H.R. 6900

[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>