    [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>