Establishment of refundable child tax credit with monthly advance payment

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 24 the following new sections:

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, 2025, 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 2024.(B)

Initial threshold amount

In the case of any taxable year beginning after December 31, 2024, 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 2024. 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 2024 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.

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 of such Code is amended to read as follows:

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 of such Code 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, 2024.

(d)

Disclosure of information relating to advance payment of child tax credit

Section 6103(e) of such Code 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) of such Code 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) of such Code 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) of such Code 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) of such Code is amended by inserting or section 24A, as the case may be after section 24.(5)Section 6211(b)(4)(A) of such Code 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) of such Code 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) of such Code is amended by inserting 24A, after 24,.(8)Section 6213(g)(2)(P) of such Code 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) of such Code 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 of the Internal Revenue Code of 1986 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 of such Code 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, 2024.(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, 2024.(3)

Information disclosure

The amendment made by subsection (d) shall take effect on the date of the enactment of this Act.