicable
payment that has not been encoded as provided
in subparagraph (B) has been deposited
electronically on any date during the lookback
period or into which an applicable payment that
has been deposited by check on any date in the
lookback period, the financial institution,
upon the request of the account holder, shall
treat the amount of the funds in the account at
the time of the request, up to the amount of
the applicable payment (in addition to any
amounts otherwise protected under part 212 of
title 31, Code of Federal Regulations), as
exempt from a garnishment order without
requiring the consent of the party serving the
garnishment order or the judgment creditor.
``(iii) Liability.--A financial institution
that acts in good faith in reliance on clauses
(i) or (ii) shall not be subject to liability
or regulatory action under any Federal or State
law, regulation, court or other order, or
regulatory interpretation for actions
concerning any applicable payments.
``(D) No reclamation rights.--This paragraph shall
not alter the status of applicable payments as tax
refunds or other nonbenefit payments for purpose of any
reclamation rights of the Department of the Treasury or
the Internal Revenue Service as per part 210 of title
31, Code of Federal Regulations.
``(E) Definitions.--For purposes of this
paragraph--
``(i) Account holder.--The term `account
holder' means a natural person whose name
appears in a financial institution's records as
the direct or beneficial owner of an account.
``(ii) Account review.--The term `account
review' means the process of examining deposits
in an account to determine if an applicable
payment has been deposited into the account
during the lookback period. The financial
institution shall perform the account review
following the procedures outlined in section
212.5 of title 31, Code of Federal Regulations
and in accordance with the requirements of
section 212.6 of title 31, Code of Federal
Regulations.
``(iii) Applicable payment.--The term
`applicable payment' means--
``(I) any payment made to an
individual under this section (other
than any payment made pursuant to
paragraph (6)),
``(II) any advance payment made by
a possession of the United States with
a mirror code tax system (as defined in
section 24(h)) pursuant to an election
under paragraph (6)(B) which
corresponds to a payment described in
subclause (I), and
``(III) any advance payment made by
American Samoa pursuant to a program
for making such payments which is
described in paragraph (6)(C)(ii).
``(iv) Garnishment.--The term `garnishment'
means execution, levy, attachment, garnishment,
or other legal process.
``(v) Garnishment order.--The term
`garnishment order' means a writ, order,
notice, summons, judgment, levy, or similar
written instruction issued by a court, a State
or State agency, a municipality or municipal
corporation, or a State child support
enforcement agency, including a lien arising by
operation of law for overdue child support or
an order to freeze the assets in an account, to
effect a garnishment against a debtor.
``(vi) Lookback period.--The term `lookback
period' means the two-month period that begins
on the date preceding the date of account
review and ends on the corresponding date of
the month two months earlier, or on the last
date of the month two months earlier if the
corresponding date does not exist.
``(6) Application of advance payments in the possessions of
the united states.--
``(A) Puerto rico.--
``(i) For application of child tax credit
to residents of Puerto Rico, see section
24A(d).
``(ii) For application of monthly advance
child payments to residents of Puerto Rico, see
subsection (b)(4).
``(B) Mirror code possessions.--In the case of any
possession of the United States with a mirror code tax
system (as defined in section 24A(h)(1)(C)), this
section shall not be treated as part of the income tax
laws of the United States for purposes of determining
the income tax law of such possession unless such
possession elects to have this section be so treated.
``(C) Administrative expenses of advance
payments.--
``(i) Mirror code possessions.--In the case
of any possession described in subparagraph (B)
which makes the election described in such
subparagraph, the amount otherwise paid by the
Secretary to such possession under section
24A(h)(1)(A) with respect to taxable years
beginning in 2025, 2026, and 2027 shall each be
increased by $300,000 if such possession has a
plan, which has been approved by the Secretary,
for making monthly advance child payments
consistent with such election.
``(ii) American samoa.--The amount
otherwise paid by the Secretary to American
Samoa under subparagraph (A) of section
24A(h)(3) with respect to taxable years
beginning in 2024, 2025, and 2026 shall each be
increased by $300,000 if the plan described in
subparagraph (B) of such section includes a
program, which has been approved by the
Secretary, for making monthly advance child
payments under rules similar to the rules of
this section.
``(iii) Timing of payment.--The Secretary
may pay, upon the request of the possession of
the United States to which the payment is to be
made, the amount of the increase determined
under clause (i) or (ii), respectively,
immediately upon approval of the plan with
respect to which such payment relates.
``(i) Application of Certain Definitions and Rules Applicable to
Child Tax Credit.--
``(1) Definitions.--Except as otherwise provided in this
section, terms used in this section which are also used in
section 24A shall have the same respective meanings as when
used in section 24A.
``(2) Treatment of certain deaths.--A child shall not be
taken into account in determining the monthly advance child
payment for any calendar month if the death of such child
before the end of such month is known to the Secretary as of
date on which the Secretary estimates such payment.
``(3) Identification requirements.--Rules similar to the
rules which apply under section 24A(e) shall apply for purposes
of this section except that such rules shall apply with respect
to the return of tax for the reference taxable year or, in the
case of information provided through the on-line portal or
otherwise, with respect to the information so provided.
``(4) Restrictions on taxpayers who improperly claimed
credit or received monthly advance child payments.--For
restrictions on taxpayers who improperly claimed credit or
received monthly advance child payments, see section 24A(f).
``(j) Notice of Payments.--
``(1) In general.--Not later than January 31 of the
calendar year following any calendar year during which the
Secretary makes one or more payments to any taxpayer under this
section, the Secretary shall provide such taxpayer with a
written notice which includes--
``(A) the taxpayer's taxpayer identity (as defined
in section 6103(b)(6)),
``(B) the aggregate amount of such payments made to
such taxpayer during such calendar year, and
``(C) such other information as the Secretary
determines appropriate.
``(2) Certain payments subject to treatment as excess
advance payments.--In the case of any payments made to a
taxpayer which the Secretary has determined are subject to
treatment as excess advance payments, the notice provided under
paragraph (1) to such taxpayer shall include the amount of such
payments.
``(k) Notification of Certain Events.--With respect to any taxpayer
receiving monthly advance child payments under this section with
respect to any specified child, the Secretary shall, to the maximum
extent practicable, provide reasonable advance notice of each of the
following:
``(1) Any month with respect to which such monthly advance
child payment will increase (relative to the preceding month)
by reason of an inflation adjustment under section
24A(b)(3)(A).
``(2) Any month with respect to which such monthly advance
child payment will be reduced (relative to the preceding month)
by reason of such child ceasing to be a specified child by
reason of attaining age 18.
``(3) In the case of a taxpayer with a specified child
described in section 24A(b)(1)(A), any month with respect to
which such monthly advance child payment will be reduced by
reason of such child attaining age 6.
``(4) Such other events as the Secretary determines
appropriate.
``(l) Regulations.--The Secretary shall issue such regulations or
other guidance as the Secretary determines necessary or appropriate to
carry out the purposes of this section.''.
(c) Termination of Annual Child Tax Credit.--Section 24 is amended
by adding at the end the following new subsection:
``(l) Termination.--This section shall not apply to (and no payment
shall be made under subsection (k) with respect to) any taxable year
beginning after December 31, 2025.''.
(d) Disclosure of Information Relating to Advance Payment of Child
Tax Credit.--Section 6103(e) is amended by adding at the end the
following new paragraph:
``(12) Disclosure of information relating to advance
payment of child tax credit.--
``(A) Joint filers.--In the case of any individual
who is eligible for monthly advance child payments
under section 7527A, if the reference taxable year (as
defined in section 7527A(d)(2)) that the Secretary uses
to calculate such payments is a year for which the
individual filed an income tax return jointly with
another individual, the Secretary may disclose to such
individual any information which is relevant in
determining the monthly advance child payment under
section 7527A, and the individual's eligibility for
such payment, including information regarding any of
the following:
``(i) The number of specified children,
including by reason of the birth of a child.
``(ii) The name and TIN of specified
children.
``(iii) Marital status.
``(iv) Modified adjusted gross income.
``(v) Principal place of abode.
``(vi) Such other information as the
Secretary may provide.
``(B) Competing claimants.--In the case of any
adjudication under section 7527A(f), the Secretary may
disclose return information provided by the individual
with the original claim to the individual with the
challenge claim, return information provided by the
individual with the challenge claim to the individual
with the original claim, and any other information
considered by the Secretary in such adjudication to
either or both such individuals. Such information shall
be limited to the items specified in subparagraph (A)
and the following:
``(i) Information received under any
agreements or coordination the Secretary
entered into with--
``(I) any State, local government,
Tribal government, or possession of the
United States, or
``(II) any other individual or
entity that the Secretary determines to
be appropriate for purposes of
adjudicating claims under section
7527A(f).
``(ii) Information considered by the
Secretary about where and with whom the
specified child resided.
``(iii) Information considered by the
Secretary about expenditures made by the
claimants to the extent such payments relate to
the original or challenge claim.''.
(e) Conforming Amendments.--
(1) Section 26(b)(2) is amended by striking ``and'' at the
end of subparagraph (Y), by striking the period at the end of
subparagraph (Z) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(AA) section 24A(g)(2) (relating to increase in
tax equal to excess advance payments in certain
circumstances).''.
(2) Section 152(f)(6)(B)(ii) is amended to read as follows:
``(ii) the credits under sections 24, 24A,
and 24B and the payments under sections
7527A,''.
(3) Section 3402(f)(1)(C) is amended by inserting ``or
section 24A (determined after application of subsection (g)
thereof)'' after ``section 24 (determined after application of
subsection (j) thereof)''.
(4) Section 6103(l)(13)(A)(v) is amended by inserting ``or
section 24A, as the case may be'' after ``section 24''.
(5) Section 6211(b)(4)(A) is amended by inserting ``24A by
reason of subsection (d) thereof,'' after ``24 by reason of
subsections (d) and (i)(1) thereof,''.
(6) Section 6213(g)(2)(I) is amended by inserting ``or
section 24A(e) (relating to monthly child tax credit)'' after
``section 24(e) (relating to child tax credit)''.
(7) Section 6213(g)(2)(L) is amended by inserting ``24A,''
after ``24,''.
(8) Section 6213(g)(2)(P) is amended--
(A) by inserting ``or 24A(f)(2)'' after ``section
24(g)(2)'',
(B) by inserting ``or 24A'' after ``under section
24'', and
(C) by striking ``subsection (g)(1) thereof'' and
inserting ``section 24(g)(1) or section 24A(f)(1),
respectively''.
(9) Section 6695(g)(2) is amended by inserting ``24A,''
after ``24,''.
(10) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting ``24A,'' after ``24,''.
(11) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 24 the following new items:
``Sec. 24A. Monthly child tax credit.
``Sec. 24B. Credit for certain other dependents.''.
(12) The table of sections for chapter 77 is amended by
striking the item relating to section 7527A and inserting the
following new item:
``Sec. 7527A. Monthly payments of child tax credit.''.
(f) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2025.
(2) Monthly advance child payments.--The amendments made by
subsection (b) shall apply to--
(A) calendar months beginning after the date of the
enactment of this Act, and
(B) in the case of section 7527A(g) of the Internal
Revenue Code of 1986 (relating to grace periods and
hardships), calendar months beginning after December
31, 2025.
(3) Information disclosure.--The amendment made by
subsection (d) shall take effect on the date of the enactment
of this Act.
Subtitle B--Child and Dependent Care
SEC. 32001. ENHANCEMENT OF CHILD AND DEPENDENT CARE TAX CREDIT.
(a) In General.--Paragraph (2) of section 21(a) is amended to read
as follows:
``(2) Applicable percentage.--
``(A) In general.--For purposes of paragraph (1),
the term `applicable percentage' means 50 percent
reduced (but not below the phaseout percentage) by 1
percentage point for each $2,000 (or fraction thereof)
by which the taxpayer's adjusted gross income for the
taxable year exceeds $125,000.
``(B) Phaseout percentage.--For purposes of
subparagraph (A), the term `phaseout percentage' means
20 percent reduced (but not below zero) by 1 percentage
point for each $2,000 (or fraction thereof) by which
the taxpayer's adjusted gross income for the taxable
year exceeds $400,000.''.
(b) Increase in Dollar Limit on Amount Creditable.--Subsection (c)
of section 21 is amended--
(1) in paragraph (1), by striking ``$3,000'' and inserting
``$8,000''; and
(2) in paragraph (2), by striking ``$6,000'' and inserting
``$16,000''.
(c) Special Rule for Married Couples Filing Separate Returns.--
Paragraph (2) of section 21(e) is amended to read as follows:
``(2) Married couples filing separate returns.--
``(A) In general.--In the case of married
individuals who do not file a joint return for the
taxable year--
``(i) the applicable percentage under
subsection (a)(2) and the number of qualifying
individuals and aggregate amount excludable
under section 129 for purposes of subsection
(c) shall be determined with respect to each
such individual as if the individual had filed
a joint return with the individual's spouse,
and
``(ii) the aggregate amount of the credits
allowed under this section for such taxable
year with respect to both spouses shall not
exceed the amount which would have been allowed
under this section if the individuals had filed
a joint return.
``(B) Regulations.--The Secretary shall prescribe
such regulations or other guidance as is necessary to
carry out the purposes of this subsection.''.
(d) Adjustment for Inflation.--Section 21 is amended by adding at
the end the following new subsection:
``(i) Inflation Adjustment.--
``(1) In general.--In the case of a calendar year beginning
after 2026, the $125,000 amount in paragraph (2) of subsection
(a) and the dollar amounts in subsection (c) shall each be
increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2025' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
``(2) Rounding.--If any dollar amount, after being
increased under paragraph (1), is not a multiple of $100, such
dollar amount shall be rounded to the next lowest multiple of
$100.''.
(e) Credit Made Refundable.--Section 21(g) is amended to read as
follows:
``(g) Credit Made Refundable for Certain Individuals.--If the
taxpayer (in the case of a joint return, either spouse) has a principal
place of abode in the United States (determined as provided in section
32) for more than one-half of the taxable year, the credit allowed
under subsection (a) shall be treated as a credit allowed under subpart
C (and not allowed under this subpart).''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 32002. INCREASED MAXIMUM CONTRIBUTION TO DEPENDENT CARE ASSISTANCE
PROGRAMS.
(a) In General.--Section 129(a)(2)(A) is amended by striking
``$5,000 ($2,500'' and inserting ``$10,000 ($5,000''.
(b) Cost-of-Living Adjustment.--Section 129 is amended by adding at
the end the following new subsection:
``(f) Inflation Adjustment.--
``(1) In general.--Each dollar amount in this section shall
be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
such taxable year begins, determined by substituting
`calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
``(2) Rounding.--If any increase under paragraph (1) is not
a multiple of $50, such increase shall be rounded to the
nearest multiple of $50.''.
(c) Removing Deadwood.--Section 129(a)(2) is amended by striking
subparagraph (D).
(d) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2025.
SEC. 32003. CREDIT FOR WORKING FAMILY CAREGIVERS.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
is amended by inserting after section 25E the following new section:
``SEC. 25F. WORKING FAMILY CAREGIVERS.
``(a) Allowance of Credit.--In the case of an eligible caregiver,
there shall be allowed as a credit against the tax imposed by this
chapter for the taxable year an amount equal to 30 percent of the
qualified expenses paid by the taxpayer during the taxable year to the
extent that such expenses exceed $2,000.
``(b) Limitation.--
``(1) In general.--The amount allowed as a credit under
subsection (a) for the taxable year shall not exceed $5,000.
``(2) Adjustment for inflation.--In the case of any taxable
year beginning after 2026, the dollar amount contained in
paragraph (1) shall be increased by an amount equal to the
product of--
``(A) such dollar amount, and
``(B) the medical care cost adjustment determined
under section 213(d)(10)(B)(ii) for the calendar year
in which the taxable year begins, determined by
substituting `2025' for `1996' in subclause (II)
thereof.
If any increase determined under the preceding sentence is not
a multiple of $50, such increase shall be rounded to the next
lowest multiple of $50.
``(c) Eligible Caregiver.--For purposes of this section, the term
`eligible caregiver' means an individual who--
``(1) during the taxable year pays or incurs qualified
expenses in connection with providing care for a qualified care
recipient, and
``(2) has earned income (as defined in section 32(c)(2))
for the taxable year in excess of $7,500.
``(d) Qualified Care Recipient.--For purposes of this section--
``(1) In general.--The term `qualified care recipient'
means, with respect to any taxable year, any individual who--
``(A) is the spouse of the eligible caregiver, or
any other person who bears a relationship to the
eligible caregiver described in any of subparagraphs
(A) through (H) of section 152(d)(2), and
``(B) has been certified, before the due date for
filing the return of tax for the taxable year, by a
licensed health care practitioner (as defined in
section 7702B(c)(4)) as being an individual with long-
term care needs described in paragraph (3) for a
period--
``(i) which is at least 180 consecutive
days, and
``(ii) a portion of which occurs within the
taxable year.
``(2) Period for making certification.--Notwithstanding
paragraph (1)(B), a certification shall not be treated as valid
unless it is made within the 39\1/2\-month period ending on
such due date (or such other period as the Secretary
prescribes).
``(3) Individuals with long-term care needs.--An individual
is described in this paragraph if the individual meets any of
the following requirements:
``(A) The individual is at least 6 years of age
and--
``(i) is unable to perform (without
substantial assistance from another individual)
at least 2 activities of daily living (as
defined in section 7702B(c)(2)(B)) due to a
loss of functional capacity, or
``(ii) requires substantial supervision to
protect such individual from threats to health
and safety due to severe cognitive impairment
and is unable to perform, without reminding or
cuing assistance, at least 1 activity of daily
living (as so defined) or to the extent
provided in regulations prescribed by the
Secretary (in consultation with the Secretary
of Health and Human Services), is unable to
engage in age appropriate activities.
``(B) The individual is at least 2 but not 6 years
of age and is unable due to a loss of functional
capacity to perform (without substantial assistance
from another individual) at least 2 of the following
activities: eating, transferring, or mobility.
``(C) The individual is under 2 years of age and
requires specific durable medical equipment by reason
of a severe health condition or requires a skilled
practitioner trained to address the individual's
condition to be available if the individual's parents
or guardians are absent.
``(e) Qualified Expenses.--For purposes of this section--
``(1) In general.--Subject to paragraph (4), the term
`qualified expenses' means expenditures for goods, services,
and supports that--
``(A) assist a qualified care recipient with
accomplishing activities of daily living (as defined in
section 7702B(c)(2)(B)) and instrumental activities of
daily living (as defined in section 1915(k)(6)(F) of
the Social Security Act (42 U.S.C. 1396n(k)(6)(F))),
and
``(B) are provided solely for use by such qualified
care recipient.
``(2) Adjustment for other tax benefits.--The amount of
qualified expenses otherwise taken into account under paragraph
(1) with respect to an individual shall be reduced by the sum
of any amounts paid for the benefit of such individual for the
taxable year which are--
``(A) taken into account under section 21 or 213,
or
``(B) excluded from gross income under section 129,
223(f), or 529A(c)(1)(B).
``(3) Goods, services, and supports.--For purposes of
paragraph (1), goods, services, and supports (as defined by the
Secretary) shall include--
``(A) human assistance, supervision, cuing and
standby assistance,
``(B) assistive technologies and devices (including
remote health monitoring),
``(C) environmental modifications (including home
modifications),
``(D) health maintenance tasks (such as medication
management),
``(E) information,
``(F) transportation of the qualified care
recipient,
``(G) non-health items (such as incontinence
supplies), and
``(H) coordination of and services for people who
live in their own home, a residential setting, or a
nursing facility, as well as the cost of care in these
or other locations.
``(4) Qualified expenses for eligible caregivers.--For
purposes of paragraph (1), the following shall be treated as
qualified expenses if paid or incurred by an eligible
caregiver:
``(A) Expenditures for respite care for a qualified
care recipient.
``(B) Expenditures for counseling, support groups,
or training relating to caring for a qualified care
recipient.
``(C) Lost wages for unpaid time off due to caring
for a qualified care recipient as verified by an
employer.
``(D) Travel costs of the eligible caregiver
related to caring for a qualified care recipient.
``(E) Expenditures for technologies, as determined
by the Secretary, that assist an eligible caregiver in
providing care for a qualified care recipient.
``(5) Human assistance.--The term `human assistance'
includes the costs of a direct care worker.
``(6) Documentation.--An expense shall not be taken into
account under this section unless the eligible caregiver
substantiates such expense under such regulations or guidance
as the Secretary shall provide.
``(7) Mileage rate.--For purposes of this section, the
mileage rate for the use of a passenger automobile shall be the
standard mileage rate used to calculate the deductible costs of
operating an automobile for medical purposes. Such rate may be
used in lieu of actual automobile-related travel expenses.
``(8) Coordination with able accounts.--Qualified expenses
for a taxable year shall not include contributions to an ABLE
account (as defined in section 529A).
``(f) Phase Out Based on Adjusted Gross Income.--For purposes of
this section--
``(1) In general.--The amount of the credit allowable under
subsection (a) shall be reduced (but not below zero) by $100
for each $1,000 (or fraction thereof) by which the taxpayer's
modified adjusted gross income exceeds the threshold amount.
``(2) Modified adjusted gross income.--The term `modified
adjusted gross income' means adjusted gross income increased by
any amount excluded from gross income under section 911, 931,
or 933.
``(3) Threshold amount.--The term `threshold amount'
means--
``(A) $150,000 in the case of a joint return, and
``(B) $75,000 in any other case.
``(4) Indexing.--In the case of any taxable year beginning
in a calendar year after 2026, each dollar amount contained in
paragraph (3) shall be increased by an amount equal to the
product of--
``(A) such dollar amount, and
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2025' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
``(5) Rounding rule.--If any increase determined under
paragraph (4) is not a multiple of $50, such increase shall be
rounded to the next lowest multiple of $50.
``(g) Identification Requirements.--No credit shall be allowed
under this section to a taxpayer with respect to any qualified care
recipient unless the taxpayer includes the name and taxpayer
identification number of such individual, and the identification number
of the licensed health care practitioner certifying such individual, on
the return of tax for the taxable year.''.
(b) Clerical Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 is amended by inserting after the
item relating to section 25E the following new item:
``Sec. 25F. Working family caregivers.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 32004. LICENSED FAMILY CHILD CARE CREDIT.
(a) In General.--Subpart C of part IV of subchapter A of chapter 1,
as amended by the preceding provisions of this Act, is amended by
inserting after section 36D the following new section:
``SEC. 36E. LICENSED FAMILY CHILD CARE CREDIT.
``(a) In General.--In the case of a qualified taxpayer, there shall
be allowed as a credit against the tax imposed by this subtitle for any
taxable year an amount equal to so much of the qualified child care
startup expenses of the taxpayer for such taxable year or for the
preceding taxable year as do not exceed $5,000.
``(b) Qualified Taxpayer.--For purposes of this section, the term
`qualified taxpayer' means, with respect to a taxable year, a taxpayer
that operates a qualified family child care provider.
``(c) Qualified Family Child Care Provider.--For purposes of this
section, the term `qualified family child care provider' means a family
child care provider that, with respect to a taxable year--
``(1) provides child care services for compensation that,
as of the last day of such taxable year, is licensed or
registered under State law and satisfies State and local
requirements applicable to the child care services it provides,
``(2) primarily provides child care at the taxpayer's
primary residence, and
``(3) provided child care services to not less than 2
children (excluding children of such taxpayer) for a
significant portion of such taxable year.
``(d) Qualified Child Care Startup Expenses.--For purposes of this
section, the term `qualified child care startup expenses' means amounts
paid or incurred for any of the following in order to establish and
operate a qualified family child care provider:
``(1) Child care licensing fees.
``(2) Child care supplies including diapers, food, toys,
and learning materials.
``(3) Liability insurance.
``(4) Fencing and installation of such fencing.
``(5) Outdoor playground equipment and installation of such
equipment.
``(6) Furniture necessary to provide child care.
``(7) Salary of an employee other than the taxpayer.
``(8) Printer and computers.
``(9) Professional training required as a condition of
State licensure or registration.
``(10) Remediation or renovation of the taxpayer's primary
residence required as a condition of State licensure or
registration.
``(e) Limitations.--No credit shall be allowed under subsection (a)
to any taxpayer to whom a credit was allowed under such subsection in
any other taxable year.
``(f) Denial of Double Benefit.--No credit shall be allowed under
subsection (a) for any expense for which a deduction or credit is
allowed under any other provision of this chapter.
``(g) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations relating to such
information reporting and coordination with state and local licensing
or registration entities as the Secretary determines appropriate.
``(h) Sunset.--No credit shall be allowed under subsection (a) for
any taxable year beginning after the date that is 7 years after the
date of the enactment of this section.''.
(b) Conforming Amendments.--
(1) Section 6211(b)(4)(A), as amended by the preceding
provisions of this Act, is amended by inserting ``36E,'' after
``36D,''.
(2) Section 1324(b)(2) of title 31, United States Code, as
amended by the preceding provisions of this Act, is amended by
inserting ``36E,'' after ``36D,''.
(c) Clerical Amendment.--The table of sections for subpart C of
part IV of subchapter A of chapter 1, as amended by the preceding
provisions of this Act, is amended by inserting after the item relating
to section 36B the following new item:
``Sec. 36E. Licensed family child care credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after the date of the enactment of
this Act.
Subtitle C--Ensuring Affordable Adoptions
SEC. 33001. REFUNDABLE ADOPTION TAX CREDIT.
(a) Credit Made Refundable.--
(1) Credit moved to subpart relating to refundable
credits.--The Internal Revenue Code of 1986, as amended by the
preceding provisions of this Act, is amended--
(A) by redesignating section 23 as section 36F, and
(B) by moving section 36F (as so redesignated) from
subpart A of part IV of subchapter A of chapter 1 to
the location immediately before section 37 in subpart C
of part IV of subchapter A of chapter 1.
(2) Conforming amendments.--
(A) Section 25(e)(1)(C) is amended by striking
``sections 23 and 25D'' and inserting ``section 25D''.
(B) Section 36E, as so redesignated, is amended--
(i) in subsection (b)(2)(A), by striking
``(determined without regard to subsection
(c))'',
(ii) by striking subsection (c), and
(iii) by redesignating subsections (d)
through (i) as subsections (c) through (h),
respectively.
(C) Section 137 is amended--
(i) in subsection (d), by striking
``section 23(d)'' and inserting ``section
36F(c)'', and
(ii) in subsection (e), by striking
``subsections (e), (f), and (g) of section 23''
and inserting ``subsections (d), (e), and (f)
of section 36F''.
(D) Section 1016(a)(26) is amended by striking
``23(g)'' and inserting ``36F(f)''.
(E) Section 6211(b)(4)(A), as amended by the
preceding provisions of this Act, is amended by
inserting ``36F,'' after ``36E,''.
(F) The table of sections for subpart A of part IV
of subchapter A of chapter 1 is amended by striking the
item relating to section 23.
(G) Paragraph (2) of section 1324(b) of title 31,
United States Code, as amended by the preceding
provisions of this Act, is amended by inserting
``36F,'' after ``36E,''.
(H) Paragraph (33) of section 471(a) of the Social
Security Act (42 U.S.C. 671(a)) is amended by striking
``section 23'' and inserting ``section 36F''.
(I) The table of sections for subpart C of part IV
of subchapter A of chapter 1, as amended by the
preceding provisions of this Act, is amended by
inserting after the item relating to section 36E the
following new item:
``Sec. 36F. Adoption expenses.''.
(b) Third-Party Affidavits.--Section 36F(h), as redesignated and
moved by subsection (a), is amended--
(1) by striking ``such regulations'' and inserting ``such
regulations and guidance'',
(2) by striking ``including regulations which treat'' and
inserting ``including regulations and guidance which--
``(1) treat'',
(3) by striking the period at the end and inserting ``,
and'', and
(4) by adding at the end the following:
``(2) provide for a standardized third-party affidavit for
purposes of verifying a legal adoption--
``(A) of a type with respect to which qualified
adoption expenses may be paid or incurred, or
``(B) involving a child with special needs for
purposes of subsection (a)(3).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
(d) Transitional Rule To Treat Carryforward as Refundable Credit.--
In the case of any excess described in section 23(c) of the Internal
Revenue Code of 1986 with respect to any taxpayer for the taxable year
which precedes the first taxable year to which the amendments made by
this section apply, such excess shall be added to the credit allowable
under section 36F(a) of such Code with respect to such taxpayer for
such first taxable year.
TITLE IV--EDUCATION AND WORKFORCE TRAINING
Subtitle A--Ensuring Affordable Higher Education
SEC. 41001. AMERICAN OPPORTUNITY CREDIT EXPANDED TO 6 YEARS, MADE
TEMPORARILY FULLY REFUNDABLE.
(a) In General.--Section 25A(i) is amended--
(1) in subsection (b)(2)--
(A) in subparagraph (A)--
(i) in the heading, by striking ``4 taxable
years'' and inserting ``6 taxable years'', and
(ii) by striking ``4 prior taxable years''
and inserting ``6 taxable years'', and
(B) in subparagraph (C)--
(i) in the heading, by striking ``first 4
years'' and inserting ``first 6 years'', and
(ii) by striking ``the first 4 years'' and
inserting ``the first 6 years'', and
(2) by redesignating subsection (j) as subsection (k) and
by inserting after subsection (i) the following:
``(j) American Opportunity Tax Credit Made Fully Refundable for
2026.--In the case of a taxable year beginning after December 31, 2025,
and before January 1, 2027, subsection (i) shall be applied by
substituting `100 percent' for `forty percent'.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to taxable years beginning after December 31, 2025.
(c) Outreach Campaign.--
(1) In general.--The Secretary of the Treasury (or the
Secretary's delegate) shall conduct an outreach campaign to--
(A) provide information to the public regarding the
expansion of the American Opportunity Credit under
section 25A of the Internal Revenue Code of 1986, as
amended by this Act, and
(B) assist individuals with claiming such credit.
(2) Methods.--With respect to the outreach campaign
described in paragraph (a), the Secretary shall--
(A) provide relevant information on the public
website of the Internal Revenue Service, and
(B) send communications via direct mailing and
electronic mail to individuals who have been identified
as eligible for such credit for the taxable year.
SEC. 41002. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME.
(a) In General.--Section 117(b)(1) is amended by striking
``received by an individual'' and all that follows and inserting
``received by an individual--
``(A) as a scholarship or fellowship grant to the
extent the individual establishes that, in accordance
with the conditions of the grant, such amount was used
for qualified tuition and related expenses, or
``(B) as a Federal Pell Grant under section 401 of
the Higher Education Act of 1965 (as in effect on the
date of the enactment of this subparagraph).''.
(b) No Adjustment Under American Opportunity and Lifetime Learning
Credits.--Section 25A(g)(2)(A) is amended by striking ``a qualified
scholarship which'' and inserting ``a qualified scholarship which is
described in section 117(b)(1)(A) and which''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 41003. EXPANSION OF AMERICAN OPPORTUNITY AND LIFETIME LEARNING
CREDITS.
(a) In General.--Section 25A is amended--
(1) in subsection (f)(1)--
(A) in subparagraph (A), by striking ``tuition and
fees'' and inserting ``tuition, fees, computer or
peripheral equipment, child and dependent care
expenses, and course materials'',
(B) by striking subparagraph (D), and
(C) by adding at the end the following new
subparagraphs:
``(D) Child and dependent care expenses.--For
purposes of this paragraph--
``(i) In general.--The term `child and
dependent care expenses' means amounts paid for
the following expenses, but only if such
expenses are incurred to enable the taxpayer to
be enrolled in an eligible educational
institution for any period for which there are
1 or more qualifying individuals with respect
to the taxpayer:
``(I) expenses for household
services, and
``(II) expenses for the care of a
qualifying individual.
Such term shall not include any amount paid for
services outside the taxpayer's household at a
camp where the qualifying individual stays
overnight.
``(ii) Qualifying individual.--The term
`qualifying individual' has the meaning given
such term in section 21(b)(1).
``(iii) Exception, dependent care
centers.--Rules similar to the rules of
subparagraphs (B), (C), and (D) of section
21(b)(2) shall apply, except the term `child
and dependent care expenses' shall be
substituted for the term `employment-related
expenses' each place it appears in such
subparagraphs.
``(E) Child and dependent care expenses only
qualified expenses when claimed by eligible student.--
Amounts paid for an expense described in subparagraph
(E) may not be taken into account under this paragraph
for a taxable year unless required for the enrollment
or attendance of an individual described in
subparagraph (A)(i) or subparagraph (A)(ii).
``(F) Computer or peripheral equipment.--
``(i) Defined.--For purposes of this
paragraph, the term `computer or peripheral
equipment' means expenses for the purchase of
computer or peripheral equipment (as defined in
section 168(i)(2)(B), computer software (as
defined in section 197(e)(3)(B))), or internet
access and related services, if such equipment,
software, or services are to be used primarily
by the individual during any of the years the
individual is enrolled at an eligible
educational institution.
``(ii) Dollar limit on amount creditable.--
The aggregate of the amounts paid or expenses
incurred for computer or peripheral equipment
which may be taken into account under this
paragraph for a taxable year by the taxpayer
shall not exceed $1,000.'', and
(2) in subsection (g)(5)--
(A) in the heading, by adding ``or credit'' at the
end, and
(B) by inserting ``or credit'' after ``a
deduction''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 41004. ELIMINATION OF DENIAL OF AMERICAN OPPORTUNITY TAX CREDIT
FOR STUDENTS CONVICTED OF A FELONY DRUG OFFENSE.
(a) In General.--Section 25A(b)(2) is amended by striking
subparagraph (D).
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
SEC. 41005. MODIFICATION OF TREATMENT OF STUDENT LOAN FORGIVENESS.
(a) In General.--Section 108(f) is amended--
(1) by amending paragraph (1) to read as follows:
``(1) In general.--In the case of an individual, gross
income does not include any amount which (but for this
subsection) would be includible in gross income by reasons of
the discharge (in whole or in part) of--
``(A) any loan provided expressly for postsecondary
educational expenses, regardless of whether provided
through the educational institution or directly to the
borrower, if such loan was made, insured, or guaranteed
by--
``(i) the United States, or an
instrumentality or agency thereof,
``(ii) a State, territory, or possession of
the United States, or the District of Columbia,
or any political subdivision thereof, or
``(iii) any institution of higher
education,
``(B) any private education loan (as defined in
section 140(a)(7) of the Truth in Lending Act),
``(C) any loan made by any educational organization
described in section 170(b)(1)(A)(ii) if such loan is
made--
``(i) pursuant to an agreement with any
entity described in subparagraph (A) or any
private education lender (as defined in section
140(a) of the Truth in Lending Act) under which
the funds from which the loan was made were
provided to such educational organization, or
``(ii) pursuant to a program of such
educational organization which is designed to
encourage its students to serve in occupations
with unmet needs or in areas with unmet needs
and under which the services provided by the
students (or former students) are for or under
the direction of a governmental unit or an
organization described in section 501(c)(3) and
exempt from tax under section 501(a), or
``(D) any loan made by an educational organization
described in section 170(b)(1)(A)(ii) or by an
organization exempt from tax under section 501(a) to
refinance a loan to an individual to assist the
individual in attending any such educational
organization but only if the refinancing loan is
pursuant to a program of the refinancing organization
which is designed as described in subparagraph
(C)(ii).'',
(2) by striking paragraphs (2) and (5),
(3) by redesignating paragraphs (3) and (4) as paragraphs
(2) and (3), respectively, and
(4) in paragraph (2), as so redesignated, by--
(A) striking ``made by an organization described in
paragraph (2)(D)'' and inserting ``made by an
organization described in paragraph (1)(C) or made by a
private education lender (as defined in section
140(a)(7) of the Truth in Lending Act)'', and
(B) inserting ``or for such private education
lender'' after ``either such organization''.
(b) Effective Date.--The amendments made by this section shall
apply to discharges of loans after December 31, 2025.
SEC. 41006. STUDENT LOAN INTEREST DEDUCTION LIMITATION APPLIED
SEPARATELY TO EACH SPOUSE.
(a) In General.--Section 221(b)(1) is amended to read as follows:
``(1) In general.--The interest taken into account with
respect to a taxpayer for a taxable year under subsection (a)
for indebtedness incurred by an individual shall not exceed
$2,500.''.
(b) Conforming Amendments.--Section 221 is amended--
(1) in subsection (b), by striking the heading and
inserting ``Dollar Limitations'', and
(2) by amending subsection (e) to read as follows:
``(e) Denial of Double Benefit.--No deduction shall be allowed
under this section for any amount for which a deduction is allowable
under any other provision of this chapter.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
Subtitle B--Supporting Our Workforce
SEC. 42001. EDUCATOR EXPENSE DEDUCTION TO INCLUDE EARLY CHILDHOOD
EDUCATORS.
(a) In General.--Section 62 is amended--
(1) in subsection (a)(2)(D), by striking the heading and
inserting ``Certain expenses of early childhood, elementary,
and secondary school teachers.'';
(2) in subsection (d)(1)(A), by striking ``kindergarten
through grade 12 teacher'' and inserting, ``early childhood
educator, kindergarten through grade 12 teacher''; and
(3) in subsection (d)(1)(B), by striking ``elementary
education or secondary education (kindergarten through grade
12)'' and inserting, ``early childhood education, elementary
education, or secondary education (pre-kindergarten through
grade 12)''.
(b) Effective Date.--The amendments made by this section shall
apply to expenses incurred in taxable years beginning after December
31, 2025.
SEC. 42002. ALLOWANCE OF DEDUCTION FOR CERTAIN EXPENSES OF THE TRADE OR
BUSINESS OF BEING AN EMPLOYEE.
(a) Above-the-Line Deduction for Union Dues and Expenses.--Section
62(a)(1) is amended by adding at the end the following new sentence:
``The limitation under the preceding sentence shall not apply to
deductions which are attributable to a trade or business consisting of
the performance of services by the taxpayer as an employee if such
deductions are for union dues and expenses.''.
(b) Allowance of Miscellaneous Itemized Deduction for Other
Expenses of the Trade or Business of Being an Employee.--Section 67(g)
is amended--
(1) by striking ``2025.--Notwithstanding subsection (a),''
and inserting ``2025.--
``(1) In general.--Notwithstanding subsection (a), except
as provided in paragraph (2),''; and
(2) by adding at the end the following:
``(2) Exception for expenses of the trade or business of
being an employee.--
``(A) In general.--Paragraph (1) shall not apply to
miscellaneous itemized deductions for any taxable year
which are itemized deductions attributable to a trade
or business carried on by the taxpayer which consists
of the performance of services by the taxpayer as an
employee.
``(B) Application of 2-percent test.--In applying
subsection (a) for any taxable year to which this
paragraph applies, only the itemized deductions
described in subparagraph (A) shall be taken into
account as miscellaneous itemized deductions.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 42003. MODIFICATION OF DEDUCTION FOR CASH TIPS.
(a) Made Permanent.--Section 224 is amended by striking subsection
(h).
(b) Application of Limitation on Individual Basis.--Section
224(b)(1) is amended by inserting ``to an individual'' after ``amount
allowed as a deduction under this section''.
(c) Treatment of Automatic Gratuities.--Section 224(d) is amended
by adding at the end the following new paragraph:
``(4) Treatment of certain automatic gratuities.--
``(A) In general.--In the case of an individual
engaged in an occupation in hospitality, food and
beverage service, or cosmetology, the term `qualified
tips' shall include automatic gratuities.
``(B) Automatic gratuity.--For purposes of this
paragraph, the term `automatic gratuity' means, with
respect to an individual, any amount which--
``(i) would be a qualified tip with respect
to the individual but for paragraph (2)(A), and
``(ii) is a mandatory or suggested amount
paid pursuant to a uniform policy of the
employer, under which such entire amount is
received by the individual or, under State or
local law, is pooled and received only by
employees of the employer under a tip-sharing
arrangement.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 42004. DEDUCTION FOR CERTAIN OVERTIME COMPENSATION.
(a) In General.--Section 225(c)(1) is amended to read as follows:
``(1) In general.--For purposes of this section, the term
`qualified overtime compensation' means--
``(A) any overtime compensation paid to an
individual required under section 7 of the Fair Labor
Standards Act of 1938 that is in excess of the regular
rate (as used in such section) at which such individual
is employed, or
``(B) any compensation paid to an individual that
is in excess of the regular rate at which such
individual is employed if--
``(i) such compensation is paid for work
for a single employer pursuant to an agreement
between the employee (or labor organization
representing such employee) and employer
entered into before the performance of the
work, and
``(ii) either--
``(I) such work is in excess of a
standard number of hours of such work
for a specified period of time, and
such agreement specifies that such
standard number of hours for a
specified period of time is not less
than 40 hours for a 7-day work period,
or
``(II) if the employee (including
any crewmember or flight crewmember, or
rail operating craft employee) and
employer referred to in clause (i) are
both covered by the Railway Labor Act,
such work is beyond scheduled or
anticipated hours on duty or for hours
on duty that exceed a maximum number of
hours with respect to a specified
period of time (as determined pursuant
to such agreement).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
SEC. 42005. ABOVE-THE-LINE DEDUCTION OF EXPENSES OF PERFORMING ARTISTS.
(a) In General.--Section 62(a)(2)(B) is amended--
(1) by striking ``performing artists.--The deductions'' and
inserting the following: ``performing artists.--
``(i) In general.--The deductions'', and
(2) by adding at the end the following new clauses:
``(ii) Phaseout.--The amount of expenses
taken into account under clause (i) shall be
reduced (but not below zero) by 10 percentage
points for each $2,000 ($4,000 in the case of a
joint return), or fraction thereof, by which
the taxpayer's gross income for the taxable
year exceeds $100,000 (200 percent of such
amount in the case of a joint return).
``(iii) Cost-of-living adjustment.--In the
case of any taxable year beginning in a
calendar year after 2026, the $100,000 amount
under clause (ii) shall be increased by an
amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for the calendar year in which
the taxable year begins, determined by
substituting `calendar year 2025' for
`calendar year 2016' in subparagraph
(A)(ii) thereof.
If any amount after adjustment under the
preceding sentence is not a multiple of $1,000,
such amount shall be rounded to the nearest
multiple of $1,000.''.
(b) Clarification Regarding Commission Paid to Performing Artist's
Manager or Agent.--Section 62(a)(2)(B)(i), as amended by subsection
(a), is amended by inserting before the period at the end the
following: ``, including any commission paid to the performing artist's
manager or agent''.
(c) Increase in Threshold for Determining Nominal Employers.--
Section 62(b)(2) is amended--
(1) by striking ``An individual'' and inserting the
following:
``(A) In general.--An individual'',
(2) by striking ``$200'' and inserting ``$500'', and
(3) by adding at the end the following new subparagraph:
``(B) Cost-of-living adjustment.--In the case of
any taxable year beginning in a calendar year after
2026, the $500 amount under subparagraph (A) shall be
increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2025'
for `calendar year 2016' in subparagraph
(A)(ii) thereof.
If any amount after adjustment under the preceding
sentence is not a multiple of $50, such amount shall be
rounded to the nearest multiple of $50.''.
(d) Conforming Amendments.--
(1) Section 62(a)(2)(B)(i), as amended by the preceding
provisions of this Act, is amended by striking ``by him'' and
inserting ``by the performing artist''.
(2) Section 62(b)(1) is amended by inserting ``and'' at the
end of subparagraph (A), by striking ``, and'' at the end of
subparagraph (B) and inserting a period, and by striking
subparagraph (C).
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 42006. PERMANENT EXTENSION OF EARNED INCOME CREDIT RULES FOR
INDIVIDUALS WITHOUT QUALIFYING CHILDREN.
(a) Decrease in Minimum Age for Credit.--
(1) In general.--Subclause (II) of section 32(c)(1)(A)(ii)
is amended by striking ``age 25'' and inserting ``the
applicable minimum age''.
(2) Applicable minimum age.--Paragraph (1) of section 32(c)
is amended by adding at the end the following new subparagraph:
``(F) Applicable minimum age.--For purposes of this
paragraph--
``(i) In general.--The term `applicable
minimum age' means--
``(I) except as otherwise provided
in this clause, age 19,
``(II) in the case of a student (as
defined in section 152(f)(2)), other
than a qualified former foster youth or
a qualified homeless youth, age 24, and
``(III) in the case of a qualified
former foster youth or a qualified
homeless youth, age 18.
``(ii) Qualified former foster youth.--For
purposes of this subparagraph, the term
`qualified former foster youth' means an
individual who--
``(I) on or after the date that
such individual attained age 14, was in
foster care provided under the
supervision or administration of an
entity administering (or eligible to
administer) a plan under part B or part
E of title IV of the Social Security
Act (without regard to whether Federal
assistance was provided with respect to
such child under such part E), and
``(II) provides (in such manner as
the Secretary may provide) consent for
entities which administer a plan under
part B or part E of title IV of the
Social Security Act to disclose to the
Secretary information related to the
status of such individual as a
qualified former foster youth.
``(iii) Qualified homeless youth.--For
purposes of this subparagraph, the term
`qualified homeless youth' means, with respect
to any taxable year, an individual who
certifies, in a manner as provided by the
Secretary, that such individual is either an
unaccompanied youth who is a homeless child or
youth, or is unaccompanied, at risk of
homelessness, and self-supporting.''.
(b) Elimination of Maximum Age for Credit.--Subclause (II) of
section 32(c)(1)(A)(ii) is amended by striking ``but not attained age
65''.
(c) Increase in Credit and Phaseout Percentages.--The table
contained in paragraph (1) of section 32(b) is amended by striking
``7.65'' each place it appears and inserting ``15.3''.
(d) Increase in Earned Income and Phaseout Amounts.--The table
contained in subparagraph (A) of section 32(b)(2) is amended--
(1) by striking ``$4,220'' and inserting ``$9,820'', and
(2) by striking ``$5,280'' and inserting ``$11,610''.
(e) Inflation Adjustments.--
(1) In general.--Paragraph (1) of section 32(j) is amended
to read as follows:
``(1) In general.--In the case of any taxable year
beginning after--
``(A) 2021, in the case of the dollar amount in
subsection (i)(1),
``(B) 2026, in the case of the dollar amounts in
the third row of the table in subsection (b)(2)(A), and
``(C) 2015, in any other case,
each of the dollar amounts in subsections (b)(2) and (i)(1)
shall be increased by an amount equal to the inflation
amount.''.
(2) Inflation amount.--Subsection (j) of section 32 is
amended by adding at the end the following new paragraph:
``(3) Inflation amount.--For purposes of paragraph (1), the
inflation amount with respect to any dollar amount for any
taxable year is the amount equal to--
``(A) such dollar amount, multiplied by
``(B) the percentage (if any) by which--
``(i) the CPI (as defined in section
1(f)(4)) for the calendar year preceding the
year in which the taxable year begins, exceeds
``(ii) the CPI (as so defined) for--
``(I) in the case of amounts in the
third row of the table in subsection
(b)(2)(A), 2025,
``(II) in the case of any other
amount in subsection (b)(2)(A), 1995,
``(III) in the case of the $5,000
amount in subsection (b)(2)(B), 2008,
and
``(IV) in the case of the $10,000
amount in subsection (i)(1), 2020.''.
(f) Conforming Amendment.--Section 32 is amended by striking
subsection (n).
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 42007. APPLICATION OF EARNED INCOME CREDIT TO POSSESSIONS OF THE
UNITED STATES.
(a) Puerto Rico.--Subparagraph (B) of section 7530(a)(1) is amended
by striking ``in the case of calendar years 2021 through 2025,''.
(b) Possessions With Mirror Code Tax Systems.--Subparagraph (B) of
section 7530(b)(1) is amended by striking ``in the case of calendar
years 2021 through 2025,''.
(c) American Samoa.--Subparagraph (B) of section 7530(c)(1) is
amended by striking ``in the case of calendar years 2021 through
2025,''.
SEC. 42008. ELECTION TO USE PRIOR YEAR EARNED INCOME FOR EARNED INCOME
TAX CREDIT.
(a) In General.--Paragraph (2) of section 32(c) is amended by
adding at the end the following new subparagraph:
``(C) Election to use prior year earned income.--
``(i) In general.--If the earned income of
the taxpayer for any taxable year is less than
the earned income of the taxpayer for the
preceding taxable year, the credit allowed
under subsection (a) may, at the election of
the taxpayer, be determined by substituting--
``(I) such earned income for such
preceding taxable year, for
``(II) such earned income for the
taxable year for which such credit is
being determined.
``(ii) Application to joint returns.--For
purposes of clause (i), in the case of a joint
return, the earned income of the taxpayer for
the preceding taxable year shall be the sum of
the earned income of each spouse for such
taxable year.
``(iii) Special rules.--
``(I) Errors treated as
mathematical errors.--For purposes of
section 6213, an incorrect use on a
return of earned income pursuant to
clause (i) shall be treated as a
mathematical or clerical error.
``(II) No effect on determination
of gross income, etc.--Except as
otherwise provided in this
subparagraph, this title shall be
applied without regard to any
substitution under clause (i).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
TITLE V--HEALTHCARE
SEC. 50001. INCREASE IN ELIGIBILITY FOR HEALTH INSURANCE PREMIUM
ASSISTANCE TAX CREDIT.
(a) In General.--Subparagraph (A) of section 36B(c)(1) is amended
by striking ``but does not exceed 400 percent''.
(b) Applicable Percentages.--
(1) In general.--Subparagraph (A) of section 36B(b)(3) is
amended to read as follows:
``(A) Applicable percentage.--The applicable
percentage for any taxable year shall be the percentage
such that the applicable percentage for any taxpayer
whose household income is within an income tier
specified in the following table shall increase, on a
sliding scale in a linear manner, from the initial
premium percentage to the final premium percentage
specified in such table for such income tier:
------------------------------------------------------------------------
The initial The final
``In the case of household income (expressed premium premium
as a percent of poverty line) within the percentage percentage
following income tier: is-- is--
------------------------------------------------------------------------
Up to 150 percent............................. 0 0
150 percent up to 200 percent................. 0 2.0
200 percent up to 250 percent................. 2.0 4.0
250 percent up to 300 percent................. 4.0 6.0
300 percent up to 400 percent................. 6.0 8.5
400 percent and higher........................ 8.5 8.5.''.
------------------------------------------------------------------------
(2) Conforming amendments relating to affordability of
coverage.--
(A) Paragraph (1) of section 36B(c) is amended by
striking subparagraph (E).
(B) Subparagraph (C) of section 36B(c)(2) is
amended by striking clause (iv).
(C) Paragraph (4) of section 36B(c) is amended by
striking subparagraph (F).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 50002. FILLING THE COVERAGE GAP.
(a) Ensuring Affordability of Coverage for Certain Low-Income
Populations.--Section 1402 of the Patient Protection and Affordable
Care Act (42 U.S.C. 18071) is amended--
(1) in subsection (b)--
(A) in paragraph (2), by inserting ``(or, with
respect to plan years 2026, 2027, and 2028, whose
household income does not exceed 400 percent of the
poverty line for a family of the size involved)''
before the period; and
(B) in the matter following paragraph (2), by
adding at the end the following new sentence: ``In the
case of an individual who is determined at any point to
have a household income for 2025 that does not exceed
138 percent of the poverty line for a family of the
size involved, such individual shall, for each month
during such year, be treated as having a household
income equal to 100 percent for purposes of applying
this section.''; and
(2) in subsection (c)--
(A) in paragraph (1)(A), in the matter preceding
clause (i), by inserting ``, with respect to eligible
insureds (other than, with respect to plan years 2026,
2027, and 2028, specified enrollees (as defined in
paragraph (6)(C))),'' after ``first be achieved'';
(B) in paragraph (2), in the matter preceding
subparagraph (A), by inserting ``with respect to
eligible insureds (other than, with respect to plan
years 2026, 2027, and 2028, specified enrollees)''
after ``under the plan'';
(C) in paragraph (3)--
(i) in subparagraph (A), by striking ``this
subsection'' and inserting ``paragraph (1) or
(2)''; and
(ii) in subparagraph (B), by striking
``this section'' and inserting ``paragraphs (1)
and (2)''; and
(D) by adding at the end the following new
paragraph:
``(6) Special rule for specified enrollees.--
``(A) In general.--The Secretary shall establish
procedures under which the issuer of a qualified health
plan to which this section applies shall reduce cost-
sharing under the plan with respect to months occurring
during plan years 2026, 2027, and 2028 for enrollees
who are specified enrollees (as defined in subparagraph
(C)) in a manner sufficient to increase the plan's
share of the total allowed costs of benefits provided
under the plan to 99 percent of such costs.
``(B) Methods for reducing cost sharing.--
``(i) In general.--An issuer of a qualified
health plan making reductions under this
paragraph shall notify the Secretary of such
reductions and the Secretary shall, out of
funds made available under clause (ii), make
periodic and timely payments to the issuer
equal to 12 percent of the total allowed costs
of benefits provided under each such plan to
specified enrollees during plan years 2026,
2027, and 2028.
``(ii) Appropriation.--In addition to
amounts otherwise available, there are
appropriated, out of any money in the Treasury
not otherwise appropriated, such sums as may be
necessary to the Secretary to make payments
under clause (i).
``(C) Specified enrollee defined.--For purposes of
this section, the term `specified enrollee' means, with
respect to a plan year, an eligible insured who is
determined at any point to have a household income for
such plan year that does not exceed 138 percent of the
poverty line for a family of the size involved. Such
insured shall be deemed to be a specified enrollee for
each month in such plan year.''.
(b) Open Enrollments Applicable to Certain Lower-Income
Populations.--Section 1311(c) of the Patient Protection and Affordable
Care Act (42 U.S.C. 18031(c)) is amended--
(1) in paragraph (6)--
(A) in subparagraph (C), by striking at the end
``and'';
(B) in subparagraph (D), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(E) with respect to a qualified health plan with
respect to which section 1402 applies, for months
occurring during the period beginning on January 1,
2026, and ending on December 31, 2028, enrollment
periods described in subparagraph (A) of paragraph (8)
for individuals described in subparagraph (B) of such
paragraph.''; and
(2) by adding at the end the following new paragraph:
``(8) Special enrollment period for certain low-income
populations.--
``(A) In general.--The enrollment period described
in this paragraph is, in the case of an individual
described in subparagraph (B), the continuous period
beginning on the first day that such individual is so
described.
``(B) Individual described.--For purposes of
subparagraph (A), an individual described in this
subparagraph is an individual--
``(i) with a household income that does not
exceed 138 percent of the poverty line for a
family of the size involved; and
``(ii) who is not eligible for minimum
essential coverage (as defined in section
5000A(f) of the Internal Revenue Code of 1986),
other than for coverage described in any of
subparagraphs (B) through (E) of paragraph (1)
of such section.''.
(c) Additional Benefits for Certain Low-Income Individuals for Plan
Years 2026 and 2027.--Section 1301(a) of the Patient Protection and
Affordable Care Act (42 U.S.C. 18021(a)) is amended--
(1) in paragraph (1)--
(A) in subparagraph (B), by striking ``and'' at the
end;
(B) in subparagraph (C)(iv), by striking the period
and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(D) provides, with respect to a plan offered in
the silver level of coverage to which section 1402
applies during plan year 2026 and 2027, for benefits
described in paragraph (5) in the case of an individual
who has a household income that does not exceed 138
percent of the poverty line for a family of the size
involved, and who is eligible to receive cost-sharing
reductions under section 1402.''; and
(2) by adding at the end the following new paragraph:
``(5) Additional benefits for certain low-income
individuals for plan year 2026 and 2027.--
``(A) In general.--
``(i) Benefits.--For purposes of paragraph
(1)(D), the benefits described in this
paragraph to be provided by a qualified health
plan are benefits consisting of--
``(I) non-emergency medical
transportation services (as described
in section 1902(a)(4) of the Social
Security Act) for which Federal
payments would have been available
under title XIX of the Social Security
Act had such services been furnished to
an individual enrolled under a State
plan (or waiver of such plan) under
such title; and
``(II) services described in
subsection (a)(4)(C) of section 1905 of
such Act for which Federal payments
would have been so available;
which are not otherwise provided under such
plan as part of the essential health benefits
package described in section 1302(a).
``(ii) Condition on provision of
benefits.--Benefits described in this paragraph
shall be provided--
``(I) without any restriction on
the choice of a qualified provider from
whom an individual may receive such
benefits; and
``(II) without any imposition of
cost sharing.
``(B) Payments for additional benefits.--
``(i) In general.--An issuer of a qualified
health plan making payments for services
described in subparagraph (A) furnished to
individuals described in paragraph (1)(D)
during plan year 2026 or 2027 shall notify the
Secretary of such payments and the Secretary
shall, out of funds made available under clause
(ii), make periodic and timely payments to the
issuer equal to payments for such services so
furnished.
``(ii) Appropriation.--In addition to
amounts otherwise available, there is
appropriated, out of any money in the Treasury
not otherwise appropriated, such sums as may be
necessary to the Secretary to make payments
under clause (i).''.
(d) Education and Outreach Activities.--
(1) In general.--Section 1321(c) of the Patient Protection
and Affordable Care Act (42 U.S.C. 18041(c)) is amended by
adding at the end the following new paragraph:
``(3) Outreach and educational activities.--
``(A) In general.--In the case of an Exchange
established or operated by the Secretary within a State
pursuant to this subsection, the Secretary shall carry
out outreach and educational activities for purposes of
informing individuals described in section
1902(a)(10)(A)(i)(VIII) of the Social Security Act who
reside in States that have not expended amounts under a
State plan (or waiver of such plan) under title XIX of
such Act for all such individuals about qualified
health plans offered through the Exchange, including by
informing such individuals of the availability of
coverage under such plans and financial assistance for
coverage under such plans. Such outreach and
educational activities shall be provided in a manner
that is culturally and linguistically appropriate to
the needs of the populations being served by the
Exchange (including hard-to-reach populations, such as
racial and sexual minorities, limited English
proficient populations, individuals residing in areas
where the unemployment rates exceeds the national
average unemployment rate, individuals in rural areas,
veterans, and young adults).
``(B) Limitation on use of funds.--Funds
appropriated under this paragraph shall not be used to
promote any health insurance coverage other than
qualified health plans.
``(C) Funding.--In addition to amounts otherwise
available, there is appropriated, out of any money in
the Treasury not otherwise appropriated, to remain
available until expended, $105,000,000 for fiscal year
2026 to carry out this paragraph, of which--
``(i) $15,000,000 shall be used to carry
out this paragraph in fiscal year 2026; and
``(ii) $30,000,000 shall be used to carry
out this paragraph for each of fiscal years
2027 through 2028.''.
(2) Navigator program.--Section 1311(i) of the Patient
Protection and Affordable Care Act (42 U.S.C. 18031(i)) is
amended--
(A) in paragraph (1)--
(i) by striking ``An Exchange'' and
inserting the following:
``(A) In general.--An Exchange''; and
(ii) by adding at the end the following:
``(B) Grants for eligible entities with respect to
certain states.--The Secretary shall establish a
program to award grants to entities described in
paragraph (2) to carry out the duties described in
paragraph (3) in one or more States that do not provide
under the State plan under title XIX of the Social
Security Act (or a waiver of such plan) benchmark
coverage described in section 1937(b)(1) of such Act or
benchmark equivalent coverage described in section
1937(b)(2) of such Act to all individuals described in
section 1902(a)(10)(A)(i)(VIII) of such Act.''; and
(B) in paragraph (6)--
(i) by striking ``Grants under'' and
inserting the following: ``
``(A) State exchanges.--Grants under''; and
(ii) by adding at the end the following new
subparagraph:
``(B) Federal exchanges; grants to eligible
entities with respect to certain states.--For purposes
of carrying out this subsection, with respect to an
Exchange established and operated by the Secretary
within a State pursuant to section 1321(c) and with
respect to grants under paragraph (1)(B), the Secretary
shall obligate not less than $10,000,000 out of amounts
collected through the user fees on participating health
insurance issuers pursuant to section 156.50 of title
45, Code of Federal Regulations (or any successor
regulations) for fiscal year 2026, and not less than
$20,000,000 for each of fiscal years 2027 and 2028.
Such amount so obligated for a fiscal year shall remain
available until expended.''.
(e) Funding.--In addition to amounts otherwise available, there is
appropriated to the Secretary of Health and Human Services for fiscal
year 2026, out of any money in the Treasury not otherwise appropriated,
$65,000,000, to remain available until expended, for purposes of
carrying out the provisions of, and the amendments made by, this
section (other than subsections (f) and (g)).
(f) Temporary Expansion of Health Insurance Premium Tax Credits for
Certain Low-Income Populations.--
(1) In general.--Section 36B is amended by redesignating
subsection (h) as subsection (i) and by inserting after
subsection (g) the following new subsection:
``(h) Certain Temporary Rules Beginning in 2026.--With respect to
any taxable year beginning after December 31, 2025, and before January
1, 2029--
``(1) Eligibility for credit not limited based on income.--
Subsection (c)(1)(A) shall be applied without regard to `equals
or exceeds 100 percent but'.
``(2) Credit allowed to certain low-income employees
offered employer-provided coverage.--In the case of an
individual whose household income does not exceed 138 percent
of the poverty line for a family of the size involved, clause
(i) of subsection (c)(2)(C) shall be applied (including in the
case of any individual described in the last sentence of such
clause) without regard to subclause (II) thereof.
``(3) Credit allowed to certain low-income employees
offered qualified small employer health reimbursement
arrangements.--A qualified small employer health reimbursement
arrangement shall not be treated as constituting affordable
coverage for an employee (or any spouse or dependent of such
employee) for any months of a taxable year if the employee's
household income for such taxable year does not exceed 138
percent of the poverty line for a family of the size involved.
``(4) Limitations on recapture.--
``(A) In general.--In the case of a taxpayer whose
household income is less than 200 percent of the
poverty line for the size of the family involved for
the taxable year, the amount of the increase under
subsection (f)(2)(A) shall in no event exceed $300
(one-half of such amount in the case of a taxpayer
whose tax is determined under section 1(c) for the
taxable year).
``(B) Limitation on increase for certain non-
filers.--In the case of any taxpayer who would not be
required to file a return of tax for the taxable year
but for any requirement to reconcile advance credit
payments under subsection (f), if an Exchange
established under title I of the Patient Protection and
Affordable Care Act has determined that--
``(i) such taxpayer is eligible for advance
payments under section 1412 of such Act for any
portion of such taxable year, and
``(ii) such taxpayer's household income for
such taxable year is projected not to exceed
138 percent of the poverty line for a family of
the size involved,
subsection (f)(2)(A) shall not apply to such taxpayer
for such taxable year and such taxpayer shall not be
required to file such return of tax.
``(C) Information provided by exchange.--The
information required to be provided by an Exchange to
the Secretary and to the taxpayer under subsection
(f)(3) shall include such information as is necessary
to determine whether such Exchange has made the
determinations described in clauses (i) and (ii) of
subparagraph (B) with respect to such taxpayer.''.
(2) Employer shared responsibility provision not applicable
with respect to certain low-income taxpayers receiving premium
assistance.--Section 4980H(c)(3) is amended to read as follows:
``(3) Applicable premium tax credit and cost-sharing
reduction.--
``(A) In general.--The term `applicable premium tax
credit and cost-sharing reduction' means--
``(i) any premium tax credit allowed under
section 36B,
``(ii) any cost-sharing reduction under
section 1402 of the Patient Protection and
Affordable Care Act, and
``(iii) any advance payment of such credit
or reduction under section 1412 of such Act.
``(B) Exception with respect to certain low-income
taxpayers.--Such term shall not include any premium tax
credit, cost-sharing reduction, or advance payment
otherwise described in subparagraph (A) if such credit,
reduction, or payment is allowed or paid for a taxable
year of an employee (beginning after December 31, 2025,
and before January 1, 2029) with respect to which--
``(i) an Exchange established under title I
of the Patient Protection and Affordable Care
Act has determined that such employee's
household income for such taxable year is
projected to not exceed 138 percent of the
poverty line for a family of the size involved,
or
``(ii) such employee's household income for
such taxable year does not exceed 138 percent
of the poverty line for a family of the size
involved.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2025.
(g) Further Increase in FMAP for Medical Assistance for Newly
Eligible Mandatory Individuals.--Section 1905(y)(1) of the Social
Security Act (42 U.S.C. 1396d(y)(1)) is amended--
(1) in subparagraph (D), by striking at the end ``and'';
(2) in subparagraph (E), by striking ``2020 and each year
thereafter.'' and inserting ``2020, 2021, 2022, 2023, 2024, and
2025;''; and
(3) by adding at the end the following new subparagraphs:
``(F) 93 percent for calendar quarters in 2026,
2027, and 2028; and
``(G) 90 percent for calendar quarters in 2029 and
each year thereafter.''.
SEC. 50003. FREEZE OF PREMIUM ADJUSTMENT PERCENTAGE INCREASE.
Section 1302(c)(4) of the Patient Protection and Affordable Care
Act is amended--
(1) by striking ``For purposes of'' and inserting the
following:
``(A) In general.--For purposes of''; and
(2) by adding at the end the following new subparagraph:
``(B) Freeze in premium adjustment percentage
increase.--For plan years beginning on or after January
1, 2027, the maximum annual limitation on cost sharing
(as described in section 156.130(a)(2) of title 45,
Code of Federal Regulations) is equal to the greater
of--
``(i) the maximum annual limitation on cost
sharing for plan year 2025, as described in the
final rule published on April 15, 2024 (89 Fed.
Reg. 26218 et seq.); and
``(ii) 90 percent of the amount described
in clause (i), increased by the percentage by
which the average per capita premium for health
insurance coverage in the United States for the
preceding calendar year (as estimated by the
Secretary not later than October 1 of such
preceding calendar year) exceeds such average
per capita premium for 2024.''.
SEC. 50004. REQUIRING COVERAGE OF CERTAIN IMMUNIZATIONS RECOMMENDED BY
THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES.
(a) Group Health Plans and Health Insurance Coverage.--
(1) PHSA.--
(A) In general.--Part D of title XXVII of the
Public Health Service Act (42 U.S.C. 300gg-111 et seq.)
is amended by adding at the end the following new
section:
``SEC. 2799A-11. COVERAGE OF CERTAIN IMMUNIZATIONS RECOMMENDED BY THE
ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES.
``(a) In General.--With respect to plan years occurring during the
date of the enactment of this section, or beginning on or after the
date of the enactment of this section and before January 1, 2030, a
group health plan and a health insurance issuer offering group or
individual health insurance coverage shall provide coverage for and
shall not impose any cost sharing requirements for immunizations that
had in effect a recommendation from the Advisory Committee on
Immunization Practices of the Centers for Disease Control and
Prevention with respect to the individual involved as of October 25,
2024, including such an immunization as updated or changed after that
date under a supplement to a biologics license application approved by
the Food and Drug Administration.
``(b) Special Rule.--Subsection (a) shall not apply in the case of
an immunization administered during the minimum interval established
under section 2713(b) with respect to such immunization.''.
(B) Conforming amendment.--Section 1302(e)(1)(B)(i)
of the Patient Protection and Affordable Care Act (42
U.S.C. 18022(e)(1)(B)(i)) is amended by striking
``section 2713'' and inserting ``sections 2713 and
2799A-11 of the Public Health Service Act''.
(2) ERISA.--
(A) In general.--Subpart B of part 7 of subtitle B
of title I of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1185 et seq.) is amended by
adding at the end the following new section:
``SEC. 726. COVERAGE OF CERTAIN IMMUNIZATIONS RECOMMENDED BY THE
ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES.
``(a) In General.--With respect to plan years occurring during the
date of the enactment of this section, or beginning on or after the
date of the enactment of this section and before January 1, 2030, a
group health plan and a health insurance issuer offering group health
insurance coverage shall provide coverage for and shall not impose any
cost sharing requirements for immunizations that had in effect a
recommendation from the Advisory Committee on Immunization Practices of
the Centers for Disease Control and Prevention with respect to the
individual involved as of October 25, 2024, including such an
immunization as updated or changed after that date under a supplement
to a biologics license application approved by the Food and Drug
Administration.
``(b) Special Rule.--Subsection (a) shall not apply in the case of
an immunization administered during the minimum interval established
under section 2713(b) of the Public Health Service Act with respect to
such immunization.''.
(B) Clerical amendment.--The table of contents in
section 1 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1001 note) is amended by
inserting after the item relating to section 725 the
following new item:
``Sec. 726. Coverage of certain immunizations recommended by the
Advisory Committee on Immunization
Practices.''.
(3) IRC.--
(A) In general.--Subchapter B of chapter 100 of the
Internal Revenue Code of 1986 is amended by adding at
the end the following new section:
``SEC. 9826. COVERAGE OF CERTAIN IMMUNIZATIONS RECOMMENDED BY THE
ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES.
``(a) In General.--With respect to plan years occurring during the
date of the enactment of this section, or beginning on or after the
date of the enactment of this section and before January 1, 2030, a
group health plan shall provide coverage for and shall not impose any
cost sharing requirements for immunizations that had in effect a
recommendation from the Advisory Committee on Immunization Practices of
the Centers for Disease Control and Prevention with respect to the
individual involved as of October 25, 2024, including such an
immunization as updated or changed after that date under a supplement
to a biologics license application approved by the Food and Drug
Administration.
``(b) Special Rule.--Subsection (a) shall not apply in the case of
an immunization administered during the minimum interval established
under section 2713(b) of the Public Health Service Act with respect to
such immunization.''.
(B) Clerical amendment.--The table of sections for
subchapter B of chapter 100 of the Internal Revenue
Code of 1986 is amended by adding at the end the
following new item:
``Sec. 9826. Coverage of certain immunizations recommended by the
Advisory Committee on Immunization
Practices.''.
(b) Medicare.--Section 1860D-2(b)(8)(B) of the Social Security Act
(42 U.S.C. 1395w-102(b)(8)(B)) is amended--
(1) by striking ``with recommendations'' and inserting
``with--
``(i) recommendations'';
(2) by striking the period at the end and inserting ``;
or''; and
(3) by adding at the end the following new clause:
``(ii) for plan years occurring during the
date of the enactment of this clause, or
beginning on or after the date of the enactment
of this clause and before January 1, 2030, in
the case of a vaccine with respect to which
such a recommendation is revoked with respect
to the individual involved on or after October
25, 2024, including such a vaccine as updated
or changed after that date under a supplement
to a biologics license application approved by
the Food and Drug Administration, the most
recent recommendation that was in effect with
respect to such vaccine and such individual
prior to such revocation.''.
(c) Medicaid.--
(1) In general.--Section 1905 of the Social Security Act
(42 U.S.C. 1396d) is amended--
(A) in subsection (a)(13)(B)--
(i) by striking ``individual, approved''
and inserting ``individual--
``(i) approved''; and
(ii) by adding at the end the following new
clause:
``(ii) for the period beginning on the date
of the enactment of this clause and ending on
December 31, 2029, approved vaccines, and the
administration of such vaccines, that were
recommended by such advisory committee with
respect to the individual involved as of
October 25, 2024, including such a vaccine as
updated or changed after that date under a
supplement to a biologics license application
approved by the Food and Drug
Administration.''; and
(B) in subsection (r)(1)(B)(iii), by--
(i) striking ``section 1928(c)(2)(B)(i)''
and inserting ``clause (i) of section
1928(c)(2)(B)''; and
(ii) inserting ``, subject to the
limitation described in clause (iii) of such
section'' after ``pediatric vaccines''.
(2) Coverage for pregnant individuals.--Section 1902(a)(10)
of the Social Security Act (42 U.S.C. 1396a(a)(10)) is amended
in the matter following subparagraph (G) by inserting ``medical
assistance for vaccines described in section 1905(a)(13)(B) and
the administration of such vaccines,'' after ``complicate
pregnancy,''.
(3) Program for distribution of pediatric vaccines.--
Section 1928 of the Social Security Act (42 U.S.C. 1396s) is
amended--
(A) in subsection (c)(2)(B)--
(i) in clause (i), by striking ``clause
(ii)'' and inserting ``clauses (ii) and
(iii)''; and
(ii) by adding at the end the following new
clause:
``(iii) For the period beginning on the date of the
enactment of this clause and ending on December 31,
2029, the provider will not take into account any
change in the schedule described in clause (i) that
removes the recommendation to administer a pediatric
vaccine with respect to the vaccine-eligible child
involved if such pediatric vaccine was recommended with
respect to such child under such schedule as of October
25, 2024, including with respect to such pediatric
vaccine as updated or changed after that date under a
supplement to a biologics license application approved
by the Food and Drug Administration.''; and
(B) in subsection (e), by inserting ``For purposes
of the preceding sentence, during the period beginning
on the date of the enactment of this sentence and
ending on December 31, 2029, the Secretary may not take
into account any revision of such list that occurs on
or after October 25, 2024, that removes a pediatric
vaccine from such list if such vaccine was included in
such list as of such date, including with respect to
such vaccine as updated or changed after that date
under a supplement to a biologics license application
approved by the Food and Drug Administration.'' after
the period at the end.
(4) State flexibility in benefit packages.--Section 1937(b)
of the Social Security Act (42 U.S.C. 1396u-7(b)) is amended by
adding at the end the following new paragraph:
``(9) Coverage of adult vaccines.--Notwithstanding the
previous provisions of this section, a State may not provide
for medical assistance through enrollment of an individual with
benchmark coverage or benchmark-equivalent coverage under this
section unless such coverage includes (and does not impose any
deduction, cost sharing, or similar charge for) the medical
assistance described in section 1905(a)(13)(B).''.
(d) CHIP.--Section 2103 of the Social Security Act (42 U.S.C.
1397cc) is amended--
(1) in subsection (c), by adding at the end the following
new paragraph:
``(13) Required coverage of certain vaccines recommended by
the advisory committee on immunization practices.--Regardless
of the type of coverage elected by a State under subsection
(a), the child health assistance provided for a targeted low-
income child shall include coverage, during the period
beginning on the date of the enactment of this paragraph and
ending on December 31, 2029, of vaccines, and the
administration of such vaccines, that had in effect a
recommendation from the Advisory Committee on Immunization
Practices of the Centers for Disease Control and Prevention
with respect to the child involved as of October 25, 2024,
including such a vaccine as updated or changed after that date
under a supplement to a biologics license application approved
by the Food and Drug Administration.''; and
(2) in subsection (e)(2), by inserting ``vaccines described
in subsection (c)(13) administered during the period beginning
on the date of the enactment of such subsection and ending on
December 31, 2029 (and the administration of such vaccines),''
before ``services described in section 1916(a)(2)(G)''.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committees on Education and Workforce, and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committees on Education and Workforce, and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committees on Education and Workforce, and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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